PENSIONS INVESTMENTS LIFE INSURANCE Group Risk Benefits Shane O Farrell BAFS, FSAI, QFA Head of Products and Pricing Irish Life Corporate Business
CONTENTS Introduction - who I am and where do I come from? Group Risk Benefits - what they are Voluntary vs. Corporate/Compulsory forms Pricing Factors Brief look at Multinational benefit Typical Claim Statistics Final Thoughts: why these benefits are important and underconsidered 2
Introduction-who I am and where do I come from? Head of Products and Pricing in Irish Life Group Risk With Irish Life since college from 1996 (barring a year travelling in Oz + South East Asia); Qualified Actuary 1999 Last 10 years in Corporate Business starting with Group Risk and Annuity but now covering all Products Responsibility includes Product Development, Pricing, Reinsurance, Sales and Retention of larger cases etc. Member of CB Leadership Team 3
Introduction-who I am and where do I come from? More interesting answer is Donabate.. 4
Group Risk Benefits-what they are Life and Disability insurance provided by virtue of employment or membership of a group Corporate Risk is employer paid and typical examples are: Life Cover 4 times Salary (or maybe 10 times if no Dependents) Possibly a Dependent Pension of (say) 50% Salary with cpi max 3% escalation And possibly children add on) payable for life Income Protection Income Protection of 2/3rds of Salary less State Benefit (designed to give 2/3rds in conjunction with State) with (say) cpi max 3% escalation Payable to NRA (usually 65) and usually occupation specific Benefits cease once no longer an employee 5
Voluntary vs. Corporate/Compulsory forms Voluntary is where the person has access to a group plan via membership of an affinity organisation (such as a union) Rates and benefits specific to that scheme are agreed (vary every 3-5 years) Paid for by the individual Not compulsory so some underwriting to limit anti-selection (but much reduced versus pure individual cover) Rates are usually age and gender neutral-view of simplicity and community rating within the group Very large plans for teachers, nurses and others 6
PRICING FACTORS in UNIT RATE Corporate Risk Risk profile of the membership Average age Gender mix Benefit level Occupation Type Claims Experience Interest Rates Employer actions on Income Protection Price review completed every 3 years Larger Scheme will price itself Voluntary Risk Risk profile of the membership Average age Gender mix Benefit level Occupation Type Claims Experience Interest Rates Exposure to anti-selection Price review varies: 2-5 years, depending on scheme, risk profile etc. 7
Multinational Angles Larger, multinational companies often seek to combine their worldwide insurance into a Multinational Pooling Arrangement Think of this as a global profit share with the partnering insurers (co-ordinating by an international agents like IGP or Swiss Life or Allianz) Some go further and use Captives: these are multinational company owned insurance entities who take the risk often in Bermuda etc Concept is control, information flow and perceived value for money 8
CLAIMS LIFE ASSURANCE Claim Stats (Group Risk) Cancer - average age 55 Average 60m per annum 1.2m per week 108,000 average pay-out Two-thirds of amounts paid are lump sum payments 30% are Spouses Pensions 8% 7% 23% 5% 5% 52% Heart Disease - average age 55 Accident - average age 37 Suicide - average age 41 Stroke - average age 58 2% are children s pensions Other 9
CLAIMS INCOME PROTECTION Claim Stats 2,100 claims in payment All Other Conditions 26% Mental Health 20% Claims Admitted Recent Mix Assess 1,200 claims per year Cancer 23% Back Pain 16% We pay 50m in benefits per annum Female claims rates approx. twice male rates All Other Conditions 44% Mental Health 21% Back Pain 21% Current Claims in Payment Cancer 14% 10
CLAIMS SPECIFIED ILLNESS COVER More common as Voluntary product Note Specified name Challenge of increasing early detection of conditions Very age dependent Cancer Heart Related Brain Tumour Stroke 2% 2% 3% 2% 5% Breast Cancer Multiple Sclerosis Parkinsons Disease Other 16% 56% 120 100 80 60 40 Claims by Gender Female Male 14% 2014 20 0 Child 20's 30's 40's 50's 60's 70's 11
Final Thoughts: why these benefits are important and underconsidered All agree that insurance serves a good social purpose-it smooths out bad luck over a population Group Risk is the cheapest, easiest form of cover: it s often compulsory so not action needed by the employee (no inertia risk) This reduces risk to underwriter so selection reduced and can be provided cheaper: win-win Contrast to cost and hassle and underwriting of individual cover Often people don t realise they have it (and don t appreciate the value)-that s a challenge for the sponsor 12
THANK YOU Irish Life Assurance plc is regulated by the Central Bank of Ireland. Irish Life Assurance plc, Registered in Ireland number 152576, VAT number 9F55923G. Irish Life Assurance plc Lower Abbey Street Dublin 1 Tel 353 (0)1 704 2000