2007 Annual Meeting ● Assemblée annuelle 2007

Vancouver

2007 Annual Meeting ● Assemblée annuelle 2007

Vancouver

Canadian Institute

of Actuaries

Canadian Institute

of Actuaries

L’Institut canadien desactuaires

L’Institut canadien desactuaires

IP-5IP-5

LTC InsuranceLTC Insurance

The Beginnings of a Market in CanadaThe Beginnings of a Market in Canada

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Long Term Care InsuranceLong Term Care Insurance

Saul GercowskyAVP & Pricing Actuary, Living BenefitsManulife Financial

June 28, 2007

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Agenda

• Past Sales• Future Potential

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Source: Statistics Canada, LIMRA

LTCI In-Force in Canada

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1999 2000 2001 2002 2003 2004 2005 2006

Lives Premiums ($000s)

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Source: LIMRA

In-Force

LTCI Sales in Canada

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1999 2000 2001 2002 2003 2004 2005 2006

Lives Premiums ($000s)

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Source: LIMRA

Sales

Why LTCI?

• In 2006, almost 2.3 million seniors had long-term health conditions.

• Asset and income protection• Quality and choice of care• Avoid being a burden on family20

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Source: Statistics Canada, LIMRA

0-9

10

-19

20

-29

30

-39

40

-49

50

-59

60

-69

70

-79

80

-89

90

-99

10

0+

0

1

2

3

4

5

6M

illi

on

s

Population of Canada by Age Group

2006 2031

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Source: Statistics Canada

Demographics

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Questions?

Long Term Care InsuranceLong Term Care Insurance

Anke RomanDirector, Individual Health PricingSun Life Financial

June 28, 2007

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Agenda

• The Need for LTCI• Barriers to Sales• The Value of Insurance

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At age 65, the lifetime probability of developing either a need for help with two or more activities of daily living for at least 90 days or a cognitive impairment is 44% for males and 72% for females

Cohen, Marc A., Maurice Weinrobe, Jessica Miller, and Anne Ingoldsby. "Becoming Disabled After Age 65: The Expected Lifetime Costs of Independent Living," AARP (American Association for Retired Persons) Public Policy Institute, 2005.

Who will need care?

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0%

5%

10%

15%

20%

25%

1986 1996 2006 2016 2026 2036

Over the last 20 years, the proportion of individuals age 65 and over increased by 23%.

Over the next 20 years, it will reach twice the 1986 level.

Over the next 30 years, it is expected to increase by almost 90%.

Proportion of individuals age 65+

Who receives care?• 7.4% of Canadians age 65 and over

live in institutions• 31.6% of Canadians age 85 and over

live in institutions• For those who live in private dwellings

(not institutions):• 8.7% of men and 12.7% of women age 65

and over receive personal care• 30.5% of men and 38.5% of women age 85

and over receive personal care

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A Portrait of Seniors in Canada: 2006. Statistics Canada

Cost of care• Facility care:

– 24 hour supervision by an RN– $712-$5,500 a month by type of room and province– Waiting lists can be long (one or two years)– Is this where you want to live?

• Retirement homes:– Accommodation can cost over $5,000 a month– Personal care services may be in addition

• Home care:– Depends on level of care required– Example:

• 2 hours nursing care 3 days / week at $40 / hour• 2 hours personal care 7 days / week at $20 / hour• 3 hours homemaking 4 days / week at $20 / hour

Total = $3,293 / month

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A Portrait of Seniors in Canada: 2006. Statistics Canada

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• Government home care spending reached $3.4 billion in 2003/04, an average annual increase of over 9% from 1994/95

• Even so, 65% of adults who needed help with eating, bathing or dressing did not receive government-subsidized home care

Public-Sector Expenditures and Utilization of Home Care Services in Canada: Exploring the Data, Canadian Institute for Health Information, March 2007.Kathryn Wilkins. "Government-subsidized home care" in Health Reports, Vol. 17, No. 4, October 2006, Statistics Canada. Based on 2003 statistics.

Government home care spending

Alberta’s aging population• In 2003, seniors spent an average of 60%

more per person on health care than non-seniors

• In 2001, 44% of Alberta seniors reported their everyday activities were limited because of a health-related condition or problem

• According to Alberta Health and Wellness, about 10% of Alberta seniors received home care in 2002/03 and made up 41% of all home care clients

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Source: Alberta Seniors and Community Supports, Fact Sheet: A Portrait of Alberta Seniors, 2006

Home care costs (Alberta)• If you have Alberta Health Care Insurance,

home care services, up to an assessed amount, are covered to a monthly maximum of $2,950

• Housekeeping and companion care service charges apply and are based on income (maximum charge is $300 a month)

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Long-term care facilities (Alberta)

• $1,205 a month for standard room (four beds)• $1,277 a month for semi-private room (two beds)• $1,469 a month for private room• Plus supplementary service costs like

• private duty nursing / companion care• co-payment for special equipment as covered through the

Alberta Aids to Daily Living program• glasses/ hearing aids• professional health care services not covered by the

Alberta Health Care Insurance Plan or an insurer• laundry• hairdresser services• telephone

• Types of rooms available differ by home

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Barriers to sales• Misconception regarding government coverage• Product new and not well known• Advisor understanding/buy-in• High cost of coverage• Competition with other products• No premium guarantees• U/W seen as painful and complex• Bad press

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Age

Monthly premium* - low

-

Monthly premium* - high

-

Acc Value of avg premium paid @

age 65 (3% int a.t.)

# of months of care to break even

($3,000/month)

40 50 80 28,898 10

50 105 125 26,082 9

60 170 220 12,624 4

Value of Insurance(dependent at age 65)

* Avg of male/female for typical comprehensive indemnity plan ($100/day, 30 day EP, unlimited BP, no riders)

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Age

Monthly premium*

- low -

Monthly premium*

- high -

Acc Value of avg premium

paid @ age 80 (3% int a.t.)

# of months of care to break

even ($3,000/month)

Placement Ratio

40 50 80

59,764 20 75-85%

50 105 125 66,716

22 65-75%

60 170 220 63,894

21 55-65%

70 420 530 66,401

22 15-25%

Value of Insurance(dependent at age 80)

* Avg of male/female for typical comprehensive indemnity plan ($100/day, 30 day EP, unlimited BP, no riders)

The Cost of waiting to buy LTCI

• Monthly premium increases• No benefits for early claims• Chance of being insurable decreases

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What are the chances that . . .

• We will live long lives with no need for medical intervention or long term care?

• Our health care system will be able to cover all costs?

• The price of insurance will be cheaper than it is today?

• Insurers will liberalize their definitions of dependency?

• People will become more insurable as they age?

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Questions?

Long Term Care InsuranceLong Term Care Insurance

Frédéric JacquesDirector, Living BenefitsMunich Re

June 28, 2007

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Agenda

• Product Design• Pricing Assumptions• LTC Around the World

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LTC Product Design

• Types of Benefits:• Indemnity (fixed)• Indemnity for formal care (listed and defined)• True Reimbursement

• Payer status must be defined (government, workers compensation)

• Type of plans• Home Care (HC) Only plans• Nursing Home (NH) Only plans• Comprehensive (HC + NH)• “Structured Benefits” – daily benefit varies by

type of care

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LTC Product Design

Benefits triggered on failure of:• 2/6 ADLs (Activities of Daily Living)

- Bathing - Dressing

- Toileting - Transferring

- Continence - Eating

• Cognitive Impairment (except non-organic)

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LTC Product Design

Benefits qualifier:• Daily, weekly or monthly• Benefits amount

• $10 to $330 per day (or weekly/monthly equivalent)• Maximum Benefits:

• Expressed in years• Expressed in terms of care days• Expressed in terms of cash amount

• Shared Care Benefits• Additional Pool• Two Share one• Inherit on Death

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LTC Product Design

• Elimination Periods:• Range of choice to client

• 0 (facility) to 180 days

• Calendar days or care days?• Should EP be only paid once?• Recurring condition (e.g., 180 days)

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LTC Product Design

Riders and Options• Emergency Response System,

Durable Medical Equipment, House Alteration

• Substitute Services Clause, Alternate plan of care, Caregiver training benefit

• Bed Reservation

• Managed Care/Care Coordinator

• Respite care

• Restoration of benefits

• COLA

• GIO

• Return of Premium on death

• Waiver of premiums

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LTC Product Design

• Exclusions for Benefits:• Regular exclusions, e.g., self-inflicted injury• Non-organic cognitive impairment• Care for non-recognized institutions or

caregivers (e.g., family member)• Care outside Canada/US• Non-approved types of care, care-givers or

facilities• Care not certified by physician

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• Features that can present pricing issues: • Benefit and Elimination Periods• Inflating Benefits• Risky Options

• Limited Pay• Survivorship Benefits• Shared Benefits

• Myriad of Options • More choices = greater potential for anti-

selection

LTC Product Design20

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LTC Pricing Assumptions

• Assumptions Needed• Incidence Rates• Termination Rates• Benefit usage• Lapse• Mortality (ALR, DLR)• Expenses• Interest• Reserve and Required Capital• Distribution

Not a one size fits all. These assumptions and the risk exposure may be different depending on your product design.

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• Key items impacting pricing / profitability: • Lapse Rates• Interest/Investment Rates• Morbidity• Expenses

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LTC Pricing Assumptions

• Canadian market has had the benefit of learning from other countries’ “growing pains” and has avoided some major pitfalls.

• Canadian market has to learn from other countries’ “success”.

• Variation in product design that fits the country markets.

• Canada usually looks south of the border for LTC

International Situation of Private LTCI20

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1985 Japan

1989 Israel

1992 Korea, Singapore

1995 Taiwan

1999 (Malaysia)

2000 (Bangladesh)

2001 (China)

1992 Australia, New Zealand

1991 South - Africa

1974 USA

1992 Canada

1998 Mexico

1995 Argentina

1999 (Columbia)

2005 Brasilia

2006 Chile

1985 Germany

1985 France

1988 Spain

1990 Switzerland

1991 Denmark, Great Britain, Luxembourg, Netherlands

1996 Italy

1998 Czech Republic, Malta, Portugal

2001 (Russia)

2006 Ukraine

International Situation of Private LTCI20

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• US:• Reimbursement• Tax qualified• Cola inflation/GPO• Lapse rate• Cognitive testing• Nursing home usage and ALF

• France• x out of 6 ADL with varying payment level based on

severity of ADL• Germany

• Compulsory LTC insurance• Supplementary LTC insurance

International Situation of Private LTCI20

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Questions?

IP-5IP-5

LTC InsuranceLTC Insurance

The Beginnings of a Market in CanadaThe Beginnings of a Market in Canada

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