Long-Term Care Insurance
SCOR/ 삼성생명
서울사무소 대표 : Olivier Goualou
譯 : 노동현 ( 삼성생명 재보험파트장 )
Agenda of this presentation
- What is Long Term Care Insurance?
- What are Long Term Care Insurance specificities?
1 - What is Long Term Care Insurance?
- Major markets
- Characteristics
Two big Long Term Care Insurance Markets
FRANCE US
Public LTCI System
PSD / APA Medicaid / Medicare
Experience
15 years
15 / 20 years
Market annual growth
20 % 20 %
Market size
2 millions
of policy holders
6.5 millions policies
Products Cash Benefits Reimbursement
France : the most developed european LTCI Market
US / French (European) Approaches
US Market (6.5 millions policies)
– Reimbursement Model
– Nursing home / home help plans
– Temporary payment periods
French Market (2,000,000 policies sold)
– Fixed benefits model
– Lifetime payment periods
Japan Market
LTC : an acute issue because of change in terms of the ageing of the population
A new Public LTC scheme (April 2000)
LTCI Market
Rapid initial growth : around 2 millions policies issued during 89-98 and decline of consumer demand after (public scheme)
LTCI Market could start up again
Market needs
Long-term care of the elderly
Invalidity before 60
Low incidence for the young
Medically diagnosed long-term care (physical or
neuro-psychiatric)
Consolidated, irreversible long-term care
Market needs
Need for a simple, understandable, objective
definition
Product of the future: pushing back mortality,
aging and population statistics
Definition of LTC : Activities of Daily Living (ADL)
The long-term care annuity is paid after loss of3/4 ADL
The functions which human beings must perform to lead a full, independent and meaningful life
Fundamental activities of Daily Living (ADL)
• Washing:Ability to maintain bodily hygiene to normal standards without the assistance from another person.
• Dressing:Ability to dress and undress with suitable clothing, if necessary, without the help of another person.
• Feeding:Ability to serve and eat food previously preparedand provided without the help of another person.
• Continence:Ability to use the toilet and control urinary and faecal eliminations including the use of protection or surgical devices.
• Movement:Ability to move around inside the home of flat surfaces, with the help of suitable equipment.
• Transfer:Ability to move from bed to chair and chair to bed without the help of another person.
Fundamental activities of Daily Living (ADL)
Long-term care insurance products
Individual products Long-term care pension plan Double your pension
Group products
Level mutualized premium
Product characteristics
Criteria Individual LTCI Group LTCI
Subscription Optional Mandatory
Medical Selection Yes No
Benefits Selected by insured Identical
Waiting Periods & Deductible Periods Yes, Yes No, Yes
Premium By application age Identical
Cover Whole of Life Whole of Life
2 - What are Long Term Care Insurance specificities?
- Deductible period
- Waiting period
Deductible period
90 days
Avoids managing short dependencies
Reduces the cost of cover
Waiting Periods
3 years / 1 year depending on the origin of LTC
Completes medical selection
Return-insurance of premiums
0
0.01
0.02
0.03
0.04
0.05
0.06
65 70 75 80 85 90 95
Age
Inci
den
ce (
po
ur
100
per
son
ne-
ann
ées)
Incidence of dementia: PAQUID 1988-1995
0,00
0,02
0,04
0,06
0,08
0,10
60 65 70 75 80 85 90 95 100
Age
Inci
den
ce Non buveurs
Buveurs légers
Buveurs modérés
Incidence of dementia with respect to initial
wine consumption
Major LTC claim reasons:
Demencia
Cancer
15 - 50 %
9 - 30 %
Dementia & Antiselection
- “Bad risks chase out the good” (asymmetric information).
- Proportion of dementia claims among claims incidence:
Male Female40-50 0.50% 1.00%50-59 1.00% 3.00%60-64 2.50% 9.50%65-69 11.50% 19.50%70-72 17.00% 25.00%
LTC Pricing
Price Structure
Mixed pricing
Supplementary cost of women
Possible imbalance of the portfolio
Application of a couple
Technical discount
Commercial discount
Risk Modeling
Longevity of non-dependants
Incidence of long-term care
Longevity of dependants
Statistical Data
Data from experience: portfolios
Population data
Specific studies and surveys
PAQUID: monitoring a cohort for 15 years
Price Structure
Non Guaranteed rates:
Essential for building the product
Lowers the cost of uncertainty
The follow-up of pricing assumptions
in life-death, 1 survival law
Denied (or not) by the total number of Death if 100
Deaths expected during the year, to have only 60
death deny the Mortality Table.
In LTC , 3 laws
(Healthy Survival + Dependency entrance + Dependant
Survival)
Denied (or not) by the watched prevalence
Multi-states Model
AutonomusAutonomus
DeathsDeaths
DependantsDependants
qxaa
i p qx xai
xai
pxai qx
aipxia 0
qxi
Incidence law: influence of sex and age
Life expectancy for dependants: time influence
The two pitfalls
annual premium and age (at inception) :will this trend remain valid in 30 years?
The two pitfalls Mathematical Reserve f(age reached) : will this trend remain valid in 30 years?
Pricing Balance Technical Aspect
technical assumptions
– mortality of the valid
– probability of entering in dependency
– mortality of the dependants
– + other assumptions :
Administration fees,
Technical rate for the actualization of the future payments
(contractual increase rate of premiums and annuities)
Pricing Balance Technical Aspect
Need of using prospective tables
– passed statistics enable quoting... the past
predictable increase in life expectancy ...
– a) of the valid
– b) of the dependants
what will be the evolution of entering in dependency ?
– supposed stability in time ?
Pricing Balance Technical Aspect
Prevalence law
– proportion of dependants in the general population at each
age
more easily measured
– most part of the public data available
– enables adapting external data (public or market) to the
observations made by the company
Reserves
Expected evolution of the reserves:
Case of a woman who underwrites her LTC Product at 50 y.o.
Parameters sensibilityExample: influence of the incidence
Example: influence of the financial income
Parameters sensibility
Specific Risk for Korean Market
Surrender Value for Product over 7 years.
LTC: a product, which needs to be handle carefully
- A new product on a new market
- Specific pitfalls for LTC
- Korean Market specificities
Needs specific conditions (waiting period, non guaranteed rates)
Needs specific follow up