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