Chapter 14, page 12

[Kanishkas5301]

The last line of the page says that "Claims for large benefit amounts tend to continue for significantly longer than those for small amounts."

I was wondering why this is an intuitive statement? This is in relation to the long term care insurance and income protection insurance claims (on the mention of recovery rates). I had a few points that possibly contradict this statement -

For income protection insurance in specific, if we remove the possibility of overinsurance - a high benefit amount would probably indicate that the claimant was earning a substantial amount before claiming. Does this not indicate that they would have more access to the medical services are likely to recover better?
Maybe also means that they are more educated in general, and all other factors that should point to a better lifestyle and hence a speedier recovery?

These may probably suggest the other experience with long term care insurance, since better access to medical services may mean a longer life expectancy under disability hence higher continuation of claims.

Am I missing anything else?

 

[Mark Willder]

The last line of the page says that "Claims for large benefit amounts tend to continue for significantly longer than those for small amounts."

I was wondering why this is an intuitive statement? This is in relation to the long term care insurance and income protection insurance claims (on the mention of recovery rates). I had a few points that possibly contradict this statement -

For income protection insurance in specific, if we remove the possibility of overinsurance - a high benefit amount would probably indicate that the claimant was earning a substantial amount before claiming. Does this not indicate that they would have more access to the medical services are likely to recover better?
Maybe also means that they are more educated in general, and all other factors that should point to a better lifestyle and hence a speedier recovery?

These may probably suggest the other experience with long term care insurance, since better access to medical services may mean a longer life expectancy under disability hence higher continuation of claims.

Am I missing anything else?

Hi Kanishkas

The point you mention follows on from the Core Reading that says:

"The motivation to return to work is a key factor in controlling claim continuation rates."

So its not surprising that large claims last longer than small claims because the policyholder has less incentive to return to work (eg due to a higher replacement ratio).

While I agree that the points you make may operate in the opposite direction to some extent, I think they also back up the Core Reading. So yes, someone with a large benefit is likely to be well paid. This may mean that they have access to better medical treatment and so are less likely to start an IP claim as they could be treated and recover before the deferred period ends. Higher salaries also tend to be associated with office work rather than manual jobs. So we can conclude that these policyholders will only start a claim for particularly serious injuries which will take a long time to recover from.

Best wishes

Mark