Products

[N_Exam]

HI Acted,

Please could you answer the following questions I have:-
Definitions:
Q1) Claim Incidence is date at which single benefit is paid out?
Q2) Claim inception is date at which regular benefit starts?
Q3) Claim duration is duration of claim inception? So, claim duration and inception are not the same.

Products:
Q3) Accelerated CI Vs. Stand Alone CI. Accelerated CI is same as Stand alone but will also give the benefit on death (no survial period considered)?
Q4) LTCI has waiver of premiums on claim. Is this the same for PMI? and IP?

Q5) Products Capital Requirements:
IP, CI and PMI are low. This because there's low likelihood of claim?
LTCI is high because claim amounts are high?

Q6) Investment Risk/ Significance of Investments:
-PMI is low. Not sure why? This because liquid assets need to be kept to match uncertain claims or because treatments (i.e. claims) are paid in advance via provider agreements?
-CI is low. Not sure why? This because liquid assets needed?
-IP is low. Not sure why as would need to match the regular benefit paid?
-LTCI is high. This because regular, and possibly high, benefit payments need matching in long term?


Thank you very much

 

[Sarah Byrne]

Please see responses below:

Definitions:
Q1) Claim Incidence is date at which single benefit is paid out? Yes, we usually use for a single claim
Q2) Claim inception is date at which regular benefit starts? Yes, we usually use this for a claim with multiple payments
Q3) Claim duration is duration of claim inception? So, claim duration and inception are not the same. Claim duration is how long the payments are made for.

It's worth noting this is general use, if you refer to claim inception for a CI claim the examiners would know what you mean!

Products:
Q3) Accelerated CI Vs. Stand Alone CI. Accelerated CI is same as Stand alone but will also give the benefit on death (no survial period considered)? They both pay on critical illness, ACI also pays on death if earlier. (I wouldn't say they are the same as a result! And yes, no survival period on ACI.)
Q4) LTCI has waiver of premiums on claim. Is this the same for PMI? and IP?
PMI wouldn't have waiver of premium as it is short-term and doesn't pay claims on incapacity in the same way as long term products. Yes, IP can have waiver of premium.

Q5) Products Capital Requirements:
IP, CI and PMI are low. This because there's low likelihood of claim?
LTCI is high because claim amounts are high?

Yes, and the probability of claim of LTCI is relatively high. Plus there is a build up of value with the product (especially for pre-funded) that we wouldn't get with the other products.


Q6) Investment Risk/ Significance of Investments:
-PMI is low. Not sure why? This because liquid assets need to be kept to match uncertain claims or because treatments (i.e. claims) are paid in advance via provider agreements? The liabilities are short-term and therefore the assets aren't invested for the long-term. Short-term assets have lower returns/lower risk and therefore the assumptions are less significant and have less impact for the insurer.
-CI is low. Not sure why? This because liquid assets needed? As you said above, low capital requirements and reserves therefore not much is invested to earn a return on, so the assumption has low significance.
-IP is low. Not sure why as would need to match the regular benefit paid? This is higher risk/significance than CI, particularly for claims in payment. As the value of the liabilities are relatively low and therefore assets required are low, it is reasonably low significance (certainly compared to other assumptions), but we do need to ensure reserves for claims in payment match payments as you say (which will give rise to reinvestment risk)
-LTCI is high. This because regular, and possibly high, benefit payments need matching in long term? Yes, large amount of assets will be invested (either over time for PF or via the single premium for IN) and so the assumption is significant. The liabilities are high and therefore the assets required to back these are significant. Claims can be very long and high (if indemnity).

Hope this helps
Sarah