Hello, I have the following queries regarding chapter 1: 1 - Under the Term Assurance, Page 4 states "Term assurance may be sold with critical illness cover", is this referring to the "accelerated critical illness cover" explained later in the chapter or is it something different ? 2 - Under the Income Protection Insurance, Page 6 states "Unemployment, redundancy, early retirement and reluctance to return to work are a few examples of situations that should not be covered by the policy and not all kinds of illness / physical injury will be covered either, eg attempted suicide". On the other hand page 9 states that "The insurer’s claims experience is subject to many influences totally outside the insurer’s control, eg economic and social influences such as unemployment trends". If the product is only designed to pay out on accidents and illnesses then why will the claims experience be affected by unemployment trends ? 3 - Under the Income Protection Insurance, Page 10 states "A rider to the policy may also cover the risk of unemployment". does that mean that an Income Protection Policy will not cover unemployment by itself but a rider will ? 4 - Under Critical Illness Insurance, Page 12 states "an ‘accelerated CI’ benefit would pay out on death, whereas a ‘stand-alone CI’ benefit would not.". That means an accelerated CI also pays out on death whereas Stand-alone CI would not, right ? 5 - Under Critical Illness Insurance, Page 12 states "In some jurisdictions, providers have also been selling critical illness covers for impaired lives. For example, products which provide cover to diabetes sufferers. The product is designed to encourage the customer to get treatment and stick with the treatment in order to get better premium rates". I assume that premium reviews generally happen on a portfolio level rather than on individual policy level, if this assumption is true than how will an individual customer benefit from better premium rates if he sticks with the treatment and improves his health but the experience on a portfolio level is poor. 6 - Under Endowment Assurance, Page 18 states "A group endowment assurance would enable an employer to provide benefits for employees at retirement, and maybe also on death in service". Why is there a maybe ? if there is no death element shouldn't it be called a pure endowment ?
Yes and yes. An accelerated CI pays out on whichever happens earlier: a critical illness diagnosis or death.
A standard IP contract would not cover the risk of unemployment but there might be a rider added that could cover that.
There are several reasons why IP claims experience could be impacted by the economic situation and the general levels of employment in the market. For example, if companies are struggling in an economic downturn and they lay people off to cut costs, the remaining staff may have an unrealistic burden of work placed on them and levels of long-term sickness due to stress might increase, or there might be more injuries at work (particularly in a physical occupation) due to staff being tired or being pushed to do more. Those who are off sick who might previously have made more of an effort to get back to work might not do so if they are protected from redundancy during the sickness period but would not be so protected on their return. On the other hand, those who might otherwise have claimed (or stayed in claim) might push themselves harder to remain in work (or return) in order to put themselves less at risk of redundancy in a difficult employment market. (There might also be a rider that does cover unemployment, as noted in the previous post.)
Yes, for a product that has been designed to have periodically reviewable premium rates, this review would normally be done at portfolio level. This particular example is talking about a system that allows those who get treatment for their diabetes (and stick with it) to be charged lower premium rates than those who don't. It's akin to premium loadings following underwriting, but on a more flexible basis. It is also somewhat analagous to a no-claims discount system for motor insurance, where the better risks are rewarded with lower premiums.
If you go on to read the next section (4.2), the third bullet point indicates that a pure endowment is simply treated in Subject SA2 as an example of an endowment assurance, but with zero death benefit, rather than as a separate contract type.
