[PPT] - Canadian LInstitut Canadian LInstitut Institute canadien PowerPoint Presentation

SLIDE 1

2008 Annual Meeting ● Assemblée annuelle 2008 Québec 2008 Annual Meeting ● Assemblée annuelle 2008 Québec

Canadian Institute

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Actuaries Canadian Institute

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Actuaries L’Institut canadien des actuaires L’Institut canadien des actuaires

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Age and Amount Requirements -

________________________________________________________________________________________________________________________________________________________________________________________________________________________________ ____________________________________

Did you think about everything?

Dominic Hains, FCIA, FSA AVP, Development RGA Canada Ross Morton, FLMI Reassurer, Advisor, Mentor RGA Canada

SLIDE 3

Definition

Good Underwriting Decision:

categorizes risk in a fashion that is in keeping with the degree of aggressiveness in the actuaries forward looking pricing assumptions while reducing the cost of such categorization and increasing the speed of decision making and thus policy issue.

SLIDE 4

Expectation

Consistently Good Underwriting Decisions will lead to good mortality or morbidity experience.

SLIDE 5

Gaining Competitive Advantage

Alternative sources
Reduce requirements
Stretch exceptions
Automate

Data collection Risk categorization

Raise prices
Alternate product design

SLIDE 6

Alternative Sources (of information pertinent to risk categorization)

Underwriting View

Questionnaires
Prescription Databases
Better trained advisors
Technology

Pricing View

Alternative sources to

generate the same expected result

r
Finding something no one

else has used before

Studies & research to

support mortality expectation

Extrapolation is an art

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Reduce Requirements

(especially the costly and the hard to get)

Pricing View

mortality impact

– less is more

Cost benefit with

protective value analysis

Anti-selection cost

Underwriting View

Treadmill, medical, even

questions

Attending physicians

report – Mandatory/prescribe d – Reflexive

Financial justification

SLIDE 8

Mortality savings of fluid testing

The savings linked to lower underwriting costs

can easily be estimated : – Lab tests – Handling fees – Admin and overhead costs

Other advantages are harder to estimate.

– Quicker decisions & delivery – Lower not-taken ratio – Client more at ease

The mortality assumption set for pricing

purposes needs to be aligned with the underwriting

SLIDE 9

Integration of results

Mortality costs:
t= condition (e.g. HIV, Cocaine, Cotinine)
PVEMt=Present value of Extra Mortality
Rt= Prevalence
Ut= Percentage of applicant unaware of their

condition

L= Percent of applicant who lie on the application

( (1 ) )

t t t t t t

PVEM R U R U L + −

∑

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Integration of results

Saliva testing:
For an average Face Amount of $150,000,

the return on investment is 518%.

Extra Qx/ PVES 1000 policies Test cost (per 1000$) R U L Face=150k Face=150k HIV $344 0.03% 30.00% 10.00% $6,482 0.26 Cocaine $97 0.20% 0.00% 10.00% $2,875 0.11 Cotinine $34 23.70% 0.00% 10.00% $120,123 4.80 Total $129,480 5.18

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Integration of results

Urine-testing specific:

Mortality Cost PVES 1000 policies Renal dysfunction Extra Mort (per 1000$) R* A L Face=150k (Excluding diabetes)

0.31 to 0.5 g/l

50.00% $20 0.49% 50.00% 0.00% $7,306

0.51 to 1.0 g/l

100.00% $40 0.33% 50.00% 0.00% $9,692

1.01 to 2.0 g/l

150.00% $60 0.10% 50.00% 0.00% $4,473

2.01 g/l or more

200.00% $80 0.09% 50.00% 0.00% $5,368 Total Renal Dysfunction $26,838 Diabetes

Male (0 to 44)

225.00% $69 0.65% 35.00% 10.00% $27,859

Male (45 to 64)

100.00% $31 2.93% 35.00% 10.00% $55,865

Male (65 +)

100.00% $31 0.61% 35.00% 10.00% $11,600

Female (0 to 44)

250.00% $77 0.16% 35.00% 10.00% $7,603

Female (45 to 64)

175.00% $54 0.72% 35.00% 10.00% $24,012

Female (65+)

100.00% $31 0.15% 35.00% 10.00% $2,849 Total Diabetes 174.06% $53.28 5.22% 35.00% 10.00% $129,787 Total $156,625 ROI (Excess Mort / Test Cost) 391.56%

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Integration of results

These results are for indication only.

They will vary depending on:

– Actual market of the product – Economic factors – Distribution system – Size of company

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Integration of results

This type of analysis can be performed for any

underwriting test.

For example, RGA analyzed the full blood chemistry

profile.

This type of analysis can be used for standard and

preferred product.

Enables the company to make an informed business

decision.

(To know when less might be more)

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Stretch Exceptions (but with written and approved procedures)

Underwriting View

Waive requirements
APS too costly and

time consuming

Preferred is just a

state of mind

What’s a table or a

pound or a mmol/litre Pricing View

Classes shifting who

fits where. All classes increase.

Overlaps expected to

go both ways

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Segmenting the Risk

CREDITS DEBITS 80% Difference in Mortality Same Rate