Long Term Care Insurance (LTCI) A Munich Re LTC Claims Study IAAHS - - PowerPoint PPT Presentation

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Long Term Care Insurance (LTCI) A Munich Re LTC Claims Study

Münchener Rück Munich Re Group

Dipl.-Math. Hans-Jürgen Andres IAAHS Colloquium 29 April 2004

A Munich Re LTC Claims Study 2 Munich Re

Contents:

• 1. Results of the

MR LTC Claims Study

• 2. Development of the new

MR LTC calculation basis 2002+

• 3. Follow-up

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• 1. Results of the MR LTC Claims Study

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Goal: To derive a basis for best-estimate actuarial assumptions – incidence rates – mortality rates

• for active lives
• for LTC claimants

Source: Private compulsory LTCI in Germany

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Private compulsory LTCI in Germany Number Total* MR Study* Insureds 8.2 m 720,000 Beneficiaries 102,900 14,700

* 31.12.1999 = end of the claims study observation period

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Data collected

Gender Date of Birth Commen- cement

• f Claim

Diagnosis Benefit Amount Termination

• f Claim

Cause of Termination

General Claims history at home

Level I Level II Level III from until from until from until

in a nursing home

Level I Level II Level III from until from until from until

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Males Females Total Number 5,800 8,200 14,000 Gender 41% 59% Average age1 73 80 77 Place of care

• at home

81% 64% 70%

• in a nursing home

19% 36% 30%

1at claims commencement

Claims experience 1995–99 Claims portfolio

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51.4 11.5 28 1 1.2 8.4 9.9 89.3 39.8 10 20 30 40 50 60 70 80 90 100 3-19 20-39 40-59 60-69 70-79 80-89 90-99 60+ 80+ Total Males Females

Claims experience 1995–99 LTC claims: Age at commencement (distribution in %)

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15.5 16.0 10.3 17.1 16.1 0.6 25.0 4.4 1.3 5 10 15 20 25 30 35 40 b e f

• r

e 1 9 8 b e f

• r

e 1 9 8 5 b e f

• r

e 1 9 9 b e f

• r

e 1 9 9 5 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 Total Males Females

Claims experience 1995–99 LTC claims: Year of commencement (distribution in %)

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Derived data: development process Raw values

45 - 99 – claimants 40 - 95 – non-claimants mortality rates 50 - 95 incidence rates ages

Smoothing (Whittaker-Henderson)

• Extrapolation to younger/older ages

a i z z z

i ,q ,q

• Best estimate from the private compulsory LTCI

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100 90 80 70 60 50 Age 128.9% 119.4% 103.5% 74.8% 85.1% 107.1% Comparison (3)=(2)/(1) 522.7 405.6 196.8 164.9 46.3 44.7 7.3 9.8 2.0 2.4 0.7 0.7 Females (2) Males (1)

Incidence rates (in ‰)

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100 200 300 400 500 50 60 70 80 90 100 Age ‰

Males Females

Incidence rates (in ‰)

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Non-claimant mortality (in ‰)

100 90 80 70 60 50 40 Age 79.7% 192.0 240.9 62.2% 87.4 140.6 53.1% 28.4 53.6 50.4% 9.7 19.3 59.3% 4.2 7.1 61.7% 1.7 2.8 56.0% 0.6 1.0 Comparison (3)=(2)/(1) Females (2) Males (1)

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10 20 30 40 50 60 65 70 75 Age ‰

Males Females

Non-claimant mortality (in ‰)

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Claimant mortality rates (from 2nd year) (in ‰)

78.1% 67.5% 65.2% 68.2% 92.4% 76.9% 327.2 419.0 100 194.9 288.8 90 133.2 204.2 80 96.6 141.6 70 87.5 94.7 60 63.5 82.5 50 Comparison (3)=(2)/(1) Females (2) Males (1) Age

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100 200 300 400 500 50 60 70 80 90 100 Age

‰

Males Females

Claimant mortality rates (from the 2nd year)

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5.0 2.8 2.6 3.1 4.4 2.5 2.8 2.1 5.4 3.1 2.9 3.2 1 2 3 4 5 6

• pen

concluded

• bserved

in total Total Males Females

Claims experience 1995–99 Average duration of LTC (60+, at home & in a nursing home, in years)

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7.1 23.6 3.7 9.1 24.0 17.3 15.1 28.4 13.0 8.8 9.7 12.4 5 10 15 20 25 30 Males Females

Dementia Cerebrovascular diseases Arterio- sclerosis Osteoporosis Cancer Heart

Claims experience 1995–99 Primary diagnoses (in %)

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– Source = private CLTCI = identical target group for private supplementary cover plans Data on insureds – 25 % already needed care before 1995 Long-term claims are properly represented – 70 % care at home full representation for care at home / in a nursing home Characteristics of the MR claims study

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• 2. Development of the new

MR LTC calculation base 2002+

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Development of the product-specific MR LTC calculation basis 2002+ German private CLTCI

a i z z z

i , q , q MR international

a i z z z

i , q , q MR national

a i z z z

i , q , q MR product specific

a i z z z

i , q , q

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German private CLTCI MR international Modifications that make allowance for the special features

• f the CLTCI

– definition of LTC of the social insurance – benefit trigger in case of cognitive impairments – underwriting quality German private CLTCI

a i z z z

i , q , q MR international

a i z z z

i , q , q

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MR international MR national Country specific modifications which allow for special national features, e.g. – general health status – „IDH“ frequencies (invalidity, disability, handicap) – mortality rates for LTC relevant causes of death – life expectancy MR international

a i z z z

i , q , q MR national

a i z z z

i , q , q

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Gender- and age-related rates for LTC relevant causes

• f death (dementia, arteriosclerosis etc.) (source: WHO)

Development of national incidence rates

• Multiplicative modifier
• Comparison of market values with values for Germany
• Weighting using the MR statistics of primary diagnosis

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Non-claimant and claimant mortality Determining a multiplicative modifier so that:

*LE = Life Expectancy

Development of national mortality rates

LE as active life/LTC case in the country in question = LE as active life/LTC case according to MR study LE of the population as a whole in the country in question LE of the population as a whole in Germany

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qy

i

qy

a

0.82 0.86 0.70 0.74

qx

i

0.91 0.91 Claimants 0.80 0.67 0.86 Japan 0.83 0.95 0.84 France

qx

a

iy ix

Non-claimants Mortality rates Incidence rates Country

Resulting country modifiers Example

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MR national MR product specific Product specific modifications for – definition – dementia (stand-alone benefit trigger or not) – benefit design (e.g. partial benefits) – deferment period – underwriting – other MR national

a i z z z

i , q , q MR product specific

a i z z z

i , q , q

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Premium examples

2.5 % Interest Annual, lifelong , with waiver of premium Premium payment Lifelong Benefit period 50% for three or four ADLs 100% for five or six ADLs Graduation of benefits Monthly annuity of 100 Benefit None Waiting period Three months Deferment period Standard definition of six ADLs: Bathing, dressing/undressing, personal hygiene, mobility, continence, eating/drinking dementia is an independent benefit trigger Definition Care at home and in a nursing home, professional and lay Scope of cover Lifelong Cover

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Net annual level premiums Men

100.7% 192.76 98.0% 187.51 191.38 80 103.6% 95.65 100.6% 92.92 92.37 70 105.8% 52.70 102.6% 51.11 49.80 60 107.4% 32.15 104.1% 31.14 29.93 50 108.5% 21.19 105.0% 20.50 19.53 40 Comparison (3)/(1) (3) Comparison (2)/(1) (2) (1) Japan France Germany Age

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Net annual level premiums Women

89.3% 295.84 112.1% 371.17 331.22 80 95.0% 148.31 114.5% 178.81 156.15 70 99.2% 83.12 116.6% 97.73 83.81 60 101.5% 52.50 117.9% 60.98 51.75 50 103.0% 35.34 118.7% 40.73 34.31 40 Comparison (3)/(1) (3) Comparison (2)/(1) (2) (1) Japan France Germany Age

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• 3. Follow-up 31.12.2001

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Follow-up 31.12.2001 Data base 18,500 claim records Gender 57.1 % females Age at claim commencement 74 years males 80 years females Open claims 43.8 %

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Results (in comparison with the 1999 generation) Incidence rates Age 50-99: - 5.4 % males

• 7.5 % females

Mortality rates of non-claimants Age 40-95:

• 5.1 % males
• 4.3 % females

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Mortality rates for LTC claimants – first year mortality age 70 - 11 % males

• 9 % females

– ultimate (2+) age 70 + 3.7 % males + 5.6 % females Results (cont.)

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Conclusion Annual net level premiums (for an LTC standard product): Age 50-80: - 3.8 % males

• 5.5 % females

stability of MR’s current pricing basis MR-LTC-calculation basis 2002+ remains in force

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Details to the presentation can be found in the MR publication: “Long Term Care (LTC) Insurance International bases for calculation, based on a claims study carried out by Munich Re” Contact person: Hans-Jürgen Andres Münchener Rückversicherungs-Gesellschaft E-mail: hjandres@munichre.com

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Thank you for your interest!

Münchener Rück Munich Re Group