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

Long Term Care Insurance (LTCI) A Munich Re LTC Claims Study IAAHS Colloquium 29 April 2004 Dipl.-Math. Hans-Jürgen Andres Münchener Rück Munich Re Group 1

A Munich Re LTC Claims Study Munich Re Contents: 1. Results of the MR LTC Claims Study 2. Development of the new MR LTC calculation basis 2002+ 3. Follow-up 2

1. Results of the MR LTC Claims Study 3

A Munich Re LTC Claims Study Munich Re 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 4

A Munich Re LTC Claims Study Munich Re 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 5

A Munich Re LTC Claims Study Munich Re Data collected General Commen- Gender Date of Birth Diagnosis Benefit Termination Cause of cement Amount of Claim Termination of Claim Claims history at home Level I Level II Level III from until from until until from in a nursing home Level I Level II Level III from until from until from until 6

A Munich Re LTC Claims Study Munich Re Claims experience 1995–99 Claims portfolio Males Females Total Number 5,800 8,200 14,000 Gender 41% 59% Average age 1 73 80 77 Place of care - at home 81% 64% 70% - in a nursing home 19% 36% 30% 1 at claims commencement 7

A Munich Re LTC Claims Study Munich Re Claims experience 1995–99 LTC claims: Age at commencement (distribution in %) 100 89.3 90 80 70 60 51.4 50 39.8 40 28 30 20 Total 9.9 11.5 8.4 Males 10 1.2 1 Females 0 3-19 20-39 40-59 60-69 70-79 80-89 90-99 60+ 80+ 8

A Munich Re LTC Claims Study Munich Re Claims experience 1995–99 LTC claims: Year of commencement (distribution in %) 40 35 30 25.0 25 17.1 20 16.1 16.0 15.5 15 10.3 Total 10 4.4 Males 5 0.6 1.3 Females 0 5 8 9 6 7 0 9 9 9 0 5 5 9 9 9 8 8 9 9 9 9 9 9 9 9 9 1 1 1 1 1 9 1 1 1 1 e e e e r r r r o o o o f f f f e e e e b b b b 9

A Munich Re LTC Claims Study Munich Re Derived data: development process Raw values ages incidence rates 50 - 95 mortality rates – non-claimants 40 - 95 – claimants 45 - 99 � Smoothing (Whittaker-Henderson) � Extrapolation to younger/older ages � a i i ,q ,q Best estimate from the private compulsory LTCI z z z 10

A Munich Re LTC Claims Study Munich Re Incidence rates (in ‰) Males Females Comparison Age (1) (2) (3)=(2)/(1) 50 0.7 0.7 107.1% 60 2.4 2.0 85.1% 70 9.8 7.3 74.8% 80 44.7 46.3 103.5% 90 164.9 196.8 119.4% 100 405.6 522.7 128.9% 11

A Munich Re LTC Claims Study Munich Re Incidence rates (in ‰) ‰ Males 500 Females 400 300 200 100 0 50 60 70 80 90 100 Age 12

A Munich Re LTC Claims Study Munich Re Non-claimant mortality (in ‰) Age Males Females Comparison (1) (2) (3)=(2)/(1) 40 1.0 0.6 56.0% 50 2.8 1.7 61.7% 60 7.1 4.2 59.3% 70 19.3 9.7 50.4% 80 53.6 28.4 53.1% 90 140.6 87.4 62.2% 100 240.9 192.0 79.7% 13

A Munich Re LTC Claims Study Munich Re Non-claimant mortality (in ‰) ‰ Males 30 Females 20 10 0 40 50 60 65 70 75 Age 14

A Munich Re LTC Claims Study Munich Re Claimant mortality rates (from 2nd year) (in ‰) Males Females Comparison Age (1) (2) (3)=(2)/(1) 50 82.5 63.5 76.9% 60 94.7 87.5 92.4% 70 141.6 96.6 68.2% 80 204.2 133.2 65.2% 90 288.8 194.9 67.5% 100 419.0 327.2 78.1% 15

A Munich Re LTC Claims Study Munich Re Claimant mortality rates (from the 2nd year) ‰ Males 500 Females 400 300 200 100 0 50 60 70 80 90 100 Age 16

A Munich Re LTC Claims Study Munich Re Claims experience 1995–99 Average duration of LTC (60+, at home & in a nursing home, in years) 6 5.4 5.0 5 4.4 4 3.1 3.2 3.1 2.8 2.8 2.9 3 2.6 2.5 2.1 2 Total 1 Males Females 0 open concluded observed in total 17

A Munich Re LTC Claims Study Munich Re Claims experience 1995–99 Primary diagnoses (in %) 30 28.4 23.6 24.0 25 20 17.3 15.1 Males 15 13.0 Females 12.4 9.7 8.8 9.1 10 7.1 3.7 5 0 Dementia Cerebrovascular Arterio- Osteoporosis Cancer Heart diseases sclerosis 18

A Munich Re LTC Claims Study Munich Re Characteristics of the MR claims study – 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 19

2. Development of the new MR LTC calculation base 2002+ 20

A Munich Re LTC Claims Study Munich Re Development of the product-specific MR LTC calculation basis 2002+ a i i , q , q German private CLTCI z z z a i MR international i , q , q z z z a i i , q , q MR national z z z a i i , q , q MR product specific z z z 21

A Munich Re LTC Claims Study Munich Re German private CLTCI MR international a i i , q , q German private CLTCI z z z Modifications that make allowance for the special features of the CLTCI – definition of LTC of the social insurance – benefit trigger in case of cognitive impairments – underwriting quality a i i , q , q MR international z z z 22

A Munich Re LTC Claims Study Munich Re MR international MR national a i i , q , q MR international z z z 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 a i i , q , q MR national z z z 23

A Munich Re LTC Claims Study Munich Re Development of national incidence rates Gender- and age-related rates for LTC relevant causes of death (dementia, arteriosclerosis etc.) (source: WHO) � Weighting using the MR statistics of primary diagnosis � Comparison of market values with values for Germany � Multiplicative modifier 24

A Munich Re LTC Claims Study Munich Re Development of national mortality rates Non-claimant and claimant mortality Determining a multiplicative modifier so that: 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 *LE = Life Expectancy 25

A Munich Re LTC Claims Study Munich Re Resulting country modifiers Example Country Incidence rates Mortality rates Non-claimants Claimants a a i i i x i y q x q y q x q y France 0.84 0.95 0.83 0.74 0.91 0.86 Japan 0.86 0.67 0.80 0.70 0.91 0.82 26

A Munich Re LTC Claims Study Munich Re MR national MR product specific a i i , q , q MR national z z z Product specific modifications for – definition – dementia (stand-alone benefit trigger or not) – benefit design (e.g. partial benefits) – deferment period – underwriting – other a i i , q , q MR product specific z z z 27

A Munich Re LTC Claims Study Munich Re Premium examples Cover Lifelong Scope of cover Care at home and in a nursing home, professional and lay Definition Standard definition of six ADLs: Bathing, dressing/undressing, personal hygiene, mobility, continence, eating/drinking dementia is an independent benefit trigger Deferment period Three months Waiting period None Benefit Monthly annuity of 100 Graduation of benefits 50% for three or four ADLs 100% for five or six ADLs Benefit period Lifelong Premium payment Annual, lifelong , with waiver of premium Interest 2.5 % 28

A Munich Re LTC Claims Study Munich Re Net annual level premiums Men Germany France Japan Age Comparison Comparison (1) (2) (2)/(1) (3) (3)/(1) 40 19.53 20.50 105.0% 21.19 108.5% 50 29.93 31.14 104.1% 32.15 107.4% 60 49.80 51.11 102.6% 52.70 105.8% 70 92.37 92.92 100.6% 95.65 103.6% 80 191.38 187.51 98.0% 192.76 100.7% 29

A Munich Re LTC Claims Study Munich Re Net annual level premiums Women Germany France Japan Age Comparison Comparison (1) (2) (2)/(1) (3) (3)/(1) 40 34.31 40.73 118.7% 35.34 103.0% 50 51.75 60.98 117.9% 52.50 101.5% 60 83.81 97.73 116.6% 83.12 99.2% 70 156.15 178.81 114.5% 148.31 95.0% 80 331.22 371.17 112.1% 295.84 89.3% 30

3. Follow-up 31.12.2001 31

A Munich Re LTC Claims Study Munich Re 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 % 32

A Munich Re LTC Claims Study Munich Re 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 33