Different benefit triggers and their impact on long-term care life insurances

Different benefit triggers and their impact on long-term care life insurances


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Speaker(s): Thorsten Hiester (Allianz Lebensversicherungs-AG)

The need for care is one of the most challenging issues for all countries which undergo a demographic change from younger to elderly people due the associated longevity risk.

In response to this, the German government has changed in 2017 the long-term care definition for the national social system from three “care levels” to five “care degrees” which are also associated with different financial benefits. While a specific “care level” has been determined by the expected daily time needed for care, a “care degree” can be identified by measuring the impairment of particular skills of a patient.

Nevertheless, the compulsory long term care insurance is typically not sufficient to cover the related financial risks which arise for disabled customers from e.g. care-giving expenses or nursing home expenses, respectively.

Hence, private long-term care insurances will further gain in importance for the customers and finally for the national social systems as well. However, while introducing a new benefit definition, a corresponding claims’ experience is naturally not available. 

In order to derive also a new basis of calculation for long-term care life insurances, a working party of the German Actuarial Association (DAV) was allowed to use some statistical tables of the ministry of health which at least show the correlation between “care levels” and “care degrees” by double evaluating each of the about 1500 reviewed patients.

After a brief summary of some background information, the relevant mathematical steps are presented which have been applied to convert the previous incidence and mortality rates for “care levels” to those for “care degrees”. Finally, we discuss the risk of undergoing the need for care bearing in mind the longevity risk.

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