To guarantee or not to guarantee – Challenges in critical illness insurance

To guarantee or not to guarantee – Challenges in critical illness insurance

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If people are affected by a serious disease such as cancer, they often need a protection of their income or financial support to cover the cost of state of the art treatment. For these cases, Critical Illness (CI) insurance with its prompt lump sum payment is a very attractive cover for consumers in many markets. In Europe, a lot of insurers guarantee their customers the premium of CI insurance products up to the maturity of the policy. However, this exposes them to existential risks. The main reason for this is medical progress which unpredictably changes the quality and quantity of disease diagnoses. There is a risk that an illness is detected at a much earlier stage than foreseen when premiums were set, which ultimately leads to more frequent claims for minor conditions than expected. A key task in this context is wording the definitions of the medical events covered. This presentation will discuss the requirements on CI definitions and will raise awareness about their importance and complexity. The focus will be on diseases such as cancer, heart attack and stroke which account for about 80% to 90% of all CI claims. In addition, possible solutions to the aforementioned issues will be provided in order to enable actuaries to cope with the challenges outlined, even in a guarantee environment.

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