1. CRITICAL DIAGNOSIS INSURANCE
David R. Beard, ASA, MAAA, CLU
AVP, Product Development
EMC National Life Company

2. Course Objectives Most Common Covered Illnesses History
Concept of Product
Alternative Product Designs
Underwriting
Rates
Benefits
Markets
2/23/07
EMC National Life Co.

3. Incidence of Critical Illness
About 1,400,000 new cancer cases are expected to be diagnosed in 2006.*
On average, every 45 seconds someone in the United States has a stroke.**
About every 26 seconds an American will suffer a coronary event, and about every minute someone will die from one.**
* American Cancer Society. Cancer Facts and Figures Atlanta. American Cancer Society, 2006.
** American Heart Association. “Heart Disease and Stroke Statistics – 2006 Update.” Circulation. Dallas: American Heart Association, 2006.
2/23/07
EMC National Life Co.

4. Survival Rates 70% Heart Attack Victims Survive At Least Three Years
75% Stroke Sufferers Are Still Alive One Year Later
The 5-Year relative survival rate for all cancers diagnosed between 1995 and 2001 is 65%.*
* American Cancer Society. Cancer Facts and Figures Atlanta. American Cancer Society, 2006.
2/23/07
EMC National Life Co.

5. Paying for Critical Illness
90% Dependent Upon Caregivers
Savings And Borrowed Funds Subsidize Care
Critical Illnesses Create Heavy Emotional And Financial Burdens
2/23/07
EMC National Life Co.

6. Introduction and Facts About Critical Illness
Harvard Law School Study, February 2005
Half of all bankruptcies in America stem from high medical expenses. Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 even though 76% had medical insurance when they fell ill.*
* Wegner, Jonathan. Critical Illness Policies Sell, But Some Question the Need. Omaha World Herald 4 Jun. 2005: 01D.
2/23/07
EMC National Life Co.

7. Can You Survive Financially?
33% of Families Deplete All Or Most Of Their Savings As A Result Of A Serious Illness
67% Of All Cancer Related Costs Are Indirect, Non-medical Expenses
Experimental Medical Treatments May Not Be Covered By Your Health Insurance
2/23/07
EMC National Life Co.

8. History of Critical Diagnosis
Dr. Marius Barnard of South Africa
Concern About Financial Impact On Patients
Concept Spread To United Kingdom, Japan, Australia
Introduced in Canada And United States During Late 1900s
2/23/07
EMC National Life Co.

9. Introduction of Critical Diagnosis/Illness Insurance
Critical Illness coverage was first offered in South Africa in 1983.
More than 70 carriers in the United Kingdom offer Critical Illness with over $100 billion in sales since its introduction in 1987
Over 500,000 policies were sold in the first 10 months available in Japan
2/23/07
EMC National Life Co.

10. The Concept Upon Diagnosis What The Product Is Not
Terminal Illness Rider
Viatical Settlement
2/23/07
EMC National Life Co.

11. Traditional Products Not the Answer…If You Survive!
Disability
% of Monthly Salary
Lengthy Waiting Periods - Executives
Dependent Upon Ability to Work
Long-Term Care
Daily Benefit
Hospital Stay or Home Nursing Requirement
Accumulation Products
Retirement
2/23/07
EMC National Life Co.

12. Traditional Products Not the Answer…If you Survive!
Life
Intended for dependents/beneficiaries
Not available if sufferer is alive
Health
Limited in scope/access (HMO-PPO)
Portability at risk
2/23/07
EMC National Life Co.

13. Product Design Rider Attached To Life Insurance Policy
Health Policy And Riders
Treatment Of Death, By Policy Type
2/23/07
EMC National Life Co.

14. Critical Illness Insurance
Traditional life insurance provides financial security for your family if you die…
…but not for you if you live.
Now Critical Benefits Life provides both!
2/23/07
EMC National Life Co.

15. Version 1.0 $50,000 Minimum Benefit $250,000 Maximum Benefit
Issue Ages (age last birthday)
Up to Table 8
20 Year Term Or To Age 70
50% and 100% Accelerated Death Benefit
Waiver of premium, accidental death, and children’s term riders are available
2/23/07
EMC National Life Co.

16. Covered Conditions (1.0) Heart Attack Stroke Invasive Cancer 2/23/07
EMC National Life Co.

17. Covered Conditions (1.0) Terminal Illness
Non-invasive Carcinoma % initial benefit
Paralysis
Kidney Failure
Major Organ Transplant
Blindness
2/23/07
EMC National Life Co.

18. Version 2.0 $20,000 Minimum Benefit $1,000,000 Maximum Benefit
Issue Ages (ALB)
Up To Table 8
20 Year Term Or To Age 70,
50% and 100% Accelerated Death Benefit
Waiver Of Premium, Accidental Death, And Children’s Term Riders Are Available
2/23/07
EMC National Life Co.

19. Covered Conditions (2.0) Loss of Independent Living
HIV for Medical Personnel
Coronary Artery Bypass Surgery - 25% Benefit
Coronary Angioplasty - 10% Benefit
Severe Burns
2/23/07
EMC National Life Co.

20. Sample Annual Premium Male, 45, NonTobacco $100,000 Term $ 493
CI 50% $ 976
CI 100% $1,403
2/23/07
EMC National Life Co.

21. Critical Benefits Example
2/23/07
EMC National Life Co.

22. Version 3.0 $20,000 Minimum Benefit $500,000 Maximum Benefit
Issue Ages (ALB)
Up To Table 4
10 Year Term Or To Age 70
100% Accelerated Death Benefit
Waiver Of Premium, Accidental Death, And Children’s Term Riders Are Available
2/23/07
EMC National Life Co.

23. Covered Conditions (3.0) Advanced Stage Cancer Heart Attack Stroke
Kidney Failure (End Stage Renal Disease)
Major Organ Transplant Surgery
Paralysis**
Blindness**
Severe Burns**
Terminal Illness or Death
Occupational HIV Infection**
Early Stage Cancer (25%)
Coronary Artery Bypass Surgery (25%)
Coronary Angioplasty (10%)
** Benefits are excluded under the Children’s Rider
2/23/07
EMC National Life Co.

24. Covered Conditions (3.0)
ALS (Amyotrophic Lateral Sclerosis or Lou Gehrig’s Disease)
Advanced Multiple Sclerosis (25%)
Advanced Alzheimer’s Disease**
** Benefits are excluded under the Children’s Rider
2/23/07
EMC National Life Co.

25. How Product is Underwritten
Full Underwriting
Large Lump-sum Benefits
Detailed Health And Health-History Questions
Examinations May Be Required
Simplified Underwriting
$100,000 Or Less
Short-Form Applications
Physical Exams Not Required
Accept Or Reject Basis
2/23/07
EMC National Life Co.

26. Additional Considerations
Morbidity vs. Mortality
Financial Underwriting
Individual vs. Worksite Markets
Genetic/Family History Importance
2/23/07
EMC National Life Co.

27. Industry Rate Structure
Health vs. Life Product
Policy vs. Rider Consideration
Level vs. Increasing Premiums
Guaranteed vs. Indeterminate Premiums
Reinsurance Role
2/23/07
EMC National Life Co.

28. Benefit Triggers 48 Worldwide Definitions Of Critical Illness
NAIC Model Definitions
Definitions And Analysis Of Main Illnesses
Partial-Payment Considerations
Payment In Event Of Death
Waiting And Survival Periods
2/23/07
EMC National Life Co.

29. State Compliance Issues
NAIC Model
Min Loss Ratios
Max Guaranteed Rates
ADL’s
Exclude Pre-Ex Conditions
2/23/07
EMC National Life Co.

30. CI Benefit Taxation Not Clear 1099 LTC Ask Your Tax Advisor 2/23/07
EMC National Life Co.

31. Potential Markets Disability Income Enhancement
High Deductible Major Medical
Lifestyle Adjustment Expenses
Needs Analysis Solution
Stay At Home Parents - Child Care
Key Man Business Protection
2/23/07
EMC National Life Co.

32. Sources of Additional Information
Critical Illness Rider for Individual Insurance, Wendy Lee, FSA, MAAA
Actuarial Practice Forum January 22, 2007 Volume 1 Issue 2
Gen Re Critical Illness Survey
2/23/07
EMC National Life Co.

33. Questions?
2/23/07
EMC National Life Co.