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

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

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 2006. 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.

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 2006. Atlanta. American Cancer Society, 2006. 2/23/07 EMC National Life Co.

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.

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.

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.

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.

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.

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

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.

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.

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.

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.

Version 1.0 $50,000 Minimum Benefit $250,000 Maximum Benefit Issue Ages 18-65 (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.

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

Covered Conditions (1.0) Terminal Illness Non-invasive Carcinoma - 10% initial benefit Paralysis Kidney Failure Major Organ Transplant Blindness 2/23/07 EMC National Life Co.

Version 2.0 $20,000 Minimum Benefit $1,000,000 Maximum Benefit Issue Ages 18 - 65 (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.

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.

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

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

Version 3.0 $20,000 Minimum Benefit $500,000 Maximum Benefit Issue Ages 18 - 65 (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.

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.

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.

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.

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

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.

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.

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

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

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.

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.

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