2009 Annual Meeting ● Assemblée annuelle 2009 Halifax, Nova Scotia ● Halifax (Nouvelle-Écosse) 2009 Annual Meeting ● Assemblée annuelle 2009 Halifax, Nova Scotia ● Halifax (Nouvelle-Écosse) Canadian Institute of Actuaries Canadian Institute of Actuaries L’Institut canadien des actuaires L’Institut canadien des actuaires

Ins and Outs of Health Insurance Coverage for Canadians Dave Burry President Travel Insurance Specialists Ltd Annual Meeting Assemblée annuelle Annual Meeting Assemblée annuelle 2009

Plan Design Tools 1)Eligibility Criteria (eliminate the poorest risks). -Red light versus Green light -Impacts both premiums and claims in different magnitudes (eg. lowers premiums by 1000 but reduces claims by 5000)

A La Carte Eligibility Requirements 1. You must not have: a) ever been diagnosed with congestive heart failure [CHF]; b) had your most recent coronary artery by-pass or angioplasty surgery before January 1, 1999; c) an aneurysm that has not been surgically repaired; d)had 2 or more of the following: coronary artery by-pass, coronary angioplasty, stenting, pacemaker insertion or valve replacement; or e)been advised by any physician not to travel on your trip. 2. In the past 24 months you must not have: a) received treatment or taken medication for a terminal illness; b) required dialysis; or c) been prescribed home oxygen. 3. In the past 12 months you must not have been hospitalized for 24 or more consecutive hours for: a) abnormal heart rhythm, high blood pressure, blood clot(s); b) cardiomyopathy, valvular disease of the heart, valve replacement, coronary artery disease (including angina), heart attack (myocardial infarction), stroke or mini-stroke [TIA]; or c)chronic lung condition (including emphysema, chronic bronchitis, chronic asthma or Chronic Obstructive Pulmonary Disease [COPD]). 4. In the past 12 months you must not have: a) been prescribed or taken 5 or more medications (including nitroglycerine in any form) in total (regardless of whether you used the medications) for one or more of the following conditions: - stroke or mini-stroke [TIA] (transient ischemic attack); - abnormal heart rhythm, high blood pressure, blood clot(s); - cardiomyopathy, valvular disease of the heart, valve replacement, coronary artery disease (including angina), heart attack (myocardial infarction); - diabetes; - diverticulitis, Crohn's disease, ulcerative colitis, chronic constipation, Irritable Bowel Syndrome [IBS], or any other chronic bowel disorder; - kidney (or renal) failure; - liver disorder, pancreatitis; or - chronic lung condition (including emphysema, chronic bronchitis, chronic asthma or Chronic Obstructive Pulmonary Disease [COPD]); b) had a coronary angioplasty procedure or stenting; c) received treatment for metastatic cancer; or d) had surgery for a heart, lung or gastrointestinal condition refused or postponed by you or any physician.

Plan Design Tools (cont’d) 2) Plan Selection -price poorer risks at higher levels (i.e. match expected claim pattern with the premium needed to cover the risk) -use plan selection criteria that “pushes” sicker people into higher priced plans -how many plans do you need?

A La Carte Underwriting Questions A. Have you used tobacco products at any time in the last 12 months? points B. Was your last complete medical examination by a physician more than 18 months ago? points C. In the last 6 months have you been prescribed or taken any medication for, or as the result of: coronary, vascular or carotid artery surgery, heart attack (myocardial infarction), coronary artery disease (including angina), cardiomyopathy, blood clot(s), pericarditis, abnormal heart rhythm? points D. Do you have high blood pressure requiring medication and, in addition, do you have diabetes (including diet controlled)? points E. In the last 12 months, have you: 1) been prescribed or taken cholesterol medication? points 2) been prescribed or taken Coumadin (Warfarin)? points 3) been prescribed or taken, for 30 or more consecutive days, Prednisone (or equivalent steroid medication) in pill form or Lasix (Novo-Semide/Furosemide)? points 4) had cancer requiring surgery, chemotherapy, radiation and/or laser therapy (excluding removal of skin lesions)?.. 35 points 5) been prescribed or taken medication for anxiety? points 6) received treatment for urinary tract infection [UTI], urinary retention, kidney stones, gallstones or pancreatitis? points 7) had an episode of pneumonia? points 8) been prescribed or taken 3 or more medications for high blood pressure (hypertension)? points 9) been prescribed or taken 2 or more medications (including inhalers) for a chronic lung condition (including emphysema, chronic bronchitis, chronic asthma or Chronic Obstructive Pulmonary Disease [COPD])? points 10) been prescribed or taken medication for dementia (including Alzheimer’s Disease)? points 11) had a blood transfusion for anemia? points 12) received treatment for syncope or fainting? points 13) had a gastrointestinal bleed? points F. In the last 24 months, have you: 1) been diagnosed with a stroke or mini-stroke [TIA]? points 2) been diagnosed with, received treatment for or taken medication for any chronic bowel condition (including ulcerative colitis, Crohn’s disease, chronic constipation, diverticulitis or Irritable Bowel Syndrome [IBS])? points 3) had a bowel obstruction or bowel surgery? points G. Do you have peripheral vascular disease [PVD] (excluding varicose veins and venous stasis)? points

Plan Design Tools (cont’d) 3) Rate Table Construction -how many age bands (What is maximum age?) -higher daily rate by length of trip (Why?) -Single trip versus Annual Multi-Trip -Top-ups (good or bad?) Travel Insurance Specialists Ltd.

Plan Design Tools (cont’d) 4) Wording for the Policy -Pre-existing condition coverage  Length of period  Buy down to a lower period  Medication changes  Impact of using “treated” versus “stable” -Requirement for notification  Must call assistance company within 24 hours of seeking care (why, how and what happens if not compliant?) Travel Insurance Specialists Ltd.

Does the insured understand the importance of the “24 hour rule”...

Claims What is so important? -can they be stopped -how to mitigate -payment methods -managing is the key -reserving is important too Travel Insurance Specialists Ltd.

Claims 1.What happens when the answers are not accurate? 2.How do you find out? 3.Costs incurred – can they be recovered? 4.Results – deny claim? – void policy? – return premium? – pay only part of the claim?

…claim denied? …policy void? … return of premium? What happens when the answers on the application are not accurate?...

Travel Insurance Specialists Ltd. How to Fix the Loss Ratio? -reduce who you sell to by eliminating the poor risks. (easier said than done) -reduce costs (someone should be willing to work for less!) -make it up with volume (If you believe this, I have some “undervalued” stocks and real estate to speak with you about). -much better to reduce claims than to increase premiums.

…eliminate the poor risks… Fixing the loss ratio… …reduce costs…

Example 1.PremiumExpenses Claims 100% 0% 105% Solution 1: Increase premiums by 5% Solution 2: Decrease claims by 5% 2.PremiumExpenses Claims 100% 30% 75% Solution 1: Increase premiums by 7.1% Solution 2: Decrease claims by 5% 3.PremiumExpenses Claims 100% 50% 55% Solution 1: Increase premiums by 10% Solution 2: Decrease claims by 5% Travel Insurance Specialists Ltd.

…other strategies… …not quite as successful…

Travel Insurance Specialists Ltd. Marketplace Differences CANADA TOPIC U.S.A__ Not an issue Filing State by state Marketplace Rates.... Technical justification Marketplace Benefits Mandated Scrutinized Marketing Monitored Mostly fee for service....Legal Contingent fees Rarely awarded Damages Liberal Guidelines Marketing Material Filing Rely on Contract Courts Consumer friendly 1/10 of U.S Size..10 times larger than Canada Licensing Province Agents State National Carriers..... State (OFC coming?)

Marketplace Differences – Claims Canada Coverage is for “Emergency Only” Elective treatment excluded Claims management is more aggressive Claims are re-priced with savings of 25-75% Air ambulance used to repatriate to Canada U.S.A. Regulated coverage for most benefits (mandated) Claim management highly regulated (bad faith) Re-pricing used where possible Prompt payment required Travel Insurance Specialists Ltd.

Premium Differences Example: Age 73, travelling 180 days Plan 1 (best price) 1123 Plan (+8%) Plan (+50%) Plan (+60%) Plan 5 (worst price) 4044 (+40%) make it up with volume (I have some “undervalued” stocks and real estate to speak with you about). much better to reduce claims than to increase premiums.

…will put you ahead of the competition! Good plan design Proper claims management Fixing your loss ratio

Thank you. Any questions? Dave Burry President Travel Insurance Specialists Ltd.