Health: Critical analysis

ANALYSIS CRITICAL

John Ferguson looks at the critical illness experience in Asia and what insurance claims tell us about future trends in the area

22 | THE ACTUARY | JANUARY / FEBRUARY 2020 G en Re has been conducting surveys of critical illness for nearly 30 years. The fi rst study looked at experience from 1990-1994 and analysed 4,600 claims. The most recent study, covering experience from 2012-2015, involved analysing more than 1.2m claims, refl ecting the large growth in critical illness products in Asia. In total, 39 companies participated, from Hong Kong, Singapore, Malaysia and China. The survey focused mostly on traditional acceleration critical illness products – acceleration meaning that the benefi t is paid either on death or on earlier diagnosis of a critical illness.

1 Sum assured Figure 1 shows the average sum assured (denominated in US$ for comparison), by issue year.

FIGURE 1: Average sum assured (US$) by issue year 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

KEY: CHINA HONG KONG MALAYSIA SINGAPORE

Even in developed Asian markets such as Singapore and Hong Kong, the average sum assured is not particularly large compared with regions such as the UK or Australia. It’s also worth noting that the average sum assured in China has increased six times in just 15 years, from a fraction under US$3,000 to just under US$18,000. One can also see a large increase in sum assured since 2011 in Hong Kong. Much of this can be attributed to cross-border sales – for example, people from mainland China may purchase cover in Hong Kong, where it is cheaper and the currency is freely convertible.

2 Claims declinature rates Declinature rates are the proportion of claims submitted by customers that are rejected. Figure 2 looks at claims declinature rates by claim type and by market. Claims for major diseases are more likely to be rejected than death claims, but the highest declinature rate is for claims for minor diseases, such as pre-cancerous carcinoma in situ. We also found that declinature rates varied signifi cantly by company, and did not appear to relate to company size.

FIGURE 2: Claim declinature rates by market and type of claim

MAJOR DISEASE CLAIM MINOR DISEASE CLAIM 3 Claim by disease type Figure 3 shows the percentage of claims by disease for males, together with how each disease ranks in terms of frequency of claim. Note that that not all products cover the same causes.

FIGURE 3: Claim causes by market and disease type – males

CHINA HONG KONG MALAYSIA SINGAPORE Cancer 47.3% 1 56.9% 1 38.7% 1 45.2% 1 Heart attack 16.1% 2 9.3% 3 19.1% 2 25.2% 2 Angioplasty and related procedures 0.1% 25 9.9% 2 2.0% 8 2.5% 7 Accidental death 6.2% 4 1.2% 9 8.5% 3 3.2% 5 Stroke 11.6% 3 7.0% 4 7.7% 4 6.8% 3 Coronary artery bypass graft 2.2% 8 1.8% 6 4.8% 5 3.7% 4 Other serious artery disease 0.1% 27 2.6% 5 4.7% 6 3.1% 6 Chronic kidney failure 3.3% 5 1.8% 8 4.7% 6 1.9% 8 Suicide 0.5% 16 1.8% 6 0.7% 11 0.8% 11 Sudden death 2.9% 6 0.4% 15 0.2% 25 0.2% 21 Possible suicide 2.3% 7 0.5% 12 1.4% 9 0.3% 16 Heart valve surgery 0.6% 14 1.0% 10 0.9% 10 1.2% 9 Sudden death – cardiac 1.1% 9 0.1% 24 0.6% 13 0.2% 20 Liver failure 0.9% 10 0.4% 13 0.7% 12 0.4% 15 Parkinson’s disease 0.1% 31 0.2% 22 0.3% 19 1.1% 10 TOP 10 93.8% 93.4% 92.6% 94.0% TOP 20 98.4% 97.1% 97.6% 98.3%

We note that cancer is by far the most common claim cause, followed by heart attack and heart-related procedures (such as angioplasty or coronary artery bypass surgery).

Accidental death claims are signifi cant in China and Malaysia but less so in Singapore and Hong Kong. We examined the accidental deaths in more detail and noted that the fi rst and second policy years had signifi cantly worse experience. Suicide would normally be excluded in the fi rst one or two policy years, so it may be that these accidents are undetected suicides. We looked into accidental death claims where the cause may be associated with suicide, including ‘falling from a great height’, ‘accidental drowning’ and ‘gas poisoning’. Drilling down at this level for the Chinese market data seemed to suggest that many of these extra accidental deaths could be due to suicide.

FIGURE 4: Claim causes by market and disease type – females

CHINA HONG KONG MALAYSIA SINGAPORE Cancer 73.6% 1 83.4% 1 79.0% 1 82.9% 1 Stroke 7.7% 2 3.4% 2 5.3% 2 4.9% 2 Chronic kidney failure 2.4% 5 0.8% 8 3.4% 3 1.8% 4 Heart attack 4.9% 3 1.1% 6 2.7% 4 3.5% 3 CIS of breast 0.1% 24 2.0% 3 0.0% 61 0.0% 31 Accidental death 2.5% 4 0.5% 9 2.6% 5 1.0% 5 CIS of cervix 0.2% 17 1.8% 4 0.0% 61 0.0% 48 Angioplasty and related procedures 0.0% 36 1.4% 5 0.5% 7 0.4% 12 Coronary artery bypass graft 0.9% 8 0.1% 21 0.8% 6 0.3% 13 Heart valve surgery 0.7% 9 0.4% 11 0.4% 10 0.6% 6 Sudden death 1.1% 6 0.0% 49 0.0% 39 0.0% 48 Other serious artery disease 0.0% 39 0.3% 14 0.5% 7 0.4% 11 Possible suicide 0.9% 7 0.1% 23 0.4% 11 0.1% 17 Parkinson’s disease 0.1% 29 0.1% 25 0.3% 14 0.6% 7 Suicide 0.5% 11 1.0% 7 0.2% 17 0.5% 10 TOP 10 95.3% 95.9% 95.6% 96.8% TOP 20 98.4% 98.2% 98.1% 99.0%

Claim causes for females (shown in Figure 4) are dominated by cancer in all four markets. The second most common claim cause, stroke, accounts for less than one tenth of claims. Claims from heart attack and heart-related diseases are less important than for males. This is partly because most exposure still comes from women under the age of 50. We would expect to see more claims from these causes over time as the insured female population ages.

4 Female cancer claims We looked at a breakdown of female cancer claims in more detail (Figure 5), since this is the dominant claim reason.

FIGURE 5: Cancer claims by sites for diff erent markets – females

CHINA HONG KONG MALAYSIA SINGAPORE

KEY: NASOPHARYNGEAL OESOPHAGUS AND STOMACH COLORECTAL LIVER AND BILE PANCREAS LUNG BONE BREAST UTERUS OVARY KIDNEY BRAIN THYROID LYMPHOMA MULTIPLE MYELOMA LEUKAEMIA OTHER

Breast cancer is the most common type of cancer in each of the four markets, making up more than 40% of cancer claims. In China, thyroid cancer is the second most common cancer in females. This is surprising,

FIGURE 6: Trend in thyroid cancer claims rates (per thousand) for females

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

since thyroid cancer is not a particularly common cancer elsewhere. Figure 6 (below left) shows the large increase in female thyroid cancer during the past decade in China. This was also seen in Korea a few years previously (not shown in the fi gure). The cause does not appear to be related to diet, lifestyle or any particular genetic factors, and the increase may actually be due to improved diagnostic technology in China, where screening can be included as an employment benefi t. Studies show that thyroid cancer, in particular papillary carcinoma of the thyroid, could have a 10-30% prevalence in the Asian population, even at younger adult ages. However, the great majority of these will not have any symptoms, as the cancer remains small and slow-growing, and may even disappear. A suff erer could live to an old age and die of other causes, never knowing that they had thyroid cancer. Since the standardised disease defi nition used in China currently does not exclude the very small papillary carcinomas, improved diagnosis has driven the increase in thyroid cancer claims.

5 Body mass index (BMI) For the fi rst time in this survey, we received information from companies that enabled us to calculate claim rates by BMI band (Figure 7). There is a clear upward trend, starting from the lowest BMI band.

We also looked at the eff ect of BMI on diff erent diseases. For cancer, the highest BMI band had incidence rates 50% higher than the lowest band. Diff erences were even more marked for cardiovascular diseases. For stroke, the highest BMI category was 170% higher than the lowest, while for heart attack the diff erence was around 300%.

FIGURE 7: Age standardised claim rates (per thousand) by BMI

7.00 6.00 5.00 4.00 3.00 2.00 1.00 0

17-18 18-19 19-21 21-23 23-24 24-25 25-26 26-27 27-28 28-30

KEY: FEMALE MALE

This article highlighted some of the fi ndings from Gen Re’s 2012-2015 critical illness survey. While we have been able to show common trends and diff erences at a market level, there will be signifi cant variation within each market, at a company level, which we did not have space to explore in this feature.

JOHN FERGUSON is life/health regional chief actuary, Shanghai at Gen Re. He would like to thank Dr Jianbo Xiang and Ryan Tian for managing the survey.

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