CMI IP Experience: A User’s PerspectiveDarshan Singh, Gen Re

A User’s Perspective

Inception rates: trends and the economy Termination rates: is there scope for more?

Comments on the CMI graduation and;

More data please!

2001-2002 experience vs 1995-96

Male FemaleDP4 DP13 DP26 DP52 DP4 DP13 DP26 DP52

Class 1 -32% -32% -31% -33% -48% -38% -31% -30%Class 2 -49% -11% -21% -29% -56% -50% -35% -18%Class 3 -54% -28% -13% -28% -77% -53% -59% -79%Class 4 -50% -33% -32% -64% - - - -

Trends in Male Class I inceptions

As % of Year 2002. Ages 18-59

Trends in Female Class I inceptions

Changes in contributing offices

Offices do not necessarily provide figures on all their business

Reclassification of Class Unknown into Class 1

Some points to watch out for…

Some reasons for inception trends The Economy Change in state benefits in 1995

Replacement of invalidity benefit by incapacity benefit

Underwriting developments Occupational reclassification of doctors, nurses, teachers etc

Changes in product design Early notification Changing definitions of incapacity

Male Class 1 Inceptions vs Unemployment

0%

2%

4%

6%

8%

10%

12%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Year

Un

em

plo

ym

en

t ra

te

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

DP

4 i

ncep

tio

ns a

s %

of

2002

Unemployment DP4 Inceptions as % of 2002

The economic link elsewhere Australian study shows link

http://ecocomm.anu.edu.au/research/papers/pdf/2001-01.pdf

American study by UNUM also shows a link http://library.soa.org/library/record/2000-09/rsa02v28n233of.pdf

Link with the local economy is apparent for state benefits

Will the trend turn?

The UK economy has enjoyed tremendous growth Is a downturn inevitable?

Should insurers price in an economic cycle? For guaranteed rates? For reviewable rates?

How much of the recent trend is permanent and how much cyclical?

Trends in recoveriesMale Class 1 CMIR12 A/E as % of 2002 A/E

Scope for more recoveries

Case management focus Get in there early! Rehab is here to stay Use of the telephone Specialist approaches for different causes of

claim

New CMI graduation of recoveries

Main changes: No longer ‘unified’

model Different for different

DPs

Comments on the new graduation

At some point recovery rates for the different DPs should converge

The graduation is based on 1991-98 data trends to 2002 have not been calculated on this basis

Good CMI data is crucial

To increase supply…

We need to maintain and improve the data the CMI gives the industry

A scene replicated across the UK….

Demand for IP is high

More data please! Rating factors in CMI

Age Sex Deferred period Occupational class

Rating factors not in CMI Disability definition Exact Occupation Self-employment Smoking status Benefit amount Replacement ratio Policy duration Claims management practices Socio-economic group Geographic location ....

More technology please!

Individual year data still circulated as word documents

Flexibility reduced by hard coded age categories Termination data especially difficult to work with: age

and duration categories change from year to year

Questions