How to Get Better at Critical Illness Pricing
Critical illness policies in the UK commonly use definitions that are based purely on the fact of a diagnosis, rather than the severity of the diagnosis. It means that advances made in diagnostic methods can influence claims rates, as well as actual incidence trends in diseases such as breast cancer or prostate cancer.
Clearly, screening programs, especially where advanced techniques are used, will increase diagnosis rates by bringing forward diagnoses from older ages. Screening also identifies illnesses that might not otherwise be detected in the patient’s lifetime.
Breast cancer screening using mammograms was introduced to the UK in 1988 for women aged between 55 and 64 and extended up to age 70 in 2003. For the age bands 50-64 and 65-69, breast cancer incidence peaked at a rate 47% higher than the pre-screening rate.
With prostate cancer in men, current detection rates are only a fraction of the underlying prevalence shown by autopsies. But again detection rates are increasing with time, inevitably leading to higher claim rates in the future, especially in insurers’ back book.
It’s different in the life insurance business, where mortality risk is more certain and screening can reduce claim rates. Guaranteeing sustainable rates for critical illness products that can last 20 years is a more complex challenge altogether.
The problem isn’t insurmountable, but the onus is now on critical illness insurance providers to stay up-to-date with developments in screening, factor them into pricing and modify policy wordings - and even consider setting up additional reserves for existing business. Read our full article for more on critical illness rates.