Unborn Child Insurance - How Early Can Coverage Begin?
Life insurance products provide financial protection for the life and health of a person. The question is when does that life begin and at what point may insurance cover be provided. Pre-natal cover is the generic name of an innovative product that has emerged in Asia in recent years to insure an unborn life from the early stages of a pregnancy through to birth and for the rest of a child’s life.
The juvenile market (ages 0-19) has traditionally been an important segment for insurers in Asia. It forms between 15% and 24% of all insurance business in Asia.1,2 In countries such as Vietnam and Philippines, the juvenile market accounts for as much as a third of the insured pool. In the face of increasing competition, the ability to offer coverage before a child is born offers an ideal way of capturing more of this market earlier.
By issuing a policy covering a person before they are born, pre-natal cover pushes the boundary of the answer to the question on when insurable life begins.
Typically, pre-natal products comprise of three elements that insure both the mother, and the child she carries, during different stages of pregnancy and life. The first element insures a pregnant mother until right after her child is born, offering cover against severe and specific pregnancy complications, hospitalization due to premature birth or death of the mother. To avoid moral hazard, providing a benefit due to loss of the foetus isn’t generally encouraged. If the focus of the coverage (the foetus) ceases to exist, insurers typically refund the premium paid and the policy is cancelled.
The second part of the product covers the immediate period following birth - through to the first few years (typically two or three years). Coverage during this stage includes serious congenital conditions and specific childhood diseases that require hospitalization. Some products provide a small benefit upon the death of the child (including stillbirth).
However, the final part of this product's concept is also where the main focus lies. It provides long-term coverage, including mortality, terminal illness, total permanent disability, critical illness, etc. Essentially, the full suite of insurance coverage that an insurer offers to its juvenile market can be packaged in the “third part” of the pre-natal product.
The key marketing message of the product is about securing long-term insurance cover for the child even before it is born. This cover is offered on a “guaranteed issue” basis, with no further underwriting following the child’s birth. This helps overcome the anxiety and uncertainty of the parent(s) regarding the child’s insurability should it be born with congenital disorders or conditions.
The target market for these products includes soon-to-be mothers and fathers. The policy is first issued on the life of the pregnant woman before being transferred to her child after birth. Due to cultural concerns and pregnancy stability during the initial weeks, insurers typically restrict the minimum entry to 16 to 18 weeks into gestation. This also helps to facilitate underwriting as a gynaecological assessment at the end of first trimester, which typically accompanies a detailed antenatal scan, and provides information on the health status of the mother and a good indication on the (normal) foetal development. Maximum gestation age at entry is typically capped at 35 or 36 weeks to allow the insurer time to underwrite the risk before the child is born.
With declining birth rates in many developed and developing countries in Asia, one may argue that such a product has limited potential. Nevertheless, it allows insurance agents to “capture” a life at its earliest stage and often gives them the opportunity to sell other products to expecting parents at the same time. Tugging at the heart strings of a parent-to-be, centering on the love and concern for the unborn child, a pre-natal product provides some peace of mind during pregnancy and a child’s life.
- Gen Re Dread Disease Survey, 2008-2012.
- Actuarial Society of Hong Kong, 2002-2006: Hong Kong Assured Lives Mortality and Critical Illness Experience Study.