2003 Pensions Convention

2003 Pensions Convention

The 3rd Younger Members Convention 29-30 November 2004, The Chesford Grange Hotel, Kenilworth B2 Critical Illness ....... Pricing the Unknown Working Party / Research Group Update Scott Reid Revios Reinsurance UK Ltd. Critical Illness Trends Research Group Our Aims : To examine underlying trends in the factors influencing UK Insured Critical Illness claim rates, and from these, to assess : The historic trend in incidence and death rates for the major CIs Any pointers for future trends in Standalone CI, Mortality and hence Accelerated CI. Formed in March 2001

Group Members and our Current Focus Heart Attack Non-CI Morty Cancer Stroke & Overall Projn Actuaries Richard Morris Neil Robjohns Scott Reid Hamish Galloway Joanne Wells Martin Gilbert Medical Experts Professor Rubens Richard Croxson Consultant Oncologist Consultant Cardiologist Links :

Actuaries Panel on Medical Advances CMIB CI experience investigation ABI CI definitions group New IoA WP being set up to look at risk based capital for CI & Trends in Critical Illness Risk Costs An update from the Critical Illness Trends Research Group Historic trends in incidence for the major CIs Variations over time, by sex, by smoker status, by socioeconomic group Focussing on the age group 40 - 60 Exploring scenarios for future trends Learning from the past and looking to the future

Mapping a range of possible future outcomes for CI risk costs Trends in Critical Illness Risk Costs An update from the Critical Illness Trends Research Group Historic trends in incidence for the major CIs Variations over time, by age, sex, by smoker status, by socio-economic group Exploring scenarios for future trends Learning from the past and looking to the future Mapping a range of possible future outcomes for CI risk costs Summary of Trends in CI Incidence and Mortality Best Estimate Avg Change % pa, England & Wales, 1980-2000 Men, aged 40 - 60 Change in Incidence % pa

12% 10% 8% Heart Attack 6% Stroke 4% CABG 2% Lung Cancer 0% Other Cancer Non CI Mortality

-2% -4% -6% -10% -8% -6% -4% -2% 0% 2% Change in Mortality % pa Size of Balls Indicates Relative Importance of CI Measured by Incidence Rate. Summary of Trends in CI Incidence and Mortality

Best Estimate Avg Change % pa, England & Wales, 1980-2000 Women, aged 40 - 60 Change in Incidence % pa 10% 8% Heart Attack 6% Stroke 4% CABG Breast Cancer 2% Other Cancer

0% Non CI Mortality Lung Cancer -2% -4% -8% -6% -4% -2% 0% 2% Change in Mortality % pa Size of Balls Indicates Relative Importance of CI Measured by Incidence Rate.

Females Males Relative CI Rates by Deprivation Category Scotland, 1989 93, Ages 40 59, CI Incidence 125% 100% 75% 50% 25% 0% -25% -50% -75% Heart Stroke Cancer Lung C

Prostate C Heart Stroke Cancer Lung C Breast C 125% 100% 75% 50% 25% 0% -25% -50% -75%

Cat 1 Cat 2 Cat 3 Cat 4 Cat 5 Cat 6 Cat 7 Trends in Critical Illness Risk Costs An update from the Critical Illness Trends Research Group Historic trends in incidence for the major CIs Variations over time, by age, sex, by smoker status, by socio-economic group

Exploring scenarios for future trends Learning from the past and looking to the future Part 1 Part 2 Mapping a range of possible future outcomes for CI risk costs Exploring scenarios for future trends Part 1 Impact of statins on heart attack Troponin and incidence of heart attack, CABG and angioplasty Obesity scenario impact on critical illness claims International comparisons Statins and the Incidence of Heart Attack Statins reduce cholesterol lower levels of cholesterol are associated with a lower risk of cardiovascular disease

Currently prescribed to people with a 30% chance heart attack in next 10 years To become available without prescription from a pharmacist to people at "moderate risk" of CHD Allow more people to protect themselves from CHD Statins Those at 'Moderate Risk' of Heart Attack Men age 55 or more Men age 45-54 and women 55 or more if also have one of the following risk factors Family history of CHD in 1st degree relative Smoker or given up for less than a year Overweight South Asian ethnicity Statins Those at 'Moderate Risk' of Heart Attack Age Up to 44 45_49

50_54 Over 55 Males Non Smoker Smoker 0% 48% 48% 100% 0% 100% 100% 100% Females Non Smoker Smoker 0% 0% 0% 38%

0% 0% 0% 100% Statins What is the potential impact For adults in Western societies it can be beneficial to reduce cholesterol levels whatever the starting point Need to take regularly on a long term basis Cholesterol can be reduced in the first month Risk of heart attack reduced by 10% after one year 33% after three years Statins - Will people take them? Can not predict the take up rate price not yet confirmed Compliance - will people continue to take their medicine in the longer term?

Adverse reaction from some medical professionals Percentage Reduction in Incidence of Heart Attack by Level of Compliance - Males 25% 20% Low Medium Good 15% 10% 5% 0%

Up to 44 45_49 50_54 over 55 Percentage Reduction in Incidence of Heart Attack by Level of Compliance - Females 25% 20% Low Medium Good 15%

10% 5% 0% Up to 44 45_49 50_54 over 55 Statins and Heart Attack Incidence for Insured Lives Higher take up amongst higher socio-economic groups? smaller 'moderate risk' group Compliance still an unknown Impact over the next 5 to 10 years

Troponin and Incidence of Heart Attack - Males Total increase +15% 8.00 7.00 6.00 Angioplasty 2+ 5.00 CABG 4.00 Stroke 3.00 2.00 Heart Attack

1.00 0.00 2001 2004 to 2007 Troponin and Incidence of Heart Attack - Females 8.00 7.00 Total increase +5% 6.00 5.00 Angioplasty 2+ CABG

4.00 3.00 2.00 1.00 Stroke Heart Attack 0.00 2001 2004 to 2007 Obesity overview Obesity - why? Modelling Obesity Underwriting and socio-economic effect

Conclusion Obesity why? What is obesity? excessive body fat Increases risk of: Heart Attack Stroke and some Cancers Angina Pectoris Hypertension (High blood pressure) Diabetes (type 2) High level fats in the blood (lipids)

Osteoarthritis Obesity why? How is it measured? Body Mass Index (BMI) = (Weight in Kg)/(height in metres) 2 Is this a good measure? Obesity why? Fundamental cause: Consuming more calories than are expended Why has number of obese people trebled over the last 20 years: Less active lifestyle Changes in eating patterns

Genetic Women after menopause Social economic effect Ethnic and cultural background Obesity overview Obesity - why? Modelling Obesity Underwriting and socio-economic effect Conclusion Modelling Obesity Project BMI by weight category Weight Categories: Underweight (<20) Healthy (20

Obese (3040) Male split of percentage by weight category 100% 80% 60% % 20% 0% USA 2000 Optimistic Government initiatives Halt upward trend Improve back to 1993 levels

Pessimistic Upward trend continues Catches America by 2022 UK 2002 Pessimistic Healthy weight plus underweight: <25 Overweight: 2530 Obese: 30-40 Morbidly obese: Over 40 Optimistic Female split of percentage by weight category 100% 80%

60% % 40% 40% 20% 0% USA 2000 UK 2002 Pessimistic Healthy weight plus underweight: <25 Overweight: 2530 Obese: 30-40

Morbidly obese: Over 40 Optimistic Modelling obesity Historical trends key facts (in UK) 1980: 6% male and 8% female are obese 1993: 13% males and 16% females are obese 2002: 22% male and 23% female are obese No sign upward trend moderating Optimistic trend assumes 1993 levels in 20 years USA prevalence: 28% males and 34% females are obese Pessimistic: 52% males and 56% females

The Evolution of Man Since 1850 Modelling obesity Project the BMI by weight category Breakdown historic aggregate incidence by weight category Project separate breakdown of incidence: i (healthy) .. i (morbidly obese) Aggregate the breakdown of incidence using: Future BMI trends by weight category Relative risk factors by weight category Modelling obesity Modelling obesity percentage

Gap between optimistic and pessimistic 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 41% 32% 29% 24% 15% 6%

Heart Attack Male Heart Attack Female Stroke Male Stroke Female All Cancer Male Condition Heart Attack Male Heart Attack Female Stroke Male Stroke Female

All Cancer Male All Cancer Female All Cancer Female Obesity overview Obesity - why? Modelling Obesity Underwriting and socio-economic effect Conclusion Underwriting and socio-economic effect Obesity1 among adults: by sex and NS-SeC2, 2001 England Percentages

Higher managerial and professional Males Females Lower managerial and professional Intermediate Small employers and own account workers Lower supervisory and technical Semi-routine Routine Never worked and long-term unemployed All 0 5 10 15 20

25 30 1 Using the body mass index (BMI) for people aged 16 and over. See Appendix Part 7: Body mass index. 2 See Appendix Part 1: National Statistics Socio-economic Classification. Source: Health Survey for England, Department of Health 35 Underwriting and socio-economic effect How do we underwrite obesity risk for critical illness Obese applicants sent for a medical Other risk factors are rated separately: Diabetes High blood pressure Insurers rate obesity risk or decline BMI Reinsurer A

Reinsurer B Reinsurer C Reinsurer D 30 35 40 0% 50% 125% 22% 100% 200% 0% 50% 100%

75% 125% Decline Obesity overview Obesity - why? Modelling Obesity Underwriting and socio-economic effect Conclusion Obesity - conclusion Biggest relative impact on heart attack Cancer less impact Insurance population needs to allow for: Underwriting Social-economic effect

Lower proportion of women Obesity has become a focus point Over 50 government initiatives cost to NHS Minor impact on insured population for critical illness claims? New Remote Control Can Be Operated by Remote No more leaning forward to get remote from coffee table means greater convenience for TV viewers.

elevision watching became ven more convenient this week with Sonys introduction f a new remote-controlled emote control. Trends in Critical Illness Risk Costs An update from the Critical Illness Trends Research Group Historic trends in incidence for the major CIs Variations over time, by age, sex, by smoker status, by socio-economic group Exploring scenarios for future trends Learning from the past and looking to the future Part 1 Part 2

Mapping a range of possible future outcomes for CI risk costs Exploring scenarios for future trends Part 2 Cancer Screening Breast Cancer Prostate Cancer Bowel Cancer Smoking Prevalence / Lung Cancer Breast Cancer Screening Current programme for ages 50 to 65 Initial catch-up surge phase saw 50% increase in reported breast cancer incidence rates for the 50 to 65 age group Settled phase reflects around 25% increase in reported breast cancer incidence rates for the 55 to 65 age group Overall consistent with advancing breast cancer diagnosis by up to 3 years

Possible extension to start age 40 New surge for ages 40 to 50 Rates for age 40 remain high but those at ages 50 to 55 would fall back Prostate Cancer Screening Example taken from USA data No formal programme but PSA tests widely available Initial catch-up surge phase saw 140% increase in reported prostate cancer incidence rates across a wide age group Settled phase reflects around 40% increase in reported prostate cancer incidence rates across a wide age group Overall consistent with advancing prostate cancer diagnosis by up to 5 years Bowel Cancer Screening - No polyp detection Registrations per 10,000 Results from the model Trend in bowel cancer registrations, by age group 45 40

Text 35 alignment and case as Title page 30Text alignment and case as Title page 25 Text alignment and case as Title page 40-44 45-49 50-54 55-59 20 60-64 15 65-69 10 70-74

5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Year

Bowel Cancer Screening - No polyp detection Results from the model Trend in bowel cancer registrations, by Dukes Stage 100% 90% 80% 70% D 60% C 50% B

40% A 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bowel Cancer Screening Up to 10% Polyp detection Results from the model Trend in bowel cancer registrations, by age group Registrations per 10,000 45 40 40-44 35

45-49 30 50-54 25 55-59 20 60-64 15 65-69 10 70-74

5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Year

Bowel Cancer Screening Up to 10% Polyp detection Registrations Index % v Year 1 Results from the model Indexed trend in bowel cancer registrations, by age group 200 180 Text alignment and case as Title page 160 140 Text alignment and case as Title page 120 Text alignment and case as Title page 100 40-44 45-49 50-54

55-59 80 60-64 60 65-69 40 70-74 20 0 1 2 3

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Year Bowel Cancer Screening Models based on pilot screening studies, covering age range 50 to 70 Initial catch-up surge phase gives 80% increase in reported bowel cancer incidence rates for the 50 to 65 age group Overall consistent with advancing diagnosis by 2 to 3 years Settled phase critically depends on whether the screening also detects precancerous polyps No polyps detected - settle at around 20% increase

10% polyps detected - settle perhaps 50% below current reported incidence rates, except for starting age group Recent government announcement signals national screening starting at age 60 from 2006 Trends in Critical Illness Risk Costs An update from the Critical Illness Trends Research Group Historic trends in incidence for the major CIs Variations over time, by age, sex, by smoker status, by socio-economic group Exploring scenarios for future trends Learning from the past and looking to the future Mapping a range of possible future outcomes for CI risk costs Mapping a range of possible future outcomes for CI risk costs Summarize and compare a selection of scenarios we

have evaluated Cautions : Illustrative, but very rough, estimates Still work in progress Focus on cancer, heart attack, CABG and stroke only Far from exhaustive, even for the CIs partially covered Mix of high and low likelihood Many overlaps and lots of gaps Modelled individually - how might the scenarios combine ? Mapping a range of possible future outcomes for CI risk costs Key - Part 1 Extrapolation of trends from the 1990s Obesity - optimistic and pessimistic scenarios

Smoking - continuation of recent trends in smoking habits Convergence to USA CI incidence rates Convergence to EU CI incidence rates - best and worst Cancer Screening - Breast (extended down to age 40) Cancer Screening - Bowel Cancer - No polyps detected Cancer Screening - Bowel Cancer - 10% polyps detected Cancer Screening - Prostate (similar to USA experience) Mapping a range of possible future outcomes for CI risk costs Key - part 2 Cancer Screening - 1 year advancement in detection Cancer Screening - 3 year advancement in detection Cancer Screening - 5 year advancement in detection Impact of Troponin on heart attack diagnoses Definition drift on Strokes / TIAs Impact of Statins on heart attack rates Blue sky - polypills and cancer vaccinations Scenario Impact on Over CI Risk Rates for Males % Change in Overall CI risk Rate 30%

25% 20% 15% 10% 5% 0% -5% -10% -15% Near Term Medium Term Long Term Scenario Impact on Over CI Risk Rates for Females % Change in Overall CI risk Rate 30% 25% 20% 15% 10%

5% 0% -5% -10% -15% -20% Near Term Medium Term Long Term Scenario Impact on Over CI Risk Rates for All Lives % Change in Overall CI risk Rate 30% 25% 20% 15% 10% 5% 0% -5%

-10% -15% Near Term Medium Term Long Term Mapping a range of possible future outcomes for CI risk costs Shifting viewpoint from Population to Insured Lives Segregated non-smoker / smoker rates Remove past beneficial trend in smoking prevalence Affects extrapolation scenario and future impact of smoking habits Different socio-economic mix Cancer gains in importance at expense of heart attack and stroke Different access and attitudes to medical checks and treatment Different mix by sex Possible impacts from policyholder actions Non-disclosure ; anti-selective lapses Scenario Impact on Over CI Risk Rates for Insured

% Change in Overall CI risk Rate 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Near Term Medium Term Long Term Mapping a range of possible future outcomes for CI risk costs - Key Observations Caution : Work-in-progress and incomplete ! Many of the illustrated scenarios have relatively small impact +/- 5% but we can readily can envisage most dramatic scenarios

Balance or imbalance of competing forces is critical Of the work so far, convergence with international rates perhaps gives the best indication of possible future ranges Typically, shifting from a population to an insured portfolio view magnifies the impact, particularly on cancer B2 Critical Illness ....... Pricing the Unknown Working Party / Research Group Update Scott Reid Revios Reinsurance UK Ltd We welcome your : Questions and Discussion Points Proposals for Further Research

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