CONCEPT DOCUMENT

CRITICAL ILLNESS- INDIAN EXPERIENCES VIS-A-VIS CIBT 93 RATES

  1. Critical illness has been a profitable business for the insurers of India in general. This might be mainly due to reasons as under;
  1. The pricing basis uses CIBT 93 incidence rates with suitable adjustment, adjustment being more in arbitrary and cautious manner.
  2. The claim admission process is stringent and low level of admission of claims.
  3. The CI rider might have sold to more healthy lives and not reaching to the needy with a reasonable cost.
  1. However, the Indian insurance market has unlimited potential to buy a critical illness benefit, which the insurers could not exploit so far. One of the possibilities for this non-acceptability of the CI rider benefit by a wider group of population could be the perception of customers regarding the value for money in comparison with alternative options.
  2. We need to agree that an upfront increase in all age ranges of the CIBT 93 rates is unrealistic. On the other side, any adjusted rates by re-insurers also not based on experiences in the market. In different periods, the incidence rates might show different trends for the same age/s. It would become a gambling rather than a measurement when we continue to adopt the technique of enhancing the old rates either for pricing or reserving.
  3. We have data available with all insurers and re-insurers in small volumes, possibly could become reasonably large if pooled from all of us and by clubbing data from linked and non-linked business. A possibility of re-looking into the rates in use by understanding the pulse of Indian lives might help us to identify the level and length of under-pricing/ over-pricing done in the products offered. It may be possible to relax the rigidity of definition and acceptance of claims to the expectations of the policy holders and penetrating into the market deeper.
  4. An investigation into the current practises adopted in the Indian Market for pricing and reserving CI benefits would be a beginning to understand the adequacy of the incidence rates applied by the Insurers in India. Any proxy methods currently adopted may also be evaluated on the basis of any outcome of such investigation. An attempt to identify major diseases in respect of its severity and incidence also might help to develop products with more flexibility.
  5. After CIBT 93, CMI of Institute of Actuaries of UK has captured CI experiences of the market for different periods starting from year 1999 to 2006 in its working papers and referred rates in CIBT 02, WP 43 and AC 04. The size of claims data used for all these working papers could also be achieved from all our sources as well and a possibility to re-look into the adopted rates arise.