CMI Working paper 58

CMI Working paper 58 completes the further work identified in Working paper 50, which presented the "AC04 Series" of claim diagnosis rates for accelerated critical illness insurance, on a 'lives' basis, using data for claims settled in the period 2003 to 2006. Specifically, it describes the supplementary analyses designed to aid understanding of the AC04 Series rates. The Committee intends to propose adoption of these rates by the Institute and Faculty of Actuaries early in 2012. Prior to this, further feedback is invited by 29 February 2012.

The main assumptions underlying the AC04 Series rates are restated and the sensitivity of the rates to them considered.

The Committee has developed an approach for deriving approximate standard errors to help actuaries to understand and allow for uncertainty associated with the rates. These also provide support for the existence of a select effect by duration.

The paper reports on the experience of subsets of the data to examine whether they exhibit different underlying claims experience and hence whether the characteristics used to define these subsets could be regarded as risk factors not allowed for explicitly in the AC04 Series rates. Two types of analysis were undertaken: a series of one-way analyses and a multivariate analysis, using a generalised linear model.

The AC04 Series rates apply only to accelerated critical illness business; this paper also examines the experience of stand-alone business.