Income protection investigation

Brief history

A sub-committee of the CMI was set up in 1970 to investigate sickness rates under policies providing permanent health insurance, now better known as income protection. The main dataset extends back to 1975 although occupation class is only included from 1991. There are separate pools for individual business (still open) and group business (closed 2006).

Data and methodology

Data is submitted annually by life offices. Records were historically provided for each individual policy at the start and end of the year, and for each claim in payment during the year, but we now seek to capture movements in more detail and are flexible with formatting. See CMI data for more information about data submission.

Initially the investigations used a Manchester Unity approach, but now the experience is analysed in terms of claim inceptions and terminations (by recovery or death). The current methodology is described in CMI Working Paper 59.

Results

Subscribing life offices receive results in respect of the business for which they have submitted data. Aggregate 'All offices' results are also produced. CMI Working Paper 124 presents the most recent published analysis covering the period 2011 to 2016. Note: Data issues were subsequently discovered affecting the 2011-2016 claim inceptions experience. A summary of the impact is included in Working Paper 149.

The actual claim inceptions experience is compared with that expected using the IP06 graduated inception rates from investigation year 2011, and with that expected using the IPM 1991-98 graduations for 2011-2016 and earlier years. The actual claim terminations experience is compared with that expected using the IPM 1991-98 graduations.

An overview of the IPM 1991-98 graduations is presented in CMI Working Paper 48; details of the IP06 inceptions graduations can be found in CMI Working Paper 120. 

Claim experience tables

“IP11” claim inception and termination rates, based on individual IP experience of males and females, separately by occupation class, in 2007-2016, were finalised in September 2020. Note: Data issues were subsequently discovered affecting the claim inception rates. A spreadsheet of indicative adjustments to the rates is available alongside Working Paper 136.

Analysis of actual experience compared to that expected using the IP11 rates will commence from investigation year 2017.

The CMI has previously published three main sets of graduated rates for individual IP claim inceptions and two for terminations. The “IP06” claim inception rates were based on individual IP experience of males and females, separately by occupation class, in 2003-2010, and were published in March 2019 alongside Working Paper 120. IPM 1991-98, reflects the experience of male lives in CMI occupation class 1 policies for 1991-98, with an overview presented in CMI Working Paper 48.

The CMI Income Protection Rate Table Tool is a spreadsheet-based application, designed to assist practitioners in deriving claim inception and termination rates, as well as other factors required for their in-house profit testing, valuation and experience analysis tools, such as claim annuity values. It is intended to help practitioners make full use of the published graduations and experience. Version 1.2 of the CMI IP Tool incorporates the “IP11” claim inception and termination rates.

Further analysis

The Income Protection Committee is seeking to gather qualitative information on the impact of COVID-19 for Income Protection providers and views on its implications for the future. The results of this exercise are expected to be summarised and shared with CMI Subscribers. The Committee has extended the deadline for responses to the COVID-19 survey by 3 September 2021, accessible to Authorised Users only.

An analysis of individual Income Protection experience, 1991-2009, by cause of sickness is contained in CMI Working Paper 72.  An accompanying spreadsheet containing two databases, covering inceptions and terminations experience, was also made available to enable practitioners to pursue further investigations. An updated version of these databases, covering 1991-2010, was released alongside Working Paper 96 in which some of the previous analyses were updated.

Supplementary analyses to those included in regular ‘all offices’ results were released in Working Paper 102. These consider IP experience in 2003-2010 by benefit amount and policy duration.