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CMI Working Paper 28

Progress towards an improved methodology for analysing CMI critical illness experience

CMI Working Paper 28 introduces a development to the methodology previously used by the CMI Critical Illness Committee to assist with the interpretation of critical illness insurance claims experience

It illustrates this development for experience in 1999-2002 and discusses the further work required to enable realistic claim rates for critical illness business to be produced.

The main area of difficulty in analysing claims experience within the CMI critical illness investigation has been the substantial delays from diagnosis of a claim to settlement. This and other issues with the data are discussed in CMI Working Paper 14, which was published when the results for 1999-2002 were issued to member offices in May 2005.

CMI Working Paper 14 also introduced the concept of a ‘grossing-up factor’ that sought to adjust the reported experience from settled claims to diagnosed claims, that can be meaningfully compared with the exposure. This methodology could not easily be applied to subsets of the data, required to understand the claims experience by age, gender, smoker status, duration, cause and other factors.

The development to the methodology outlined in this paper is to use the known in force data to estimate the exposure in the years preceding the investigation period. Diagnosed claims during this period are estimated and delays to settlement applied in order to estimate settled claims during the investigation period.

The CMI Critical Illness Committee believes that this development is a significant step forward in overcoming this difficulty, but further analysis of claim delays is still required before we are able to use the revised methodology to produce reliable results for subsets of the data and to develop realistic claim rates for critical illness business.

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