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CMI Working Paper 50

CMI critical illness diagnosis rates for accelerated business, 2003-2006

CMI Working Paper 50 presents claim diagnosis rates for accelerated critical illness insurance, on a 'lives' basis, based on data for nearly 20,000 claims settled in 2003 to 2006

Four sets of rates are included in the paper: for males and females, and for non-smokers and smokers; these have been named:

  • ACMNL04;
  • ACMSL04;
  • ACFNL04;
  • ACFSL04.

Each table has separate rates at durations 0, 1, 2, 3, 4 and 5+ for ages 18 to 65 and ultimate (durations 5+) rates for ages 66 to 110.

Only the rates at ages 30 to 60 have genuine credibility as insured rates

At these ages the derivation of these diagnosis rates is based on the methodology set out in CMI Working Paper 43 in which diagnosis rates were derived using data for claims settled in 1999 to 2004.

The 2003-2006 dataset is more recent, covers a shorter period and is more stable in terms of contributing offices than the dataset used in CMI Working Paper 43, however both are very immature in terms of age and duration.

Although this may distort the shape of the rates, the Committee considers the production of a formal table to be worthwhile, particularly because of the substantial differences in the shape of these rates by age from currently available tables of critical illness rates. The derivation of rates at these ages uses a similar approach to that set out in CMI Working Paper 43.

The Committee has also extended the rates to younger and older ages to produce a full age-range table that can be used in the pricing and valuation of whole-of-life policies and (the small proportion of) term and endowment assurance policies that cover individuals outside the age range for which we have credible data volumes. We have adopted a pragmatic means of extending the age range of the rates and it is important for actuaries to recognise that these rates are not based on credible volumes of data.

The AC04 rates themselves are also available in a spreadsheet

The rates are by no means the only sets of rates that could have been derived from the data. Consequently the Committee is again making available to member offices critical illness spreadsheets containing summarised data that will allow practitioners to experiment with alternative approaches.

The Committee is not undertaking a formal consultation exercise on the rates derived in this paper but, as always, the Committee welcomes feedback.

CMI Working Paper 50 contains a statement that the Committee intended to recommend the AC04 diagnosis rates for ‘adoption’ by the IFoA. It was subsequently agreed that the concept of adoption was no longer relevant and this was not pursued. It should not be inferred that there was any dilution of quality standards in respect of the AC04 tables.

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