When these women apply for life and critical illness cover, the insurance industry wants to ask them whether they have been tested for the gene mutations BRCA1 or BRCA2. These are the gene complications that increase the chances of them developing these cancers. But before the insurance companies can ask these questions on their application forms, they must get approval from the Genetics and Insurance Committee, the body that advises the Government on these and similar issues.
In the coming months the Association of British Insurers (ABI) will be requesting the Committee for authority to ask women whether they have been tested positive for BRCA1 or BRCA2 gene mutations. These are the mutations that are present in 1 in 10 of newly diagnosed cases of ovarian cancer and 1 in 20 of new cases of breast cancer. Approximately 1 in 850 women in Britain inherit a faulty BRCA1 gene and of those, 14 - 18% will develop breast cancer during in their lives.
On the web site for the Genetics and Insurance Committee we found a notice saying, " The Committee expects that the Association of British Insurers will submit in late 2006/2007 four revised and updated applications for the use of adverse results from the predictive genetic tests of the BRCA1 and BRCA2 genes (breast/ovarian cancer) in helping to determine insurance premiums for life and critical illness insurance".
So far, application forms issued by British insurance companies are only allowed to ask for the results of predictive tests for Huntington's disease. Even then, the question can only be asked when the application is for more than £500,000 of life insurance cover or mote than £300,000 for critical illness insurance or over £30,000 for payment protection insurance. This rule is set under an agreement entered into by the insurance industry which is due to expire in 2011 but the Chairman of the ABI's Genetics Working Party, Harpal Karlcut, is reported in the trade insurance magazine "Cover", as saying: -
"We are looking to get approval for the breast cancer test by the end of the year", adding, "The two breast cancers are the next conditions that we will look at but after that we don't see the need to look at other conditions. We do keep an eye out for what diseases may come up in the future but there is nothing else on the horizon". We add another important rider - yet!
As per Standard Life 2005, an amount of approximately GBP19.8 million may have been paid on about 342 critical illness claims. More precisely, a sum of around GBP 58,000 may have been disbursed per claim. Furthermore, during the year 2005, around 82 percent of critical illness claims may have been awarded in contrast to nearly 80 percent of the previous year. Moreover, 18 percent of claims may have been declined. Not meeting policy definitions may have accounted for around 10 percent of critical illness claims being turned down. On the other hand non disclosure may have brought around 8 percent of declined cases.
Additionally, Skandia, one of the leaders in the critical illness market has pulled the curtain on its report about critical illness claims as from February 2007. They affirm having paid around 1920 claims summing up to an amount of around GBP182 million. They also revealed that the average age of claimants may have been more likely to be 46. However, the most common critical illness claims may have been cancer, around 58 percent, heart attack, around 15 percent, heart surgery around 8 percent and stroke around 7 percent. More statistics show that the most common forms of cancer more likely claimed for may have been: breast cancer, around GBP23million, lower intestine nearly GBP11 million, malignant melanoma about GBP9 million and prostate approximately GBP7 million. In addition to, they may have paid around 88 percent of claims while the remaining 12 percent could have been rejected as they did not match policy criteria or non disclosure.
Furthermore, as per Munich Re, if reinsurance is carried out on a surplus basis, it may be advisable to fix only a retention for the life risk. The critical illness risk may then be reinsured in the same proportion as the corresponding life risk. For example, the insurer might want to retain all life risks up to an amount of USD 50,000. A policy with USD 200,000 life sum insured and 50 percent prepayment in the case of critical illness would be reinsured as follows: The excess of USD 150,000 over the life risk retention, i.e. 75 percent of the total sum, could be assumed by the reinsurer. The critical illness risk may then be reinsured in the same proportion. In the case of a critical illness claim, the reinsurer may pay out USD 75,000 (75 percent of 50 percent of USD 200,000) and another USD 75,000 (75 percent of [USD 200,000?USD 100,000]) on subsequent death, or USD 150,000 (75 percent of USD 200,000) if death occurs first
One aspect of critical illness cover may be the quota share reinsurance. For example, the insurer might reinsure 30 percent of its life and prepayment critical illness business. In case of a reinsured policy with USD 200,000 life sum insured and a critical illness acceleration benefit of 50 percent, the reinsurer may pay USD 30,000 (30 percent of 50 percent of USD 200,000) upon critical illness and another USD 30,000 (30 percent of [USD 200,000?USD 100,000]) succeeding death, or USD 60,000 (30 percent of USD 200,000) if death occurred first.
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