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Jarod's Story

Realities of Critical Illness Critical Illness Insurance Product Overview Worldwide Major Market Success US Market Opportunity

 

 

JAROD'S STORY

Jarod, a father of two and the Chief Financial Officer of a national software company was 43 when a mass on the side of his brain was found in December of 1998.  After a number of visits to his local doctor, Jarod and his wife, Elizabeth, made the journey to see a specialist at Mass General Hospital in Boston.  After numerous tests, Jarod’s worst fears were realized; he had a cancerous cyst on his brain known as glioblastoma.  Prognosis for recovery was slim; doctor’s said the combination of chemotherapy and radiation treatment would extend his life by only 6 months.

Jarod, not ready to give up, began to seek alternative solutions and found a medical college in California offering an experimental gene therapy treatment; the results were encouraging.  As Jarod’s current medical insurance did not cover experimental treatments, he was faced with a major financial decision.  To cover the $600,000 cost, Jarod would be forced to liquidate his life savings and his retirement funds and take a second mortgage on their four-bedroom home.  Jarod decided to fight the cancer.  Jarod and Elizabeth left their two young children with his wife’s family in upstate New York, and headed cross-country to Los Angeles to begin stage 1 of what would turn out to be a 5-stage treatment process.  Jarod now faced additional expenses associated with travel back and forth between Massachusetts and California and continued lost wages.  Like many other victims of serious illnesses, Jarod discovered he did not qualify for his company’s long-term disability benefit and discussion with the insurance company failed to convince them to offer coverage.  In total, the financial burden of Jarod’s medical ordeal cost over $750,000.

The good news is that Jarod continues his follow-up treatments in California (over 4 years since the initial treatment).  Unfortunately, Jarod was forced to sell his home to pay off debt created by the medical bills, travel costs and lost wages, and relocate his family to a modest residence.  He is now working to rebuild his families’ financial position from a new job in California with only 10 years to retirement.

“The probability of incurring a critical illness is more than twice as great as dying from any cause before age 65” (1997 Employee Benefits New and Views Magazine)

 

REALITIES OF CRITICAL ILLNESS

  • 70 million Americans have survived cancer, a heart attack or a stroke (American Cancer Society, Cancer Facts & Figures 2002 and American Heart Association, 2002 Heart and Stroke Statistical Update)  

  • There are 10 incidents of Cardiovascular Disease, Cancer or Stroke every 10 minutes (American Heart Association, 2002 Heart and Stroke Statistical Update)  

  • 1.3 million Americans were diagnosed with cancer in 1999; over 750,000 survived more than one year (American Cancer Society, Cancer Facts & Figures 2002)  

  • 66% of all costs associated with cancer are not covered by health insurance (American Cancer Society, Cancer Facts & Figures 2002)  

  • 1.1 million Americans suffered a heart attack in 2000: 800,000 are projected to survive more than five years (American Heart Association, 2002 Heart and Stroke Statistical Update) 

  • 750,000 Americans were victims of stroke in 1999.  Over 650,000 survived (American Heart Association, 2002 Heart and Stroke Statistical Update)  

  • Nearly 50% of mortgage foreclosures are due to a critical illness; only 3% are due to death (Best’s Review – Life/Health Insurance Edition, Volume 99, Number: 3, page 85 (1), July 1998.)  

  • Consumer “out-of pocket” health expenditures grew 41% between 1986 and 1996 (Health Spending in 1998: “Signals of Change,” Health Affairs, Jan/Feb 2000. Project HOPE)

 

 

CRITICAL ILLNESS INSURANCE

Critical Illness Insurance serves as a LIVING BENEFIT that provides a lump sum payment to survivors of a life-threatening illness or disease.  This living benefit can help the insured to:

  • Live longer by:  

  • Having freedom to choose expert medical care

  • Paying for experimental drugs, treatments or specialists not currently covered by medical insurance,

  • Maintain or pursue lifestyle changes such as:

  • Change in job

  • Change in skill level

  • Provide financial security to offset:

  • Premature job loss,

  • Lost income,

  • Reduced retirement benefit,

  • Home mortgage or credit debt,

  • Child-care,

  • Children’s higher education.

 

PRODUCT OVERVIEW

Critical Illness Insurance provides lump sum benefits to insureds, paid upon first diagnosis of a covered critical illness.

The lump sum benefit options range from $50,000 to $5,000,000.

Our Critical Illness Insurance Product includes the following covered illnesses:  

  • Life Threatening Cancer

  • Heart Attack

  • Stroke

  • Renal Failure

  • Coma

  • Coronary Artery Bypass Surgery

  • Loss of Sight or Hearing

  • Major Organ Transplant

  • Paralysis

  • Loss of Limbs

  • Coronary Angioplasty  

 

Program Highlights  

  • Pays full lump sum cash benefits on first diagnosis of any covered condition.

  • Pays full lump sum cash benefits directly to the insured.

  • Pays full lump sum cash benefits in addition to, on top of, any and all benefits the insured might receive from any other insurance company.

  • The insured can use the cash benefit anyway he or she sees fit - experimental treatments, pay for non-medical expenses not covered by regular insurance.

  • This is a stand-alone policy.

  • This is a level premium product - the rates will not increase as you get older.

  • Return of premium paid upon death from a non-covered cause.  

Many costs associated with critical illness are not covered by traditional health or disability insurance. Some of these expenses include:

  • Experimental drugs and treatment

  • Specialty medical care

  • Retirement funding

  • Home health care needs

  • Lost income and work time for spouses or care givers

  • Housekeeping or child care expenses

  • Fitness training and/or equipment

  • Non-covered experimental treatments

  • Expenses not covered by insurance, including co‑pays and deductibles

  • Home or car modifications

  • Lost income for the critical illness survivors

  • Travel or other luxury/leisure expenses

  • Children’s education  

There is a waiting period of thirty (30) days after the insured's coverage effective date before any conditions are covered. A first diagnosis of a critical illness less than 30 days after the policy's effective date is covered only by return of the premium paid. In addition, for the full cancer benefit to be payable, the policy must be in force for 90 days before the first diagnosis. 

The eligible ages are 20 to 65; benefits reduce 50% at age 65 and the policy lasts until age 100 or when the maximum benefit amount is paid for any covered condition.

 

Worldwide Major Market Success

The Critical Illness product class has been successfully sold in Canada, Europe and Japan.  While each of these markets have their own unique political, economic and social attributes that are dissimilar from each other, they each have a common thread of success that illustrate the standards of execution that enable market success. 

The United Kingdom

After the successful launch in the mid-1980’s of Critical Illness Insurance (CI) in South Africa, the product first became available in a major market:  The United Kingdom.  Abbey Life in the UK offered the first CI policy in 1987. Within six years, over 50 carriers offered CI as part of their product portfolio.  

  • 11,500 CI policies were sold in the UK in 1987; 800,000 were sold in 1999.

  • There are currently over 3 million CI policies in force in the UK.

  • The ratio of CI premium to life insurance premium has grown from 3.5% in 1991 to 23.6% by 1998.

  • Even with significant numbers of policies sold and premium generated, the market penetration in the UK is around 10%.  The growth potential for the market in the UK is still enormous.

Most CI policies in the UK are mortgage related; the benefits are used to repay mortgage debt if the insured is diagnosed with a covered illness.  This is a major product design difference that distinguishes CI products in UK from those in other countries, where the purpose of the benefits are left entirely to the discretion of the policy owner.

Canada

Canadian insurers began offering Critical Illness Insurance policies in 1996. In 1996 a LIMRA survey found only six Canadian companies selling CI products. As of 2001, nearly 30 insurance companies offer CI in the Canadian Market. Nearly all-Canadian carriers offer basic products covering at least cancer, heart attack, stroke, renal failure, and major organ transplant, however, 98% of Canadian CI policies cover six or more diseases or conditions.  The primary differentiator of Canadian CI products is lengthy premium guarantees, which are not found in any other country’s products. In an article published in Money Marketing in June 2002; however, a reinsurer that is very active in the Canadian market announced that it will no longer reinsure products with guarantees exceeding five years.  This could bring about significant change in the design of future Canadian CI products.  

In its annual survey of Canadian CI sales for 2001, LIMRA reports:  

  • CI premiums increased 111% over 2000 while benefit amounts and number of policies sold increased 118% and 107% respectively.

  • Annualized premiums for new sales were over $37 million

  • Annualized premium for inforce was over $65 million, an increase of 93% over 2000.

  • Over 41,000 new policies were sold in 2001, an increase of 107% over 2000.

  • The number of inforce polices in 2001 was nearly 76,000 – an 87% increase over 2000.

The Canadian market continues to show strong growth and several well known and respected insurance carriers have entered the Canadian CI market in the past 18 months.  The national health system in Canada, which sometimes limits its citizen’s access to specialists or innovative treatment options, makes it an attractive market for CI products.

Japan

According to market research and surveys published by international reinsurers in 2000 and 2001, 500,000 CI policies were sold in Japan in the first six-month following introduction of the product in that country.  Over 7 million policies have been sold in Japan to date.  

Southeast Asia

CI products began to appear in Southeast Asia in the late 1980’s. 230,000 policies were sold in this region (including Malaysia, Singapore, Hong Kong, and Taiwan) in 1993.  Over 1 million policies have been sold each year since 1996.  

Australia

In Australia, CI premium accounted for nearly 10% of all annual new business premiums by 1998.  

There are significant differences in product design in the Asian/Pacific Rim market when compared to CI policies sold in the US, UK, and Canadian markets. In all countries in the region, with the exception of Japan, products tend to cover 30 or more conditions and are often tailored for certain consumer groups.  In Hong Kong, for example, “Lady Products” that focus on female-specific conditions such as breast and ovarian cancers and complications of pregnancy are very popular.  In Japan, however, where the product has seen the dramatic growth in sales and popularity, virtually all policies cover only cancer, heart attack, and stroke.

 

US Market Opportunity

Corporations

  • Reduce overall cost of group medical insurance.

  • Provide an additional supplemental executive benefit.

  • Fund supplemental retirement income benefit.

Executives

  • Replace lost wages.

  • Provide cash to pay personal medical expenses/experimental drugs and treatments not covered by medical insurance.

  • Fund future retirement income.

  • Provide cash to pay off mortgage, loans and credit debt. 

High Net Worth Individuals 

In addition to the opportunities listed for executives :

  • Provide cash to help avoid estate depletion risks affecting inheritance planning goals.

  • Provide liquidity to avoid selling assets subject to adverse market conditions.

Business Owners & Professional Partnerships 

In addition to the opportunities listed for executives :

  • Fund Buy-Sell agreements.

  • Fund for partner and key person retirement income.

  • Provide cash for key person Replacement.

 

 

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