For the first time in 13 years, new industry standards on Critical Illness definitions were published reflecting the industry’s rapid development and changing consumer needs.

On November 5, 2020, the Insurance Association of China and the China Medical Doctor Association jointly released revised industry standard definitions of Critical Illness (CI). This is the first revision to be released since the standards were initially published in 2007, which provides 25 CI diseases with definitions and requirements. The 2020 revision also includes a replacement to the existing ‘Industry CI Experienced Incidence Rate Table’ (2006-2010), reflecting the up-to-date incidence rate and new definition.

Over the last 13 years, the definition has played an essential role in the rapid development of CI insurance products as well as driving consumer awareness and protecting their rights. The 2020 revision comes as a needed response to evolving medical technology and changing consumer needs. One significant example is the prevention and treatment of thyroid cancer. Thyroid cancer is the number one claim for CI products for many insurance companies in the China market. However, with widespread screening thyroid cancer is more frequently caught in its early stages, leading to increased survival rates and a reduction in treatment costs. As a result, under the new CI definition thyroid cancer has been redefined from a critical to a minor condition.

As of February 1, 2021, all new products need to be categorized under the new definition.

Multi-dimensional assessments were conducted based on 2,900 CI products and 400 million policies and claims in the industry. More than twenty countries and regions’ CI definitions were collected for reference, and representative markets such as the UK and South Korea were benchmarked against China. The revised definitions passed several rounds of evaluations by insurance industry practitioners and medical experts.

The Result

The revised definitions achieved the following major outcomes:

• The standard applies for adults over 18, which means juvenile CI does not necessarily follow this standard.


• Expand standard CI diseases from 25 to 28 conditions. There are six compulsory conditions, i.e., malignant tumor, acute myocardial infarction, stroke sequelae, major organ transplant or hemopoietic stem cells transplant, coronary artery bypass surgery, and severe chronic renal failure.


• Introduced standard definition of three minor diseases that is not included in the existing standard, i.e., minor malignant tumor, minor acute myocardial infarction and minor stroke sequelae. The lump sum payment of these minor diseases is limited to no more than 30% of the sum insured of the major CI.


• Early thyroid with TNM stage 1 or lesser classification is moved from cancer to minor malignant tumor with payment limited up to 30% of the major CI payment.


• Carcinoma in situ (CIS) is not covered in minor malignant tumor definition as it does not fit in the “malignant tumor” definition. Although it is not listed as the minor disease category, insurers can choose to provide the minor CI coverage for CIS on a voluntary basis.


• The definition of other diseases is adjusted more objective, broader or stricter. For example, acute myocardial infarction has added the criteria of troponin (cTn) and creatine kinase isoenzyme (CK-MB). It is more explicit for stroke in requiring CT, MRI examinations and muscle strength level. Coronary artery bypass surgery requires open pericardium instead of open chest. Added Clinic Dementia Rating (CDR) for two diseases: Alzheimer’s and sequela of encephalitis or meningitis.


• A comprehensive assessment of disease definitions should be conducted at least every five years.


• The Industry CI Experienced Incidence Rate Table CI (2006-2010) is replaced by the Industry CI Experienced Incidence Rate Table CI (2020).

New vs. Old CI Definition

Impact on the Market

 

Sales and Products

As insurance companies develop new products under the 2020 revision, they are expected to have similar features as existing products under the previous definition, such as single-pay, multi-pay grouping or without-grouping CI. However, the new definition combined with updates to the experienced incidence rates will mean wide-reaching upgrades across the industry’s CI products, including pricing and disease definition.

When comparing the CI incidence rate under the new definition (28 types) with the old definition (25 types), for ages 0-19, the incidence rate decreased about 3% for male and 10% for female. For ages 20-39, the incidence rate decreased about 35% for male and 55% for female. For ages 40-59, the incidence rate decreased about 10% for male and 25% for female. As a result, we anticipate a decrease in major CI claims accordingly. For ages 60 and over, the incidence rate is roughly the same.

Underwriting & Claims

The new definition is expected to lower anti-selection risk and improve underwriting quality. The new claims criteria are now clearer and more objective, even requiring imaging and examination of the level of muscle strength to meet the revised definition. For policy holders, the claims criteria offer greater clarity on what is or is not included in their coverage. A better understanding of coverage may play a role in further reducing the total number claims by eliminating repudiated claims that do not meet the definition.

Premium and Costs

The primary impact on premium and cost is the move of thyroid with TNM T1 stage from late-stage CI to minor CI which reduces lump sum payment from 100% to 30%. Thyroid cancer is the number one claim reason for CI products for many insurance companies in China.

Overall, the revised CI definition and Industry CI Experienced Incidence Rate Table are representative of the current state of medical technology and the market, and will play a key role in guiding CI Insurance products. To learn more about the impact on the CI definition and Industry CI Experienced Incidence Rate Table, please contact Coco Feng – Aon’s Senior Director/Head of Life, Greater China.

About the Author

Coco Feng is the Head of Life, Greater China of Aon Reinsurance Solutions. She has over 15 years’ experience in the (re)insurance industry. Before joining Aon, she worked in RGA Reinsurance Company as Director of Actuarial Services responsible for pricing for 10 years. Before that she worked in Swiss Reinsurance Company and started her career with Minsheng Life Insurance Company. She is a qualified Fellow of the Institute and Faculty of Actuaries (IFoA). She also holds a qualified membership of China Association of Actuaries.