How did the COVID-19 Pandemic impact Accelerated Critical Illness and the causes of claims?

How did the COVID-19 Pandemic impact Accelerated Critical Illness and the causes of claims? Chris Reynolds, Chair of the CMI Assurances Committee, discusses the recently published Working Paper 167, which analyses the causes of accelerated critical illness claims over the period 2017 to 2020. This working paper is the first time the Committee has been able to consider in detail the experience of critical illness policies over a period impacted by the pandemic.

It’s 2023 and the CMI Assurances Committee has kicked off a busy year ahead with a new working paper (WP167) that analyses the causes of accelerated critical illness claims over the period 2017 to 2020. There’s been much discussion of the impact of the COVID-19 pandemic on mortality, but this is the first time we’ve been able to consider in detail the experience of critical illness policies over a period impacted by the pandemic.

In the working paper, we’ve taken the period 2017-2019 as a baseline and compared the experience with that seen in 2020. This involved investigating patterns in causes of claims by calendar year and various risk factors.

The Committee also considered experience month by month across 2019 and 2020, providing a granular view of the experience of common causes of claim over the months impacted by the pandemic.

The Dataset

The data underlying this analysis covers the calendar years 2017 to 2020 and relates to accelerated critical illness (ACI) term assurances issued on standard rates. In total there are over 30,000 claims in the dataset, with “death” and “cancer” being the most common causes of claim. This blog primarily focuses on the experience of these two largest causes – results for the other causes can be found in WP167.

In the analysis we’ve presented results separately for the four “risk groups” – males / females and smoker / non-smokers. Additionally we’ve analysed the data by a range of risk factors including duration, age, commencement year, sum assured band and UK-wide Index of Multiple Deprivation decile (IMD).

Experience by Calendar Year

So what do we see in the experience by calendar year? Unsurprisingly the proportion of deaths is higher in 2020 across all risk groups (except male smokers). We also see a decrease in the proportions of cancer claims. The decrease in cancer claims, and corresponding increase in deaths claims, seen in 2020 is more pronounced for male non-smokers and female smokers, compared with female non-smokers and male smokers.

There are also slight decreases in several other causes of claim in 2020, details of which can be found in the working paper. 

Analysis by Risk Factors

We split the experience of the largest causes of claim by a range of risk factors and compared the period 2017-2019 against 2020. Key observations for death and cancer claims in the baseline period are summarised below:

  • Duration Band – we combined durations 0-4, 5-9 and 10+ to increase the credibility of our results. In the baseline period, the proportion of deaths generally increases with duration, whilst the proportion of cancer claims tends to decrease.
  • Age – the proportion of cancer claims (and most other causes) are a relatively consistent proportion of total claims across age bands. For deaths we see something different – for male non-smokers, the proportion of deaths decreases with increasing age, whilst for female non-smokers they increase with increasing age.
  • Sum Assured Band – here we consider the usual sum assured bands £0-£25,000, £25,001-£75,000, £75,001-£125,000 and £125,001+. For non-smokers, the proportion of cancer claims tends to increase with each successive sum assured band. This is the opposite to deaths which decrease with each successive band.

When we look at data cuts within the risk factors for 2020, we see a broadly consistent pattern of an increase in the proportion of death claims and a decrease in the proportion of cancer claims. The results by Index of Multiple Deprivation (IMD) are perhaps the most interesting. The proportion of cancer claims fell most, and the proportion of death claims increased most, for the more deprived socio-economic groups. This suggests that the least deprived socio-economic groups were less affected by the direct and indirect effects of the pandemic. The pattern is not as obvious by sum assured band which suggests that sum assured does not map directly to IMD.   

Analysis by Month – 2019 and 2020

It’s been well reported that the COVID-19 pandemic caused abnormally high mortality for the general population of the UK during the 2nd and 4th quarters of 2020. In Working Paper 162 we presented a high-level view of mortality and ACI experience by month in 2020. In this work we’ve been able to undertake a much more detailed monthly analysis of ACI experience by the main causes for each risk group. We have calculated Actual / Expected values for each risk group, where expected claims are calculated using cause-specific diagnosis rates derived in Working Paper 151.

So what do the results show? The experience of cancer claims appears to follow a decreasing trend in 2019 before falling markedly between January and April 2020. There is an upwards trend thereafter that persists until the end of 2020. However, the experience in the later part of 2020 remains below the level observed for most of 2019.

It’s not overly surprising that there is a spike in the experience of death claims in April 2020, as this coincides with the first wave of deaths in the general population from the COVID-19 pandemic. With the exception of August and September 2020, after April the monthly experience remains higher than that seen in 2019. 

What Next?

In this analysis, we were pleased to receive cause of claim information from all data contributors that regularly submit data to the Assurances investigation. Unfortunately, whilst the volume of data with cancer claims split by site has increased substantially, it’s still dominated by a small number of contributors, meaning we were unable to perform a granular analysis by cancer site. We hope that other life insurance providers may be able to submit information on cancer site in the future.

We’re also conscious that this cause of claim analysis is only focused on ACI. We have begun encouraging data contributors to submit cause of death information for mortality business and hope that we will be able to analyse this data in the future.

Finally the Assurances Committee hopes to report annually on cause of claim for accelerated critical illness business. Any feedback on this suggestion, or other aspects of this work, would be much appreciated.

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