I am writing to clarify Munich Re's position in the critical-illness market
following the recent article on Norwich Union's 40 per cent premium
In this article, reference was made to “the decisions by Swiss Re and
Munich Re this year to stop reinsuring long-term guaranteed
Munich Re would like to make it clear that we, in fact, withdrew from the
guaranteed critical-illness market in 1997 and that our exposure to this
market is negligible.
We said in 1997, and maintain now, that guaranteed critical-illness
products are unsustainable because of the impossibility of predicting the
future claims' experience with any degree of confidence.
Medical advances and other secular changes mean that claims that would not
have been payable when the policy was written must now be admitted. This
can arise either because the insured event would not have been identified
as such based on medical science at the time the policy was written (for
example the redefinition of heart attack includes minimal heart muscle
death and early stage cancers can now be detected) or because the accepted
definition of the event at the time the policy was written has since
changed, and claims are assessed against different criteria from those in
the policy document.
These difficulties are compounded by the potential windfall gain when a
claimant suffers only a mild form of an insured event but is able to claim
the full sum insured.
We publicised these views in 1998 in a paper entitled, Critical Illness – A
Time for Review. This paper expanded our thinking on unsustainable
critical-illness product propositions and started to consider how the next
generation of products could respond to the problems posed by medical
advances, secular change and windfall gains. The solutions we presented
then remain equally valid today and focus on propositions that are
understandable to all parties, have appropriate claims triggers and match
needs and benefits, so minimising the potential for windfall gains.
Head of marketing
Munich Reinsurance UK life branch