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Munich Re&#39s critical view

I am writing to clarify Munich Re&#39s position in the critical-illness market

following the recent article on Norwich Union&#39s 40 per cent premium

increase.

In this article, reference was made to “the decisions by Swiss Re and

Munich Re this year to stop reinsuring long-term guaranteed

critical-illness cover”.

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&#39 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.

Will Adler

Head of marketing

Munich Reinsurance UK life branch

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