Critical Illness Coverage – Key Trends Over Time
Since Critical Illness coverage often provides coverage for a condition that may not emerge until the policy has been in place for years, it seems appropriate to look at some longer-term trends for the line of business.
See image below for total earned premium and aggregate loss ratios for specified disease coverage as reported to the NAIC. The data is split into two charts, for individual and group coverage.
Note that group coverage is largely sold through worksite channels. Individual values reported here include both policies sold to individual insureds and individual policies sold to employees through their place of employment.
Source Data: NAIC Accident & Health Experience Exhibits, Regulatory Filings, Telos Actuarial Estimates
Two clear trends to note here:
The volume of business has increased tremendously! Earned premium was just over 1 billion a decade ago, and it is now approaching 3 billion!
While earned premium has demonstrated significant growth over the past decade, loss ratios have fallen from a peak of 49% in 2013 to a stabilized 36% over the last two years.
In the individual market, this is what the last ten years looked like:
Source Data: NAIC Accident & Health Experience Exhibits, Regulatory Filings, Telos Actuarial Estimates
Several specifics to call out:
Historically, individual products have accounted for a much larger volume of Critical Illness business, though group products are closing the gap! The individual chart starts at 3.5 billion in earned premium in 2013, and grows to just under 4 billion by 2022. While there have been some slight earned premium decreases since 2020, this is likely due to disruptions related to Covid.
Reported loss ratio trend is also negative for individual products, with an especially steep drop after 2020.
Pricing loss ratios tend to be 50-55% for these products, and the actual reported loss ratio experience has largely stayed in that range. The exception is the steep drop after 2020, which brought loss ratios below 50%.
With a continually-growing senior population, fairly frequent diagnoses of cancer among adults (particularly seniors), and non-medical treatment costs that are not covered by Medicare plans, there is a need for additional coverage to help cover costs when a diagnosis for a covered illness occurs.
Would you like to learn more? Our Critical Illness Market Opportunity Report can help. It provides a big picture view of the market showing main competitors, profit margins, market projections, and more. The report is designed to quickly get you up to speed on the opportunity and the market.
Contact us to find out more!
info@telosactuarial.com