Critical Illness Insurance … NOW is the Time!

1. Critical Illness Insurance … NOW is the Time! Mary Grahovac, ACS Regional Vice President Protective Life Insurance Company R. J. (Bob) Ley, RHU Vice President, A&H Sales AIG American General PLAG.2789.02.06

2. “Not because you are going to die, but because you are going to survive!” Dr. Marius Barnard

3. We all know someone who has survived Cancer…a Heart Attack…a Stroke. But what was the financial impact on their family? Surviving Critical Illness

4. There is a solution to help prevent a critical illness from becoming a financial catastrophe and destroying lives.

6. Historical Perspective • South Africa – 1983 • Asia – Late 1980’s • United Kingdom – 1987 • Australia – 1990 • Japan - 1993 • Canada - 1995

7. Critical Illness was only accepted by 3% of the producer market in England 10 years ago. Now it is promoted by 99% of the same market. Peter Dodd Pegasus Life London, England November 1999

8. Did You Know … In the next four minutes … • Nine Americans will have a heart attack. • Five Americans will have a stroke. • Ten people in the United States will be diagnosed with cancer. • Five American families will be forced to declare bankruptcy because of a medically related financial hardship. Sources: www.mercola.com-bankruptcy information American Cancer Society (www.cancer.org) - cancer information American Heart Association (www.americanheart.org) – heart attack and stroke information

9. Did You Know … • Every 45 seconds, someone will have a stroke. This number 3 killer is the leading cause of severe, long-term disability. • The leading cause of disease in women is cardiovascular disease, more than cancer, and only 13% of women consider cardiovascular disease their greatest risk. And, 40,000 more women than men have a stroke annually. • In 2000, 9.6 million Americans were alive having survived a history of cancer. Sources: “Heart Disease and Stroke Statistics – 2005 Update” American Heart Association. Dallas, Texas. 2005. “Heart Disease and Stroke Statistics – 2004 Update” American Heart Association. Dallas, Texas. 2004.

10. Did You Know … • Approximately 1.7 million Americans suffer a heart attack each year. Of these individuals, 1.2 million will survive at least 3 years …75% are under the age of 47!1 • The survival rate for cancer patients is 73% today.2 • A person who has a heart attack at age 45 has a 57% chance of surviving for 5 years or longer.2 1 Source: National Center for Health Statistics/OptimumRe 2 Source: American Cancer Society and American Heart Association/OptimumRe

11. Are you prepared inthe event of a critical illness? • According to the U. S. Department of Housing and Urban Development, 50% of home foreclosures are the result of the homeowner suffering from a critical illness. • American Heart Association estimates Americans paid about $368 billion in 2004 for heart disease related medical costs and disability. • Research shows 33% of all families deplete all or most of their savings because of a serious illness. Sources: LIMRA’s Marketfacts Spring 2002 “Critical Illness Insurance: A Lump-Sum Review” “Know the Facts, Get the Stats: American Heart Association 2002-2004”. (55-0576).2003

12. Expenses usually covered by healthcare insurance: Surgery Hospitalization Prescription Medications Doctors Office Visits Expenses not usually covered by healthcare plans: Experimental Treatment Childcare, Housekeeping Transportation & Lodging During Treatment for Family Home or Auto Modifications Home Healthcare Needs Lost Income The Cost of Survival

13. Product Designs • Stand Alone • Critical Illness product built on a health chassis • Acceleration • A Critical Illness rider added to a life chassis product

14. Product Designs • First Generation • Lump sum benefit paid upon first occurrence and diagnosis of a covered critical illness; policy lapses following payment • Second Generation • Lump sum benefit paid upon first occurrence and diagnosis of a covered critical illness; policy remains in-force to pay subsequent benefits

15. Product Designs • Subsequent Benefits • Additional benefit payment for a subsequent first occurrence and diagnosis of an additional covered critical illness • Additional benefit payment for second occurrence of critical illness for which a benefit has already been paid

16. Product Strategies • Fully Underwritten • Generally benefit amounts up to $500,000 • Simplified Issue • Generally worksite products with lower benefit amounts usually up to $100,000 • Guarantee Issue • Group Chassis – generally benefit amounts of $5,000 to $20,000

17. Heart Attack Coronary By-Pass Angioplasty Invasive Cancer Cancer in Situ Stroke End Stage Renal Failure Major Organ Transplant Coma Aortic Surgery Severe Burns Blindness Deafness Paralysis Advanced Alzheimer’s Disease Loss of Independent Living Multiple Sclerosis Motor Neuron Disease Benign Brain Tumor Heart Valve Surgery Critical Illnesses Covered by Various Carriers

18. Product Differentiators • Benefit Extension Riders • Continuance • Recurrence • Multiple Payment Benefit • Benefits for Spouse/Children • Return of Premium Upon Death • Best Doctors

19. Underwriting Critical Illness Insurance • Remember … incidence occurs before mortality • Morbidity based underwriting versus mortality based underwriting • For example, in assessing coronary risk, there is a higher occurrence for the event of either a heart attack or coronary bypass surgery than the probability of dying from either one of these. Source: OptimumRe

20. Underwriting Critical Illness Insurance • Family history typically has a greater impact on CI underwriting than life underwriting. Variables associated with family (natural parents and siblings) history include: • The number of affected first degree relatives (FDR) • The FDR’s age at diagnosis – not death • The current age of the applicant • The sex of the applicant (in some cases) Source: OptimumRe

21. Potential Impact of Family History on CII Less Impact Greater Impact

22. Underwriting Critical Illness Insurance • Build is an important factor in critical illness underwriting; obesity is a major contributor to cancer and heart disease • Generally, APSs will be ordered more frequently on CI applications • Typically the best candidates for standard CI underwriting would be the those individuals eligible to qualify for Select Preferred or Preferred life underwriting Source: OptimumRe

23. Selling Critical Illness … Who’s a Prospect? • Business Market • Key Person • Buy-Sell • Worksite/PRD • Professionals/Highly Compensated maxed-out on personal DI protection • Singles, Single Parents • Family Market – one or both spouses employed

24. Selling Critical Illness … Who’s a Prospect? • Alternative to DI to those who can’t qualify for traditional product • Stay-at-home Moms/Dads • Truckers, Barbers, Work out of home • “Assets under management” protection • Mortgage Market • Only 3% of Mortgage foreclosures are due to death1 Source: 1 Ken Smith, Assurity Life President, National Association for Critical Illness Insurance

25. Consumer Focus Groups • Reinsurance Companies conducted consumer focus groups to get input on the concept of CI insurance protection • They found these participants to be among the most enthusiastic of any focus groups ever conducted on any insurance product Source: Ken Smith, Assurity Life President, National Association for Critical Illness Insurance

26. 28% 21% 13% 8% 5% 2% Long Term Care Insurance Longevity Insurance Critical Illness Insurance The Gap Between What ProducersOffer and What Clients Want Currently obtain from advisor Would like to discuss with advisor Source: Fidelity Advisor 2006 Survey of Investors at Retirement McKinsey & Company 2006 Consumer Retirement Survey

27. Effective and Compelling Marketing - Consumers • Focus on the need for CII - • They don’t already have it • It’s hard to self-fund • Health insurance isn’t full coverage • They are financially ill-prepared • Communicate what the product is and what the product is not

28. Issues and Concerns • Education/Awareness by both producers and consumers • Evolving Medical Technology • Future of US Health Care

29. The Future? • Embedded benefits, Optional riders • Product Evolutions • More triggers • Unique payouts • Conversion options • Packaging • Mortgage, DI, LTC • More carriers entering the market with ongoing product development

30. Critical Illness Insurance …NOW is the Time! PLAG.2789.02.06