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David Wm. Brown CLU, ChFC, CFP, RHU Tuesday June 21 nd 2005

Corner The Market "The Case For Critical Illness Insurance or Disability Insurance". CIFPs Annual National Conference Niagara Falls, Ontario. David Wm. Brown CLU, ChFC, CFP, RHU Tuesday June 21 nd 2005. AGENDA. Introduction Disclosure, qualifications, guarantees

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David Wm. Brown CLU, ChFC, CFP, RHU Tuesday June 21 nd 2005

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  1. Corner The Market "The Case For Critical Illness Insurance or Disability Insurance" CIFPs Annual National Conference Niagara Falls, Ontario David Wm. Brown CLU, ChFC, CFP, RHU Tuesday June 21nd 2005

  2. AGENDA • Introduction • Disclosure, qualifications, guarantees • The Case for Income Replacement/Critical Illness insurance • Personal demonstration • Statistics • Definitions • Income Replacement Insurance • Critical Illness Insurance • The Comparison • Income Replacement/Critical Illness • Critical Illness Insurance in Canada • Current status • Challenges

  3. AGENDA- Cont’d • Critical Illness Taxation Issues • C.R.A • C.A.L.U • Structuring the C.I. Policy • Prospecting • Your doctors • Your clients – individual/group • Yourself • Questions?

  4. SURVEY

  5. STROKE

  6. HEART DISEASE

  7. HEART ATTACK

  8. CANCER

  9. Disabled as a result of an Accident or of a Sickness ?

  10. 38% of Women41% of MenWill Develop Cancer In their Lifetime. CANCER

  11. Cancer • 1 in 3 Canadians will contract some form of life-threatening cancer • 125,000 newly diagnosed cases per year Heart Attack • 1 in 4 Canadians will contract heart disease • 75,000 suffer heart attacks each year - 1 in 2 < 65 Stroke • 1 in 20 Canadians run the risk of stroke before the age of 65 • 50,000 suffer a stroke each year - 1 in 3< 65 Accounts for almost 1% of the total Canadian population

  12. Income Replacement Insurance Income Replacement or Disability Income Insurance is designed to replace a portion of an individuals income; in the event that the individual as a result of an accident or sickness cannot work in his/her/any/own occupation

  13. Disability Insurance Variables • Elimination period • Monthly Indemnity • Benefit period • Definition of total disability • Definitions of partial/residual disability • Options; F.I.O; C.O.L.A

  14. Critical Illness Insurance The Critical Illness plan provides a lump sum tax-free benefit to be paid in the event that an individual contracts a critical illness. The Critical Illness policy is designed to provide the necessary financial assistance to permit the insured and his/her family to cope with a critical illness.

  15. Alzheimer’s Disease Aortic Surgery Blindness Benign Brain Tumor Cancer Coma Coronary Angioplasty Coronary Artery Bypass Surgery Cystic Fibrosis Diabetes Deafness Kidney Failure Heart Attack Heart Valve Replacement Loss of Independent Existence Loss of Limbs Loss of Speech Major Organ Transplant Motor Neuron Disease Multiple Sclerosis Occupational HIV Infection Paralysis Parkinson’s Disease Rheumatoid Arthritis Severe Burns Stroke Critical Illness InsuranceCovered Illnesses

  16. Critical Illness InsurancePlan Provisions • Lump Sum Non-Taxable Benefit • Payout 30 Days After Diagnosis • Guaranteed Renewable to Age 65 • Limited Qualified Right to Change Premiums • Guaranteed Issue (no medical requirements) • Optional Individual Increase Offered (with medical requirements) • Group - 15% Discount • Return of Premium on Death • Portable Coverage • Pre-Existing Condition Exclusion 24 months • Recharge Provision - 5 Years

  17. Medical Costs Alternative treatment Experimental drugs Out of province treatment Nursing care Reduce Financial Obligations Debt/mortgage repayment Non-Medical Costs Leave of absence for insured or spouse Home and/or vehicle adaptation Childcare Work style changes Extraordinary Costs of a Critical Illness

  18. Critical Illness Insurance Benefits • Effectively cover the most catastrophic events • Provide stable, predictable costs • Give a significant lump sum payout • Provide access to world renowned medical services • Fill the growing gap due to increased morbidity • Address real needs • Covers real risks

  19. Critical Illness InsuranceAssistance Services BEST DOCTORS/CERIDIAN/HEALING JOURNEY InterConsultation • Expert Medical Evaluation by World-Class Physicians • FindBestDoc • Customized Search for Best Doctors Including • Specialized Canadian Physicians • FindBestCare • Comprehensive Services and Access to Treatment • Centers Throughout the United States • Ceridian/The Healing Journey • 24 Hour Access to Daily Living AssistanceProfessionals • Membership in a Self-Help Healing Program

  20. “EITHER” OR ? ?

  21. “Canadian Critical Illness sales are paltry by comparison to other countries in the English speaking universe” Advisor.ca May 17, 2005

  22. C.I. SALES STATS AND ANALYSYS2004 • In 2004 sales increased by 11% • More limited guarantees introduced • Average size of policy dropped by 2% • Permanent products increased over renewable products • Return of premium at expiry benefit reduced by 6% • Only 3% of new policies sold were for “Basic” coverage of five or fewer conditions Source: Limra CI Sales 2004

  23. “If you don’t sell CI, have a huge financial indemnity policy because your client will sue you” Bhupinder Anand Anand Associates London, England

  24. REASONS • No standardized definitions • Concern over high premiums • Advisors not aggressive enough • Tough underwriting concerns

  25. DON’T TRY TO BE A DOCTOR !

  26. CRITICAL ILLNESS UNDERWRITING • Family History • Smoking • Height-Weight Ratio • Elevated Cholesterol • Medical Impairments that affect more than one body system or organ • Seemingly Insignificant Condition

  27. “The Canadian Life and Health Insurance Association and The Conference of Advanced Life Underwriting Discussion Paper” TAXATION March 2004 See Website: www.calu.com

  28. IS C.I. Question Accident or Sickness Insurance OR Life Insurance With/or Without Refund of Premium ON DEATH ON EXPIRY

  29. Critical Illness InsuranceTaxation • CRA has not yet clarified the Agency’s interpretation of the provisions of the Act with reference to the taxation of Critical Illness Contracts (especially with refund benefits) • The Conference of Advanced Life Underwriters is continuing to work with the Department of Finance to ensure an appropriate framework for taxation of Living Benefits

  30. TAXATION Canada Revenue Agency Technical Interpretation Letter (2003-0034505, December 9 ,2003) • Grouped C.I. Non taxable benefits and deductible premium – • ~ Assumption no return or premiums

  31. Understanding The TaxationOf Critical Illness Insurance Personally – Owing Policy CRA has confirmed that it views Critical Illness Insurance Policies without ROP benefits as accident and sickness Insurance.

  32. Understanding The TaxationOf Critical Illness Insurance Corporate Protection

  33. Understanding The TaxationOf Critical Illness Insurance Individual Policy as an Employee Benefit

  34. Understanding The TaxationOf Critical Illness Insurance Grouped Individual policies providing Employee benefit

  35. Standard Group Benefit Coverages • Life Insurance • Accidental Death and Dismemberment • Dependant Life • Extended Health Care • Dental Care • Short Term Disability • Long Term Disability

  36. WHAT’S MISSING?

  37. Critical Illness Insurance, A Living Benefit Without Critical Illness Insurance, will your employees be forced to… • Deplete their RRSP’s? • Increase their debt load? • Rely on relatives? • Pass the hat around the office? • Forgo access to timely medical treatment?

  38. Perspective • Critical Illness helps refocus benefits back to providing for the most catastrophic events • Provides the opportunity to create a more “caring parent” environment and reduces the need to “pass the hat” around the office to help an employee dealing with a critical illness • Average person starting out in the workforce has a: 2.1% chance of dying prior to age 65 20.1% chance of having a critical illness diagnosis prior to age 65 It is not a question of “if”, but rather “when”

  39. Keeping Things in PerspectiveHow Significant are the Following Events • Your Clients Car is Stolen • Your Clients TV is Stolen • Your Clients Computer is Stolen • You Client is Diagnosed with Cancer • Your Client Dies Rank the Significance of the Event on your clients family from 1 to 4, 4 being the greatest

  40. What Does Your Client Currently Have Insured? • Your Clients car • Your Clients TV • Your Clients Computer • Your Clients Life • The Diagnosis of Clients Critical Illness

  41. How many of you have either a personal income replacement policy or Critical Illness Policy Please Stand Up

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