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Insurance Abstract
A method of managing the business of a life insurance scheme of
the kind in which a life insurer receives life insurance premiums
from an insured life and pays a predetermined sum to the insured
life on the occurrence of an insured event. The life insurance scheme
is linked to a medical scheme of the kind in which the provider
of such medical scheme undertakes liability in return for a premium
or contribution, the insured life being a member of the medical
scheme. A portion of the life insurance premiums paid by the insured
life during a predetermined period are allocated to a fund according
to predetermined criteria related to the status of the insured life
with the medical scheme. An amount is deducted from the balance
of the fund related to life insurance claims made by the member
during the predetermined period and at predetermined intervals,
the balance in the fund is paid to the insured life.
Insurance Claims
We claim:
1. A method of managing the business of a life insurance scheme
of the kind in which a life insurer receives life insurance premiums
from an insured life, the life insurer paying a predetermined sum
assured to the insured life or a beneficiary nominated by the insured
life on the occurrence of an insured event, the method comprising:
linking the life insurance scheme to a medical scheme of the kind
in which the provider of such medical scheme undertakes liability
in return for a premium or contribution, and provides to members
who pay such premiums, or make such contributions, relevant health
services and/or assistance in defraying expenses occurred in connection
with rendering such relevant health services, the insured life being
a member of the medical scheme; allocating a portion of the life
insurance premiums paid by the insured life during a predetermined
period to a fund according to predetermined criteria related to
the status of the insured life with the medical scheme during said
predetermined period; and at predetermined intervals, paying the
balance in the fund to the insured life or a beneficiary nominated
by the insured life.
2. A method according to claim 1 including deducting from the balance
of the fund an amount related to life insurance claims made by the
member during the predetermined period
3. A method according to claim 1 wherein the predetermined criteria
in terms of which a portion of the premiums paid by the insured
life are allocated to the fund include one or more of the following:
the specific medical plan chosen by the insured life; the number
of dependents of the insured life; the level of claims made on the
medical scheme by the insured life and his/her dependents during
the predetermined period; and the status of the insured life in
a reward program associated with the medical plan.
4. A method according to claim 1 wherein the predetermined period
is at least one year.
5. A method according to claim 4 wherein the predetermined period
is a five-year period.
6. A method according to claim 1 wherein the allocation of a portion
of the premiums paid to the fund is made annually.
7. A method according to claim 1 wherein the payment is made into
an account that the insured life or nominated beneficiary has with
a financial institution.
8. A method according to claim 1 wherein the payment is made into
a medical savings account that the insured life has with the medical
scheme or into a credit or debit card of the insured life, which
credit or debit card is associated with the life insurance scheme
or medical scheme.
Insurance Description
BACKGROUND OF THE INVENTION
[0001] This invention relates to a method of managing a life insurance
policy.
[0002] Conventionally, life insurance policies operate on the basis
that an insured person, referred to as an insured life, pays a premium
to the life insurer, and the life insurer pays a predetermined sum,
referred to as the sum assured, to the insured life or his/her beneficiary
on the occurrence of an insured event. Typical insured events are
the insured life suffering disability, contracting a dread disease
or dying.
[0003] In general, it would be beneficial both to the insured life
and the life insurer if the insured life were to maintain his/her
health and extend his/her life. It is an object of the invention
to provide a method of managing a life insurance policy which addresses
this goal.
SUMMARY OF THE INVENTION
[0004] According to the invention there is provided a method of
managing the business of a life insurance scheme of the kind in
which a life insurer receives life insurance premiums from an insured
life, the life insurer paying a predetermined sum assured to the
insured life or a beneficiary nominated by the insured life on the
occurrence of an insured event, the method comprising:
[0005] linking the life insurance scheme to a medical scheme of
the kind in which the provider of such medical scheme undertakes
liability in return for a premium or contribution, and provides
to members who pay such premiums, or make such contributions, relevant
health services and/or assistance in defraying expenses occurred
in connection with rendering such relevant health services, the
insured life being a member of the medical scheme;
[0006] allocating a portion of the life insurance premiums paid
by the insured life during a predetermined period to a fund according
to predetermined criteria related to the status of the insured life
with the medical scheme during said predetermined period; and
[0007] at predetermined intervals, paying the balance in the fund
to the insured life or a beneficiary nominated by the insured life.
[0008] The method may further include deducting from the balance
of the fund an amount related to life insurance claims made by the
member during the predetermined period
[0009] The predetermined criteria in terms of which a portion of
the premiums paid by the insured life are allocated to the fund
may include one or more of the following:
[0010] the specific medical plan chosen by the insured life;
[0011] the number of dependents of the insured life;
[0012] the level of claims made on the medical scheme by the insured
life and his/her dependents during the predetermined period; and
[0013] the status of the insured life in a reward program associated
with the medical plan.
[0014] The predetermined period is preferably at least one year
and will typically be a five-year period.
[0015] The allocation of a portion of the premiums paid to the
fund may be made annually.
[0016] The payment can be made into an account that the insured
life has with a financial institution, for example. Alternatively,
the payment could be made into another vehicle, such as into a medical
savings account that the insured life has with the medical scheme
or into a credit or debit card of the insured life, which credit
or debit card is associated with the life scheme or medical scheme.
DESCRIPTION OF AN EMBODIMENT
[0017] Conventional life insurance policies operate on the basis
that an insured person, referred to as the insured life, pays premiums
on a regular basis to the life insurer, specifying a sum assured
which is an amount to be paid out on the occurrence of an insured
event. For example, on the death of the insured life, a predetermined
death benefit is paid to the nominated beneficiaries of the insured
life. If the insured life is disabled or suffers a dread disease,
a different, lesser amount is paid out.
[0018] Medical schemes (also referred to as medical aid schemes)
exist in which the provider of the medical scheme undertakes liability
in return for a premium or contribution paid by a member of the
scheme. The provider of the medical scheme provides relevant health
services or assists the member in defraying expenses incurred in
connection with the rendering of such health services, according
to a predetermined scale of benefits. Commonly, the medical scheme
provider offers a number of different plans which provide greater
or lesser benefits to members at correspondingly higher or lower
costs.
[0019] Schemes exist which aim to encourage medical scheme members
to use their benefits responsibly and which reward members for making
use of health related services or facilities, and otherwise managing
their health positively. An example of such a scheme is the "Vitality"
scheme of Destiny Health that is described in U.S. patent application
Ser. No. 09/982,274, the contents of which are incorporated herein
by reference. The present invention seeks to link the operation
of a life insurance business to that of a medical scheme, by rewarding
an insured life who is also a member of the related medical scheme
for responsible use of the medical scheme benefits.
[0020] An example of the present invention will now be described
with reference to the Vitality scheme of Destiny Health and an associated
life insurance policy to be operated by Destiny Life. Accordingly,
the method of the invention is applicable to Destiny Life policyholders
who are also members of the Destiny Health medical scheme and the
associated Vitality scheme. It will be appreciated that the described
example is but one way of implementing the invention.
[0021] The insured life, who is also a member of the related medical
scheme, pays premiums (typically monthly or annually) to the life
insurance company determined by the value of a selected sum assured.
[0022] A payment will be made to the policyholder at the end of
every 5 years, for example, during the term of the life insurance
policy. Each 5 year period will be termed a "cycle".
[0023] The payment can be made into an account that the insured
life has with a financial institution, for example. Alternatively,
the payment could be made into another vehicle, such as into a medical
savings account that the insured life has with the medical scheme
or into a credit or debit card of the insured life, which credit
or debit card is associated with the life scheme or medical scheme.
[0024] At the end of each year, within each 5 year cycle, the life
insurance company will accumulate a portion of the client's life
insurance premiums into a fund, known as the "PayBack Fund".
The amount accumulated in the fund each year will depend on one
or more of the following criteria:
[0025] 1. The Destiny Health plan type chosen by the client (i.e.
Comprehensive or Core plan)
[0026] 2. The size of the family on the life scheme (i.e. principal
only or family)
[0027] 3. The level of claims made on the medical scheme by the
policyholder (and family) over that year
[0028] 4. The policyholder's Vitality status over that year (i.e.
Blue, Bronze, Silver or Gold)
[0029] (The calculation of the portion of the policyholder's contributions
to be accumulated into the PayBack Fund is set out in Tables 1 to
4 below.)
[0030] The amount accumulated in the PayBack Fund each year will
not earn interest and any claims made by the policyholder against
his/her life insurance policy will reduce the amount in the Payback
Fund.
[0031] At the end of each five year cycle, the balance in the PayBack
Fund will be paid out, and the hence the balance will start at zero
at the beginning of every cycle. The calculation of the payback
value in each cycle is completely independent of previous cycles
so that no claims or premiums relating to previous cycles will be
taken into account.
[0032] The premiums taken into account for the above described
PayBack benefit will be the actual premiums paid by the client on
his/her life policy. Premiums that are being waived will not be
included in the PayBack benefit.
[0033] The invention essentially provides a method of rewarding
clients for managing their health, the idea being that a person
who looks after their health should pay less for their life assurance
than a person who leads an unhealthy lifestyle.
[0034] Compared with existing methods that provide an upfront benefit
to clients who manage their health by discounting their life policy
premiums, the method of the present invention provides a long term
benefit to clients who continue to look after their health by paying
out a cash amount to them every five years.
[0035] The PayBack tables are dependent on the policyholder's Vitality
status, annual medical scheme claims, medical scheme plan type and
family size. Note that the claim bands differ between each table.
The claim bands in the table will be adjusted each year to allow
for inflation. For example, the PayBack tables could look as follows:
1TABLE 1 Principal Only - Comprehensive Health Plan Vitality Status
Health Claim amounts Blue Bronze Silver Gold 0 to 2200 20.00% 25.00%
35.00% 50.00% 2201 to 3800 15.00% 20.00% 30.00% 45.00% 3801 to 5400
10.00% 15.00% 25.00% 40.00% 5401 to 11000 7.50% 12.50% 22.50% 37.50%
11001 to 16300 2.50% 7.50% 17.50% 32.50% 16301 to 27000 0.00% 5.00%
15.00% 30.00% 27000+ -2.50% 2.50% 12.50% 27.50%
[0036]
2TABLE 2 Family - Comprehensive Health Plan Vitality Status Health
Claim amounts Blue Bronze Silver Gold 0 to 3250 20.00% 25.00% 35.00%
50.00% 3251 to 5400 15.00% 20.00% 30.00% 45.00% 5401 to 11000 10.00%
15.00% 25.00% 40.00% 11001 to 16300 7.50% 12.50% 22.50% 37.50% 16301
to 27000 2.50% 7.50% 17.50% 32.50% 27001 to 38000 0.00% 5.00% 15.00%
30.00% 38001+ -2.50% 2.50% 12.50% 27.50%
[0037]
3TABLE 3 Principal Only - Core Health Plan Vitality Status Health
Claim amounts Blue Bronze Silver Gold 0 to 1100 15.00% 20.00% 30.00%
45.00% 1101 to 2200 10.00% 15.00% 25.00% 40.00% 2201 to 3800 5.00%
10.00% 20.00% 35.00% 3801 to 5400 0.00% 5.00% 15.00% 30.00% 5401
to 11000 -2.50% 2.50% 12.50% 27.50% 11001 to 16000 -5.00% 0.00%
10.00% 25.00% 16001+ -7.50% -2.50% 7.50% 22.50%
[0038]
4TABLE 4 Family - Core Health Plan Vitality Status Health Claim
amounts Blue Bronze Silver Gold 0 to 1650 15.00% 20.00% 30.00% 45.00%
1651 to 3250 10.00% 15.00% 25.00% 40.00% 3251 to 6500 5.00% 10.00%
20.00% 35.00% 6501 to 11000 0.00% 5.00% 15.00% 30.00% 11001 to 16300
-2.50% 2.50% 12.50% 27.50% 16301 to 27000 -5.00% 0.00% 10.00% 25.00%
27000+ -7.50% -2.50% 7.50% 22.50%
[0039] A example of a calculation basis that may be used is as
follows: 1 Payback in Year 5 = Payback % in Year 1 * Annual Life
policy Premium for Year 1 + Payback % in Year 2 * Annual Life policy
Premium for Year 2 + Payback % in Year 3 * Annual Life policy Premium
for Year 3 + Payback % in Year 4 * Annual Life policy Premium for
Year 4 + Payback % in Year 5 * Annual Life policy Premium for Year
5
[0040] -Claims made on life insurance policy over the 5 years
[0041] Calculation Example
5 An Integrated Policyholder is on the Comprehensive Destiny Health
plan with a family size of 2. Both members on the plan have benefits
with Destiny Life under the principal policy. The policyholder makes
no claims on his Life life insurance policy. Initial Annual Life
policy Premium paid: R 1 000 Annual Destiny Life premium Increase:
10% Vitality Status Year 1: Blue Vitality Status Year 2: Blue Vitality
Status Year 3: Bronze Vitality Status Year 4: Silver Vitality Status
Year 5: Gold Total Medical Aid Claims Year 1: R 2 000 Total Medical
Aid Claims Year 2: R 4 000 Total Medical Aid Claims Year 3: R27
001 Total Medical Aid Claims Year 4: R 3 500 Total Medical Aid Claims
Year 5: R 0 Annual Life policy Premium (Year1) = R 1 000.00 Annual
Life policy Premium (Year2) = R 1 100.00 (=R1 000 * (1 + 10%)) Annual
Life policy Premium (Year3) = R 1 210.00 (=R1 100 * (1 + 10%)) Annual
Life policy Premium (Year4) = R 1 331.00 (=R1 210 * (1 + 10%)) Annual
Life policy Premium (Year5) = R 1 464.10 (=R1 331 * (1 + 10%)) From
the above tables, allowing for the Vitality Status and Claims: Payback
% (Year1) = 20% Payback % (Year2) = 15% Payback % (Year3) = 5% Payback
% (Year4) = 30% Payback % (Year5) = 50% Hence: Payback in Year 5
= R 1 000 * 20% + R 1 100 * 15% ++ R 1 210 * 5% ++ R 1 331 * 30%
++ R 1 464.10 * 50% = R 1 556.85 Note: This example assumes that
the claim bands in the PayBack table stay the same for the 5 year
period.
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