Health-related annuities

Ermanno Pitacco

11.1 INTRODUCTION: LINKING BENEFITS TO HEALTH STATUS

Special-rate annuities offer a significant example of how the relationship between a single premium and benefit amount can be linked to a customer’s health status (see Section 9.5).

Conversely, the long-term care (LTC) uplift shows how the amount of benefit paid can be increased in the event of a severe worsening of the annuitant’s health conditions (see Section 7.5), and hence provides an interesting example of merging two purposes (see Section 1.3.1): income (target achieved by the basic or reduced pension) and protection (realised by paying a higher benefit amount to help in covering long-term care expenses).

The two examples cited above suggest defining a specific area including all types of health-related life annuities, ie, encompassing all possible annuity structures in which life annuity payments are, in some way and to some extent, linked to individual health conditions. Diversity in linking arrangements is explained in Section 11.2, where two basic criteria for implementing the link are singled out.

Among the various linking possibilities, life annuities provided by LTC insurance (LTCI) products deserve