Chapter 0.2: General Pt 2 Flashcards
Areas that contribute to uncertainty in insurance business?
[4]
- Claims experience
- Expenses
- Investments
- Business risks
Uncertainties relating to claims experience?
[16]
- Variability in the size of claims
- Delays between the incidents giving rise to delays
- Types of policy written and cover provided
- Characteristics of policyholders
- Attitude of policyholders to claiming
- Crime rates
- Economic conditions
- Judicial decisions
- Legislation
- Accumulations of risk
- Catastrophes
- Latent claims
- Currency risks
- Reinsurance risks
- Interpretation of wording
- Inflation and consequential rates of escalation of claims
Uncertainties relating to expenses?
[6]
- Commission
- Mix of business
- Changes of the progression of staff and accommodation costs
- Changes in professional and legal costs
- Changes in the rates of inflation
- Doubts about the allocation of expenses.
Uncertainties relating to investments?
[9]
- Market conditions
- Assets available for investment
- Timing of claim payments
- Poor investment management
- Liquidity
- Mis-matching
- Security of assets
- The quantity of free assets
- Movements in asset values or currency rates
Business risks to consider?
[5]
- Failure of a third party
- Timing risk, with premiums or recoveries received later than expected or claims
paid sooner - Insurance cycle
- New business and lapses
- Operational risks
Factors that affect the quality and quantity of data?
[7]
- Size and age of company
- Existence of legacy systems
- Integrity of data systems
- Management and staff
- Nature of the organisation
- Method of sale
- Class of business.
What are the steps in a rating analysis?
[6]
- Estimate the ultimate claims
- Estimate profitability of existing rates
- Project forward to a new rating period
- Review the suitability of the existing rating structure
- Compare rates with those of competitors
- Analyse the profitability of old years on new rates
How to perform an expense analysis?
[5]
- Split expenses between direct and indirect
- Split between types of expense (eg initial, admin, renewal, claims, investment)
- Allocate expenses by class and rating group
- Express the expenses as a proportion of numbers of policies or claims
- Assess ratios
Types of reinsurance investigations?
[10]
- Required risk retention allowing for the solvency position
- Extent of exposure to accumulations of risk
- Need for catastrophe reinsurance
- Need for reinstatements
- Value for money of existing reinsurance
- Appropriateness of existing cover
- Profitability of layers
- Effects on capital
- Cost of commutation
- Check on the reinsurers’ solvency levels and assess the need for a bad debt provision
Reasons to monitor business written?
[7]
- Assess performance against goals
- Manage risk
- Gain market intelligence
- Satisfy the regulators
- Influence the market
- Assist with reserving
- Validate assumptions as part of the actuarial control cycle
Key factors to monitor on written business?
[9]
- Premium rate changes
Portfolio movements:
- Lapses at renewal / renewal rates
- New business volumes
- Quotes that result in written business (called the strike or conversion rate)
- Mid-term cancellations
- Policy endorsements
- Mix of business
- Volumes of quotations
- Persistency and profitability by source
Methods of calculating premium rate changes?
[4]
- Direct calculation for each risk separately
- Direct calculation using a standard risk
- Measuring rate changes on individual renewals
- Using underwriters’ views.
Reasons for analysing capital and investments?
[4]
- Evaluate the existing portfolio
- Assess capital requirements, risk, and investment policy
- Allocate capital between classes
- Determine return on capital
Areas of claims analysis?
[9]
- Changing frequency and severity of claims
- Impact and incidence of large claims
- Concentration of claims and aggregations of risk
- Splitting indemnity cost from expenses
- Types of claims reported
- Recoveries on gross claims
- Nil claims
- Partial payments
- Re-opened claims
Types of data to consider?
[5]
- Claims data
- Policy data
- Exposure data
- External data
- Financial markets data
