Chapter 11- Data

Question 1

Benefits of an industry wide collection scheme (5)

Answer 1

1. Enables an insurer to compare its own experience with that of the industry
2. Understand how the characteristics of the business it’s seeking to attract my differ from the business it already has
3. Provides a benchmark for insurers to assess their position compared to competitors
4. Use as benchmarks when reserving
5. Supplement internal data

Question 2

Problems with industry wide data (12)

Answer 2

1. Companies operate in different geographical or socio economic sections of the market
2. The policy sold by different companies are not identical
3. Different target markets or sales methods
4. Different practices in underwriting, claim settlement, and outstanding claim reserving policies
5. Differences in the nature and quality of the data stored by different companies
6. Coding used for risk factors may vary from company to company
7. Much less detailed and inflexible than internal data thermal data that’s more difficult to manipulate
8. Much less detailed and inflexible than internal data thus more difficult to manipulate
9. Out of date
10. The quality of the data depends on all of its contributors
11. May not be a true reflection of the industry’s experience as a whole if not all companies contribute
12. Heterogeneity issues

Question 3

Sources of data (12)

Answer 3

1. Industry wide collection schemes
2. Standard actuarial tables (PMA 92)
3. Standard actuarial tables from similar countries
4. Adjusted national statistics
5. Adjusted national statistics for similar countries
6. Reinsurer’s expertise
7. Industry data of policyholder
8. Economic data- published Financials
9. Policy statements
10. Government/national statistics
11. Research
12. Other insurers data (reciprocal agreement)