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F101 > Chapter 29 - Other risk managment techniques > Flashcards

Chapter 29 - Other risk managment techniques Flashcards

1
Q

Ways other than reinsurance that insurers can use to manage their risk

A

DUM COP M

  • DATA checks
  • UNDERWRITING
  • MANAGING the distribution process and customer relationship
  • CLAIMS management
  • OTHER internal processes
  • PRODUCT design
  • MANAGING other counterparties
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2
Q

Definition of underwriting

A

It is the process of consideration of an insurance risk. This includes assessing whether the risk is acceptable, and if so, setting the appropriate premium, together with the terms and conditions of cover

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3
Q

What are the different levels of underwriting

A
  • Full medical underwriting
  • Medical history disregard - no regard is paid to the individual’s past medical history and no exclusions are made for pre-existing conditions
  • Moratorium underwriting - No formal underwriting is carried out at the point of acceptance, but past medical history is examined at the time of claim
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4
Q

The process of full medical underwriting

A
  • Obtaining medical evidence - Questions, medical tests, medical reports
  • other factors that can affect the mortality and sickness:
    – occupation
    – leisure pursuits
    – normal country of residence
  • Financial details of the applicant are gathered to prevent over-insurance
  • Interpretation of the evidence by specialist underwriters
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5
Q

What are the options available when the applicant represents a higher risk than that assumed in the pricing assumption

A

SHOP DD

  • can have SPECIFIC clauses and/or conditions excluded
  • Offer HIGHER premium or lower benefit
  • can be OFFERED to a reinsurer facultatively with zero retention
  • can POSTPONE cover
  • DECLINED
  • offered a DIFFERENT type of policy
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6
Q

The ways in which medical underwriting can manage risk

A

ASS HOE

  • protects the provider against ANTI-SELECTION
  • enables the provider to identify risks for which SPECIAL terms must be quoted
  • for SUBSTANDARD risks, the UW process will identify the most suitable approach and level for the special terms to be enforced
  • enables provider to classify risks into HOMOGENEOUS groups for which a standard premium is charged
  • for larger proposals, the financial underwriting procedures will help to reduce the risk of OVER-INSURANCE
  • help ensure claim EXPERIENCE doesn’t depart too far from that assumed in the pricing of the contracts
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7
Q

How can a claims management team reduce risk at an insurance company

A
  • It is important in ensuring that the claims accepted are consistent with the assumptions made when the product was designed and priced
  • They should be involved in the process of product development and there should be regular interaction between them and the pricing/design teams
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8
Q

What are the 3 main methods used by PMI to manage claim costs

A
  • Methods aimed at policyholders
  • Methods aimed at healthcare providers
  • Care/utilisation management
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9
Q

What are the methods aimed at policyholders to reduce risk (manage claim costs)

A

LAMP

  • LIMITIATIONS and exclusion benefits
  • APPROVED provider networks
  • MEDICAL savings accounts, Co-payments, levies, deductibles and
  • PREVENTATIVE medicine and wellness programmes
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10
Q

What are the methods aimed at healthcare providers to reduce risk

A
  • Treatment protocols
  • Negotiated fees and fixed payment methods
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11
Q

How can care/utilisation methods reduce risk

A
  • Pre-authorisation
  • Case management
  • Utilisation reviews
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12
Q

How can checks on policy and claims data reduce risk

A

SCAR C

  • STAFF training
  • CONTROLS on data acceptance
  • Recording ACCURACY
  • REGULAR vetting and spot checks
  • COMPULSORY fields
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13
Q

How can product design reduce risk

A

Design decisions such as the form of benefits, claim definitions and the inclusion of guarantees and options have a direct impact on the level and type of risk to which the insurer is exposed

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14
Q

How can managing the distribution process and customer relationship reduce risk

A

In order to protect its relationship with the client, the insurer must:

BAMBI M

  • beware BUSINESS churning
  • ANALYSE the quality of sales staff
  • MONITOR the sales message
  • BEWARE overgenerous commission
  • INVEST in sales training
  • MONITOR premium receipts

MICS
- Meeting customer needs
- Information and literature ( provided to the customer regularly)
- Claims payment satisfaction
- Surveys on customer service satisfaction

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15
Q

Techniques for managing counterparty risk

A

DIRTS

  • DIVERSIFICATION across different counterparties
  • Credit INSURANCE or derivatives
  • RESTRICTION on the use of counterparties below a specified credit rating
  • THOROUGH due diligence on the counterparty before selection
  • SINGLE counterparty exposure limits
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16
Q

What is a service level agreements (SLA)

A
  • It contains the precise details of the role that each party agrees to undertake
  • In return for fees, certain tasks will be performed to a pre-specified standard and within pre-specified times
  • By passing on tasks in the business to experts, the insurer is reducing risk
    – but the insurer needs to have regular reports, checks and inspections in order to ensure that the insurer is not to suffer from reputational risks, business risks, and security issues
17
Q

What is enterprise risk management

A

It is a risk management framework that considers the risks of the business as a whole, rather than considering individual risks in isolation

18
Q

How can experience monitoring and control reduce risk

A

RECAP

  • REVIEWING new business strategy
  • EXPENSE control
  • CAPITAL management
  • ASSET-liability management
  • POLICY retention activity
19
Q

What are the Reimbursement methods to healthcare providers

A
  • Fee-for-service
  • Episodes of care
  • Capitation
  • Pay for performance
  • Pay for co-ordination
  • Pay for participation
20
Q

What is fee-for-service

A

Fee-for-service reimburses healthcare providers for each service administered to patients

21
Q

What is episode of care

A

Episode or bundled payments are single payments for a group of services related to a treatment or condition that may involve multiple providers in multiple settings

22
Q

What is Capitation

A

It is payment of a set amount pre head , regardless if the person uses a service

23
Q

What is Pay for performance

A

Involves a financial incentive for achieving defined and measurable goals related to care processes and outcomes, patient experience, resource use, and other factors

24
Q

What is Pay for co-ordination

A

Involves payment for specified care co-ordination services, usually to certain providers

25
Q

What is Pay for participation

A

This type of voluntary model offers additional reimbursement to providers that agree to be peer-reviewed on the generated cost efficiency and/or quality of their clinical decisions

26
Q

What is moratorium

A
  • it is an initial period of blanket exclusion for any pre-existing conditions, the proposer not being medically underwritten unless a claim is made.
  • If no further treatment is received for these conditions within, say, two years, then the exclusions may be lifted
27
Q

Techniques that may be used by insurers to manage claims costs

A

CLAMP M

  • Co-payments and levies
  • Limitations and exclusions on benefits
  • Approved provider networks
  • Medical savings accounts
  • Preventative medicine
  • Managed care
28
Q

Fixed payment methods used by insurers to manage cost of claims

A
  • Indemnity or fee-for-service
  • Modified (negotiated) fee-for-service
  • Per diem (hospitals)
  • Per case
  • Capitation
  • Salary
29
Q

Areas covered in a contract between an insurer and a third-party provider of services

A
  • Dates for which the agreement is in force
  • Who the parties are, who the main contracts are, who is going to carry out the work and who the ultimate responsibility lies with
  • Payments to be made to the third party (amount, frequency, methods, any conditions)
  • Any other obligations on the insurer’s part
  • How, and how often, the standard of service will be monitored
  • What action will be taken if service standards are failed (e.g. penalties)
  • Cancellation agreements
30
Q

3 functions co-payments can perform in managing the risk relating to cost of claims for PMI insurers

A
  • Co-payments introduce an element of cost-sharing
  • Co-payments can act as a disincentive for seeking unnecessary medical treatment and can prevent costs where the medical condition is trivial
  • Co-payments can direct utilisation of healthcare services to more cost-effective options

F101 (32 decks)

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