Chapter 31 - Monitoring and Feedback

Question 1

Experience will be monitored in order to: (5)

Answer 1

1. Update assumptions for future experience
2. Monitor any trends in experience
3. Monitor actual compared to expected experience and take corrective actions as needed
4. Provide management info to aid business decisions
5. Make more informed decisions about pricing and about adequacy of reserves

Question 2

Definition of new business strain:

Answer 2

It is deemed to occur when the cost of setting up a reserve on a statutory basis at the start of a contract is greater than the available funds (asset share) at that time

Question 3

Persistency rates in the future can be affected by: (3)

Answer 3

1. Current economic situation
2. Competitve situation of the product eg introduction of a more attractive poduct can have adverse effect
3. Perceived value of the product to the customer

Question 4

For expense analysis, expenses can be split into: (5)

Answer 4

1. Initial expenses
2. Renewal expenses
3. Termination expenses
4. Claims expenses
5. Investment expenses

Question 5

Analysia of surplus may be performed in order to: (5)

Answer 5

1. Show finacial effect of divergence between the valuation assumptions and the actual experience, exposing which assumptions are the more financially significant
2. Show financial effect of writing new business
3. Provide a check on the valuation data and process, if carried out independently
4. Identifying non recurring conponents of surplus, thus enabling appropriate decisions to be made about the distribution of surplus to with profits PHs are entitled, or to shareholders or to members
5. Comply with regulatory requirements

Question 6

Analysis of change in embedded value over a year can be done in order to: (5)

Answer 6

1. Validate the calculations, assumptions and data used
2. Reconcile the values for succesive years
3. Provide management info
4. Provide data for use in executive remuneration schemes
5. Provide detailed info for publication in the company’s accounts or those of any parent company, in particular the value of new business taken on by the company

Question 7

The results of monitoring can be used for: (11)

Answer 7

1. Improving the pricing basis
2. Establishing/revising the reserving basis
3. Changing/improving marketing message
4. Revising sales procedures ito training and selection of distributors
5. Providing for the adequacy of staffing
6. Revising the underwriting process
7. Revising claims handling process
8. Altering the capital allocation methodology
9. Improving the systems and data recording processes
10. Revising policy design
11. Improving wording of policy contracts