Chapter 34: Further risk management Flashcards
1
Q
Insurers should try to keep expenses and commissions withing the loading received to cover them. To achieve this, the company can: (7)
A
- monitor the position regularly
- monitor competitors’ expense ratios to ensure expenses are at a competitive level
- have monitoring procedures in place to pick up (and prevent) any upward slippage in commission levels
- control staffing and salary levels to be consistent with the work required, especially for new business/sales effort
- attempt to sell more business without increasing the (overhead) cost base
- improve operational efficiency, e.g. through automation
- increase premium loadings and/or charging rates provided still competitive
2
Q
To improve persistency, the company might: (4)
A
- change distribution channels
- set up alternative remuneration (commission) structures that encourage persistency
- improve sales methods so that policies are sold more strictly to meet customer needs
- restrict premium payment methods (to direct debit, for example)
3
Q
Volume and mix can be controlled by: (2)
A
- appropriate marketing, especially with regard to remuneration and targeting of distribution channels
- product design (e.g. matching charges, premium frequency, minimum premiums, guarantees)
4
Q
Control measures for options include: (2)
A
- increase charges/loadings that are paid for the option
- alter the benefits or terms of the option
- remove the option from new business.
5
Q
Possible mitigations for existing options include:
A
- appropriate reserving
- strict interpretation of terms
- using derivatives
- buy back from policyholders
6
Q
Define Enterprise Risk Management (ERM)
A
ERM is an integrated approach to risk management that allows managers to understand concentration of risk and the benefits of diversification.
7
Q
Define Enterprise Risk Management (ERM)
A
ERM is an integrated approach to risk management that allows managers to understand concentration of risk and the benefits of diversification.
