Chapter 35: Monitoring Flashcards
Why do we monitor experience?
AATM
1. Asset share: Develop earned asset share
2. Assumptions: Update assumptions for future experience
3. Trends: Monitor adverse trends so as to take corrective actions.
4. Management information
What corrective actions can be taken after identifying trends?
DIS RUPP W
- Repricing of products
- Redesign of products
- Change in investment strategy
- Change in sales strat (dbn channel)
- Change reinsurance strat
- Change underwriting strat
- Change profit distribution strat
- Re-organise workforce to make more efficient use of expensive resources
- Changing the product mix/launching new products
- Implementing or improving retention activity
- Improve wording of policy contracts
- Improving adequacy of staffing resources
- Improve administration and systems
- Improve actuarial models
- Improve governance and controls
What is the data requirement for monitoring experience?
There needs to be a reasonable volume of stable, consistent data from which future experience and trends can be deduced.
What is the data requirement for monitoring experience?
There needs to be a reasonable volume of stable, consistent data from which future experience and trends can be deduced.
How would an actuary monitor mortality experience?
Subdividing the data into:
- Type of contract
- Age
- Sex
- Duratiion
- Smoker status
- Medical status
- Source of business
Process is not tested in F102
How do you subdivide the data for persistency (withdrawal experience)
- Type of contract (term assurance vs endowment)
- Duration in force- lower persistency earlier on.
- Sales method & target market
- Frequency and size of premium
- Premium payment method
- Original term of contract
- Sex and age- experience tend to be worse for younger ages.
What other factors affect withdrawal rates?
- Economic situation
- Competition
- Perceived value of the product to the customer
Why would a company want to analyze surplus?
DIVERGENCE
- Divergence of actual vs expected (show financial effect / significance of)
- Information to management and for accounts
- Variance as a whole is equal to the sum of the variances from the individual levers.
- Experience monitoring to feedback into ACC
- Reconcile values for successive years
- Group into once-off / recurring sources of capital
- Executive remuneration schemes (data for)
- New business strain (show effects of)
- Check on valuation assumptions and calculations
- Extra check on valuation data and process
