Chapter 35 - Monitoring Experience Flashcards
1
Q
Experience will be monitored as part of the control cycle so as to: (4)
A
- Develop earned asset share
- Update assumptions as to future experience
- Monitor any adverse trends in experience so as to take corrective actions
- Provide management information
2
Q
Corrective actions that can be taken as a result of identifying adverse trends in experience: (8)
A
- Re-pricing of products
- Re-design on products
- Change in investment strategy
- Change in sales strategy
- Change in reinsurance strategy
- Change in underwriting strategy
- Change in profit distribution strategy eg bonus rates
- Re-organise the workforce and IT systems to make more efficient use of expensive resources
3
Q
Risks of big data: (5)
A
- Reputational damage, eg concerns over privacy and data protection failures
- Regulations governing big data may change. Could be fines for misuse of data
- Data collected may be inaccurate, incomplete, or irrelevant
- Risk of using the wrong model
- Expense of collecting and analysing the data may outweigh benefits of extra information received
4
Q
Factors by which data could be analysed when monitoring withdrawal experience: (7)
A
- Type of contract
- Duration in force
- Sales method used and target market
- Frequency and size of premium
- Premium payment method (eg in cash or paid via debit order)
- Original term of the contract
- Sex and age
5
Q
Withdrawal rates could be affected by: (3)
A
- Economic situation
- Competitive situation of the product, introduction of more attractive products can have an adverse effect
- Perceived value of the product to the customer
6
Q
For expense analysis, expenses can be split into: (4)
A
- Initial expenses
- Renewal expenses
- Termination expenses
- Investment expenses
7
Q
Expenses can be further split according to whether they are proportional to: (3)
A
- Number of contracts written or in force
- Amount of premium written or in force
- Amount of benefit written or in force
8
Q
Main items if expenses are: (4)
A
- Salaries and salary-related expenses
- Property costs
- Computer costs
- Investment costs
9
Q
Reasons to analyse surplus arising over a year: (6)
A
- Show the financial effect of divergences between the valuation assumptions and the actual experience, exposing which assumptions are the more financially significant
- Show the financial effect of writing new business
- Provide a check on the valuation data and process, if carried out independently
- Identify non-recurring components of surplus, thus enabling appropriate decisions to be made about the distribution of surplus to with profits policyholders
- Give management information on trends in the experience of the company
- Comply with regulatory requirements
10
Q
By analysing the embedded value profit, it will allow the company to: (5)
A
- Validate the calculations, assumptions, and data used
- Reconcile the values for succesive years
- Provide management information
- Provide data for use in executive remuneration schemes
- Provide detailed information 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
11
Q
The results of analysing the experience may result in changes to: (18)
A
- Updating pricing basis
- Revising product design
- Changing the product mix/ launching new products
- Revising the UW processes
- Revising reinsurance arrangements
- Implementing or improving retention ability
- Changing the marketing message, target market and/or distribution channel
- Revising sales procedures ito training and selection of distributors, wording and format of sales literature
- Improving the wording of policy contracts
- Improving the adequacy of staffing resources
- Improving systems and data recording processes
- Improving actuarial models
- Changing the investment strategy
- Changing the with profits surplus distribution approach
- Updating the reserving basis
- Raising capital
- Altering the capital allocation methodology
- Improving risk management governance and controls
