Chapter 9 Flashcards
What do MI companies do?
Management information companies assist in analysing trends and forcasting the future by manipulating data.
What are the 3 levels of decision making?
- Board level
- Reporting to UW managers
- Operational data
Name 3 issues a board member might be concerned with.
Growth, loss ratios, profit margin, exposure, return on capital, solvency
How often is reporting to UW generally made?
Monthly
Name 3 issues a UW manager might be concerned with.
Growth by product, retention rates, new business analysis, loss ratios, claim trends, large losses, rate changes, competitor activities
Name 3 issues an operational data consultant might be considered with?
New business, retention, rate increases, compliance, loss ratios, credit control
Why is analysing claim trends important for underwriting?
Claim information can help predict future loss patterns and anticipated future claim costs
Name 3 things an UW might consider looking at an individual clients claims when considering whether to take on the risk.
Is claims frequency improving,
Causes of the claims,
Large claims,
What is the position of the claim,
When were the claims recorded
What is PIDR and who is it for?
Personal injury discount rate. Those with life changing injuries to ensure they have enough money to cover them for the future.
Can the PIDR rate be applied to historic or settled claims?
No.
How often does PIDR have to be reviewed?
Every 3 years
What is the current PIDR rate?
-0.25%
How does the current PIDR rate affect the market?
It causes higher premiums and higher reserves.
Why do insurers have to pay more if the PIDR is negative?
A larger payout is required by insurers to compensate the fact that if the claimant invests the money, it might not grow.
In what 2 ways are risks assessed/measured?
Frequency and severity.
What is an example of a high frequency but low severity event?
Windscreen claims
What is an example of a low frequency but high severity event?
Oil spills
What kind of risks are less predictable? (In terms of frequency and severity)
Low frequency and high severity
How do insurers help to protect themselves against unpredictable/accumulated/high severity claims?
Reinsurance
How do you calculate a claims loss ratio?
Claims ratio = claims insured / premium x 100
Why are CLR’s useful to insurers?
They are good indications of how an account is running.
What is an ELR?
An Earned Loss Ratio (ELR) is a key metric used in insurance to evaluate the profitability of an insurer’s policies. It compares the losses incurred to the premiums earned over a specific period of time.
(Earned Premiums: The portion of premiums that corresponds to the coverage period that has already passed (not the full written premium if it’s for a future period)
What is an OLR? And is it useful?
An outstanding loss ratio. The loss ratio that is extracted directly from the files or computer system.
Not particularly as it doesn’t recognise that 100% premium hasn’t been earned yet.
What are the 4 types of monitoring period?
- Policy year
- Underwriting year
- Calendar year
- Accounting year
What is a policy year?
A 12-month period from when the policy starts to when it ends.
What is an underwriting year?
A type of monitoring period used at an account level.
What is an accounting year and why is it not preferred?
It will follow the financial year. Trends are harder to detect.
