HSN 10/2004: Read, Write, THink

Question 1

What the actuary needs to do when signing a formal Statement of Actuarial Opinion

Answer 1

1. Read
   a. Read what the statement actually says
   b. Read the applicable Actuarial Standards of Practice
   c. Read other available guidance from other sources including
   i. National Association of Insurance Commissioners (NIAC)
   ii. Actuarial Standards Board (ASB)
   iii. American Academy of Actuaries (AAA)
2. Think
   a. Think about what you are signing
   b. Can you really make those statements?
   c. What work have you done to support these statements?
3. Write
   a. Don’t just sign standard if you don’t believe it
   b. Write what you actually think
   c. Include work you did to support opinion
4. Make sure you are qualified to sign the statement

Question 2

Typical Items Tha Actuary Opines On

Answer 2

1. Unpaid claim liability
2. Unpaid claim adjustment expenses
3. Accrued medical incentives
4. Aggregate policy reserves
5. Claim reserves
6. Experience-rated refunds

Question 3

Statements the Actuary should make for each item opined on

Answer 3

1. The liabilities are in accordance with accepted actuarial standarads
a. Should be applied consistently from year to year
b. If departing from standards, explain methodology

2. Appropriate actuarial assumptions are used to compute liabilities
a. For a statutory statement, should be at least 75% chance that the booked reserve is sufficient

3. State requirements are met
a. Typically few state regulations for group health liabilities

4. Make good and sufficient provision for unpaid claims and other liabilities
a. Should have sufficient margin
b. Differing opinions on if overly sufficient reserves are a bad thing

5. Calculation of liabilities should be consistent with the preceding year-end
a. State if there has been a change in methodology
b. May qualify this statement if new item this year or if actuary has no knowledge about what was done in the previous year

6. Include provision for all items which ought to be established
a. Actuary needs to understand what’s going on in the company
i. New lines of business, reinsurance agreements, etc.
b. May require talking with management

Question 4

Other Considerations

Answer 4

1. Qualified Opinions
   a. With the exception of unresolved issue X, the liabilities are sufficient
2. Insufficient reserves
   a. If reserves are not sufficient, you should either:
   i. Convince management to increase reserves
   ii. Inform management you will sign form stating reserves are inadequate
3. ASOP 16
   a. Actuary should discuss what is known about provider entities that are capitated
   b. If information is limited, consider adding disclaimer that status of capitated entities is unknown
4. Data Reliance
   a. State that if data is incorrect, actuaries opinions may also be incorrect
5. Asset Adequacy
   a. Disclose if asset adequacy analysis has not been performed
6. Variability of results
   a. State that actuarial values are estimates and actual results will vary