Intro: The Insurance Value Chain

Question 1

Define Value Chain

Answer 1

All interconnected activities a business performs to produce & sell its products and services.

Question 2

What are the three primary activities in the standard insurance value chain?

Answer 2

1. Marketing & Distribution
2. Underwriting
3. Claims

Question 3

Which primary activity involves all activities relating to administering business?

Answer 3

Claims - they provide policy coverage & services as sold to customers.

Question 4

Underwriting - Primary Activities

Answer 4

Pricing & Selecting Customers

Question 5

In the value chain which department finds potential customers and secures new business?

Answer 5

Marketing & Distribution

Question 6

Used for data for Underwriting

Answer 6

1. Improve ability to evaluate risk level of an applicant.
2. Understand if risk falls in the acceptable range.
3. Determine prices to charge each customer based on their risk level.

Question 7

Which department uses data to identify fraud and better control lost costs?

Answer 7

Claims

Question 8

Uses for data in Marketing & Distribution

Answer 8

1. Identifying new opportunities - what audiences to target / what new products to develop to fulfill unmet demands.
2. Refine marketing efforts - determine best way to customise ads for various target audiences.

Question 9

4 main ‘Supporting activities’ (departments) who support Primary Activities

Answer 9

1. Actuarial
2. Special Investigations Unit (SIU)
3. Risk Control
4. Finance &Accounting

Question 10

Which ‘Supporting Activity’ maintains records on insurer’s financial transactions & generates reports based on that data?

Answer 10

Finance & Accounting

Question 11

What supporting activities does the Risk Control department perform?

Answer 11

Analyses customer’s business operations and gives advice on how the customer can reduce frequency / severity of suffering losses.

Question 12

Which supporting activity focuses solely on investigating insurance fraud!

Answer 12

Special Investigations Unit

Question 13

Which supporting activity focuses solely on investigating insurance fraud!

Answer 13

Special Investigations Unit

Question 14

Which ‘Supporting Activity’ examines loss experience to determine rates underwriters should use to calculate premium amounts to charge customers?

Answer 14

Actuarial

Question 15

What is historical claim data used for?

Answer 15

Determine insurer’s loss experience

Question 16

What is the purpose of Actuaries using data to determine how much Loss Reserves to set?

Answer 16

Ensure that insurer will have enough funds to pay for losses when it’s time to settle each claim.

Question 17

What is the definition of Loss Reserves?

Answer 17

Setting aside estimated amount of losses AHEAD of time to ensure insurer has enough funds to pay for losses when it’s time to settle each claim.

Question 18

How an insurer performs the Primary & Support Activities defines and determines what?

Answer 18

Defines: Customer Experience

Determines: How much value is able to be built into the final product / service.

Question 19

What is Predictive Analytics?

Answer 19

Evaluating KNOWN attributes from a data sample to make a prediction about a different attribute

Question 20

What is the Target Variable or Value?

Answer 20

In Predictive Analysis this is the attribute being predicted.