Part 1 : Chapter 0, 1, 2, 3 and 4 ACC, Actuarial advice, External environment, Regulation and Intro to Fin Products and Customer needs Flashcards
The general commercial and economic environment
Asset classes
Stakeholders
Providers of benefits
Regulation
Insurance products
The external environment
Economic influences
Specifying the problem
Analyse the risks of all stakeholders
Set out the problem from the view of each stakeholder
Set out the risks faced and how they can be managed, mitigated or transferred
Analysis of the options for design of plans that could be considered
Developing a solution
Model:
-Consider major actuarial models in use and how they can be adjusted
-Selection of the appropriate model to use or construct a new one
Assumptions:
-Consider and select the assumptions to be used
-Understand the sensitivity of the results to the assumptions
Data:
-Determine the quantity and quality of data available
Results:
-Interpret the results of the modelling process
-Consider the implications of the model results on the overall problem and the to the various stakeholders
Solution:
-Determining a proposed solution to the problem
-Consider alternative solutions
-Formalise a proposal
Monitoring the experience
Monitoring
Analysis of surplus
- Monitoring the experience and feedback into the problem specification and solution development
- Identify causes of any departure from the targeted outcomes from the model and whether such departures are likely to recur
Professionalism
Managing conflict of interest:
- Chinese walls
- Avoiding conflict, such as declining a job
- Records kept in detail of the work done
- Disclose the conflict to all parties involved
- Regulators notified if TCF not complied with
TCF objectives:
- Consumer confident that they being treated fairly
- Products and services meet needs
- Clear information provided
- Advice is personalized to consumer
- Products perform as expected
- Consumers do not face post sale barriers
Different types of advice
Factual advice (Based on research and facts) Recommendations (Involves research, modelling, consideration of alternatives) Indicative advice (Opinion without fully investigating the issue, an oral discussion on a matter)
The external environment considerations
CREATE GREAT LISTS
Competition/ underwriting cycle/ claims amounts and frequency
Regulation and legislation
Economic environment/ Claims expenses
Accounting standards
Tax differences
Environmental issues/ Exclusions
Governance/ compulsory benefits
Risks/ rating factors
Experience overseas
Adequacy of capital/ funding method
Trends: demographic, socio-economic
Lifestyle considerations
Institutional structures
Sales channels
Technology
State benefits
*Political situation
Functions of the regulator
SERVICE
Setting sanctions
Enforcing regulation
Reviewing and influence legislation
Vetting and registering firms and individuals
Investigating breaches
Checks to capital adequacy and management
Educating consumers and public
Regulation regimes
Unregulated
- The cost of regulation outweigh the benefits
Voluntary conducts
- Non-compulsory regulatory prescriptions
Self-Regulated
- The participants in the market set out the regulation without any government intervention
Statutory regime
- The external regulatory body independently sets out the regulations
Regulation aims to
Give confidence in the market
Reduce financial crime
Correct market inneficiencies
Protect public/consumers
How regulation reduces information asymetries
SPIDER CC -TCF
Sales techniques restrict
Pricing controls imposed
Insider trading prevention
Disclosure of understandable info
Educate consumers
Restricted public info
Cooling off periods
Chinese walls established
TCF
How regulation instils confidence in the market
Capital adequacy regulations
Practitioners- competent
Industry compensation schemes
Stock exchange requirements
Cost if regulation
Direct:
Admin
Monitoring of companies
Indirect:
Product innovation
Undermining of responsibility’s by Intermediares and brokers
Market developed structures to protect consumers lost
Altered consumer behaviour
Cost of compliance can reduce company profits
Reduced competition
Influences of policyholder reasonable expectations
Practice- competitors/general/past
Economic conditions
Marketing statements
Broker advice
Merits of Statutory regulation
Public confidence
Economies of scale
No abuse (less prone to abuse)
Independent from rest of the industry (Allows more public confidence)
Moral hazard of industry (companies may try to find loopholes in the regulation)
Unnecessary rules (not relevant to target market)
Costly (Would be passed on to consumers)
Inflexible (Rules imposed by regulator may be less flexible than self regulation)
Too far from the market to understand market specific needs
