Part 2 : Chapter 5, 6, 7 and 8 Benefits, Life, Health and General insurance

Question 1

Role of state as benefit provider

Answer 1

Direct provision of benefits
Education
Encourage/compel private benefit provision
Regulate benefit providers

Question 2

Reasons for employer benefits

Answer 2

Compulsion by state
Attract and retain good staff
Desire to look after employees

Question 3

Reason for individual to finance benefits

Answer 3

Compulsion by state/employer
Savings plan
Tax advantages

Question 4

Considerations in general insurance

Answer 4

Premiums
Underwriting
New business strain
Tail of business
Rating factors
Investment strategy
Provisions - different types of provisions

Question 5

Key risks for a life insurer

Answer 5

Mortality risk
Expense risk
Investment risk
Early withdrawal risk
Credit risk (failure by reinsurer or broker)
Morbidity risk (income protection)
Operational risk (Fraud, systems failure, regulatory changes)
Longevity risk (pensions)
New business volumes too high or too low

Question 6

Risks in General insurance

Answer 6

• Claims volumes
• Accumulation/catastrophe
• Renewal
• Operational risk
• Lapse
• Investment risk
• New business
• Expenses
• Credit risk (reinsurer or broker failure)

Question 7

Factors determining the riskiness of the class of business

Answer 7

• Tail length
• Claim amounts and frequency
• Volatility in the claims experience
• Possibility of claims accumulation
• Data available
• Reinsurance available

Question 8

Determining pricing of an insurance product

Answer 8

Determine value of each of the components
P=Claims+Expenses+Commission- investment income+ Reinsurance(ART)

Then do both sensitivity testing as well as long term projection to assess the suitability of the price.

Keep this in mind when modelling the pricing.

Question 9

Considerations when comparing insurance policies

Answer 9

1. State the definitions of the two products
2. Term of the insurance products (general vs life)
3. Idemity or not. If not what is benefit?
4. Risk events covered (perils)
5. Decline criteria
6. Premium levels
7. Guarantees

Question 10

What is a rating factor

Answer 10

A Rating factor is a factor used to the measure the risk of specific insurance contract in order to properly price the contract