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0.Combined course > Q&A Bank P1 > Flashcards

Q&A Bank P1 Flashcards

1
Q

why is age an important risk factor for hospital cash business?

A
  • older lives have a greater incidence of hospitalisation

- duration of hospitalisation tends to be longer than for younger lives

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2
Q

why is gender an important risk factor for hospital cash business?

A
  • there are different patterns of admission rates by age for males and females
  • for example, females have higher hospitalisation rates than males during child-bearing years
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3
Q

why is health status an important risk factor for hospital cash business?

A
  • pre-existing medical conditions and family medical history are likely to increase the incidence and duration of hospitalisation
  • in particular, the existence of chronic medical conditions, e.g. diabetes, is likely to increase the risk of hospitalisation.
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4
Q

why is smoking status an important risk factor for hospital cash business?

A

those who smoke have a higher mortality and morbidity

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5
Q

why is occupation an important risk factor for hospital cash business?

A

certain occupations may expose employees to a higher risk of accidents and occupational diseases

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6
Q

why is socio-economic status an important risk factor for hospital cash business?

A

socio-economic status will influence lifestyle and health

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7
Q

why is area of residence an important risk factor for hospital cash business?

A

this may influence the ease of access to hospitals and recuperation facilities

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8
Q

why is sales channel an important risk factor for hospital cash business?

A

business from independent intermediaries tends to have lighter mortality and morbidity than that from direct sales. in part, sales channel is a proxy for social class

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9
Q

suggest 2 examples of reimbursement methods than can be used to control an increase in utilisation-driven hospital expenditure?

A
  • episode/bundled payments

- pay for co-ordination

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10
Q

what is episode/bundled payments

A

a single payment is made for a group of services related to a treatment or condition that may involve multiple providers in multiple settings.
this encourages efficiency and quality of care because there is only a set amount of money to pay for the entire episode of care.

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11
Q

what is pay for co-ordination

A

payments are made for specified care co-ordination services usually to certain types of providers.

e.g. a medical home may receive a monthly payment as reimbursement for the delivery of care co-ordination services that otherwise would not be provided.

this should encourage co-ordination of care between the primary care provider and specialist providers.

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12
Q

PMI is particularly useful for individuals who

A
  • don’t have access to state healthcare
  • require a better quality or choice of care than is provided by the state
  • need quick diagnosis and treatment e.g. in order to return to work quickly
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13
Q

PMI may also be bought by employers who:

A
  • require employees to return to work quickly
  • require employees to stay healthy and productive
  • want to offer PMI to attract and retain good quality staff
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14
Q

what needs does CI insurance meet

A
  • pay for medical treatment
  • pay for nursing and other care
  • pay off family debts
  • help support dependents in the future
  • pay for recuperation, e.g. a holiday
  • pay for modifications to the home
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15
Q

LTCI is particularly useful for individuals who

A
  • are worried about who will look after them in old age,
  • particularly if they have no family or the family is unable to provide support
  • are worried about how care will be paid for, e.g. if their assets, e.g. their home, are at risk to pay for the care.
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16
Q

what are the advantages of coinsurance in PMI

A
  • there is an element of claims control because the cost of each claim is shared with the insured. the insured is less likely to make false claims or to exaggerate the size of a claim.
  • premiums will be more competitive than for a policy without coinsurance, resulting in higher sales.
  • if the feature is novel in the market, it may result in higher sales.
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17
Q

what are the advantages of a NCD scheme in PMI

A
  • it will encourage the insured to pay for small claims, thus reducing the number of claims and keeping down claims admin costs.
  • it may encourage the insured to renew their policy, particularly if the discount is not transferable between insurers.
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18
Q

what are the advantages of limiting claims payments in any policy year in PMI

A
  • it will limit the insurers liability, resulting in lower claims overall. premiums can be reduced to more competitive levels and this should lead to more sales
  • the overall impact is likely to be small because most cases where expensive or lengthy treatment is required will be for chronic conditions, these are normally excluded from most PMI policies
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19
Q

what are the advantages of introducing a high excess on each claim in PMI

A
  • this would act to reduce the number of claims, so reducing the cost of claims administration
  • overall claims costs will reduce, allowing premiums to be more competitive compared to those with normal/low excess levels
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20
Q

loss of business means that some aspect of the company’s marketing is inadequate. aspects of marketing that might be important include

A
  • premium rates - price of the product
  • the characteristics of the product
  • how the product is sold
  • how the product is promoted
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21
Q

what are the 3 main categories of health care

A
  • primary care
  • secondary care
  • tertiary care
22
Q

List of primary care professionals

A
  • primary care physician, such as a general practitioner or family physician
  • a licensed, independent practitioner such as a physiotherapist
  • a non-physician primary care provider such as a physician assistant , nurse practitioner or community nurse.
23
Q

types of secondary care

A

secondary care refers to the healthcare services provided by medical specialists and other health professionals who generally do not have first contact with patients, e.g. cardiologists, urologists and dermatologists.

it includes acute care and skilled attendance during childbirth, intensive care and medical imaging services.

24
Q

list some examples of tertiary care services

A
  • cancer management
  • neurosurgery
  • cardiac surgery
  • plastic surgery
  • treatment for severe burns
  • advanced neonatal services
  • other complex medical and surgical interventions
25
Q

what are the disadvantages of coinsurance in PMI

A
  • the insurer will be involved in all claims, so claims administration costs will be high
  • there is no limit to the amount that the insured may have to pay. this is a risk for the insured. if the insured cannot afford to contribute to very large claims, this may lead to bad publicity that may harm the insurers reputation
  • there is no limit to the amount that the insurer may have to pay
26
Q

what are the disadvantages of a NCD scheme in PMI

A
  • it may be viewed as immoral by the industry because it discourages people from claiming when they need treatment.
  • it will increase other administration costs. it is necessary to ensure that our systems can deal with the ratings imposed.
27
Q

what are the disadvantages of limiting claims payments in any policy year in PMI

A
  • if the insured is seriously ill,e.g. organ transplant needed, the insurance cover may run out before the treatment is complete. there is a risk of bad publicity harming the insurers reputation
  • this would have the most effect at older ages, where claims are more frequent. the insured may feel that they have paid for many years without claiming, and so any restriction will appear to be unfair, in spite of the policy wording
  • the insurer will still have to pay all claims (below the threshold)so the claims admin expenses will be high.
28
Q

what are the disadvantages of introducing a high excess on each claim in PMI

A

-it may look bad if the excess is seen to discourage people from seeking the treatment they need.

29
Q

alternative explanation of EAS

A

the earned asset share is the accumulation of the premiums paid, less deductions, plus allocations of miscellaneous profits, at a suitable rte of investment return.

the level of allocations and deductions and the rates of investment return will reflect the company’s actual past experience

30
Q

list the key components in the calculation of the EAS

A
  • premiums
  • investment return earned, including capital gains
  • expenses paid
  • commission paid
  • tax accrued
  • allowance for death and surrender claims paid
  • charges for guarantees
  • charge to cover capital used to smooth bonuses
  • transfers to shareholders
  • misc profits from other sources
31
Q

What is the equation for the EAS / policy’s share of the assets at the end of Y1

A

A1=[(P1-E1)(1+i1)-q1S]/(1-q1)

32
Q

what is the equation for the value of assets that build up by the end of Y1

A

(P1-E1)(1+i1)-q1S

33
Q

what is the equation for the EAS at the end of Y2

A

A2 = [(A1+P2-E2)(1+i2)-q2S]/(1-q2)

34
Q

advantages of the contribution method for WP policyholders

A
  • the bonus is received immediately instead of when the insured event arises, which ma or may not be an advantage depending on when the ph wants money.
  • the bonus may appear fairer to the ph
35
Q

disadvantages of the contribution method for WP policyholders

A
  • reduced return is likely due to limited deferral of distribution of surplus.
  • the ph may not want a reduction in premium, the ph may want to save a fixed amount each month
  • the final benefit is lower in real terms.
36
Q

advantages of the contribution method for WP to the company

A
  • this method might be attractive to ph’s and so would increase sales
  • it could be marketed as a unique feature of the product, if this is different to market practice
  • it could be used by a mutual company to combat other companies which have demutualised, since the ph would be receiving a “dividend”
37
Q

disadvantages of the contribution method for WP to the company

A

a system of cash bonuses distributed early will reduce the level of funds under management and may result in constraints on the investment policy.

affordable cash bonuses may seem low in comparison to reversionary benefits that can be provided for the same cost.

administration of cash bonuses would be more difficult and more expensive than an addition to benefits.

there is less profit deferral for the contribution method than for additions to benefits, reducing the company’s potential investment freedom and adversely affecting the potential overall returns.

38
Q

how would the dividends be determined under the contribution method?

A

by calculating the actual experience rates for suitably homogeneous groups of policies we can directly attribute investment, mortality and expense profits to the policies on which they have arisen.

some surplus may be held back as contingency. the proportion held back may vary year on year to produce a smoother progression of dividend payments.

some or all of the deferred surplus may be released to the ph at maturity in the form of a terminal dividend.

39
Q

what are the different methods used for distribution of surplus for WP policies

A
  • additions to policies
  • contribution method
  • revalorisation
40
Q

what is selective withdrawal

A

selective withdrawal refers to the fact that those who withdraw from a contract might be expected to exhibit different mortality experience from those who remain, to the detriment of the insurer.

41
Q

write down a suitable formula for calculating the claim incidence rates under an accelerated CI policy

A

ix + (1-kx)qx

where
ix is the CI inception rate
kx is the proportion of deaths due to CI
qx is the mortality rate
all for a life aged x exaclty
42
Q

what are the steps involved in repricing an existing PMI policy? re past experience (step 1)

A 
first past experience must be analysed
the data will be subdivided by
- age
-gender
-smoker status
-occupation
-distribution channel
territory
regions
several years of recent experience may be combined in order to produce credible data
43
Q

what are the steps involved in repricing an existing PMI policy? re data (step 1)

A

care must be taken to avoid introducing too much heterogeneity by keeping the period of past data used as short as is compatible with adequate data for credible estimates.

for each data cell, numbers fo claims would be divided by the number of observed policy years to obtain claim incidence rates.

trends in experience may be identified by analysing the data over time.

44
Q

what are the steps involved in repricing an existing PMI policy? re external data (step 1)

A

external data may be used to support the internal investigation
-reinsurers data
industry data
market data

however differences in applicability and relevance of the data must be taken into account.

such data may also be useful for identifying trends.

the historical incidence rates should then be projected over the next year or number of years, if there are premium guarantees(or if the company is hoping to keep its rates constant over a period for marketing reasons)

45
Q

what are the changes that may affect claim incidence rates that need to be taken into account when projecting claim incidence rates

A
  • economic conditions
  • policy benefits provided
  • mix of business
  • policy conditions
  • types of treatment covered

additionally, future rates may be adjusted to allow for higher incidence rates among phs who have claimed at least once before under their policies.

the extent of any adjustment would be estimated from the past experience in this regard

46
Q

what are the steps involved in repricing an existing PMI policy? re claims(step 2)

A

using past data, as subdivided, the average cost per claim would be calculated by dividing the total claims costs by the number of claims involved.

claim amounts will be projected to the period for which the new rates apply, allowing for the impact of changes in:

  • medical treatments
  • costs of treatments
  • medical protocols
  • hospital charging structures
  • inflation of medical costs
  • the mix of business where these are not fully allowed for in the pricing structure (e.g. age, gender, distribution channel, occupation, policy size
47
Q

how do you calculate the risk premium in PMI

A

the premium to cover the expected cost of claims is found by summing over all the different benefit classes covered by the policy:

RP = ∑ikACk over all k
ik = assumed incidence rate for benefit class k
ACk = expected average cost of claims per claim for benefit class k
48
Q

what are the steps involved in repricing an existing PMI policy? re rates of renewal (step 3)

A

number of renewals will be divided by the numbers fo policies coming up for renewal, in the past experience data, as a starting point for estimating future renewal rates.

rates may be analysed separately by

  • distribution channel
  • occupation
  • territory
  • duration since policy was first incepted (by the number of previous renewals)

any special conditions (e.g. economic circumstances) affecting the past experience should be taken into account before using the historical data to estimate the future experience.

49
Q

what special circumstances must be taken account of in the projected renewal rates

A

rates should take account of

  • changes in the perceived service delivery from state provided alternatives
  • changes in premium rates due to inflation - a large increase in premium rates would discourage renewals
  • changes in the economic outlook
  • the effect of the proposed change in premium rates, compared to the competition
50
Q

define experience rating in relation to group insurance

A

this is a system whereby the premium for a group contract depends wholly or partially on the past claims experience of that risk.

a credibility factor Z defines the proportion of the risk premium that relates to the past experience of the group.

this factor will be larger for schemes with more stable and predictable claims experience e.g. those with more employees or lower staff turnover rates.

0.Combined course (17 decks)

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