Risk Management & Monitoring (34 – 36) Flashcards
Control current cost base
– staff levels
– budgetary constraints / targets
– not overqualified
– increase business volume
– improve efficiency
– increase loadings
Monitor commissions at 3 levels
- product line
- distribution channel
- specific sales / broker
Control new business levels
– marketing
– PD
– pricing
– distribution channel
Monitor for new business
– # contracts
– premium amount
=> (avg claim size)
also
– premium frequency
– policy charges / loadings
– actual expenses
– new business valuation strain
Split non-commission expenses
– initial
– renewal
– termination
– investment
Reasons for monitoring experience
– develop AS
– update assumptions
– monitor adverse trends
– management info
AS require historic data on
– investment returns
– mortality
– withdrawal
– expenses
Assumptions of future needed in
– pricing
– model office
– valuation
– discontinuance terms
Corrective actions
– re-price
– re-design
– change investment strategy
– change sales
– change working
– change RE
– change underwriting
– change profit distribution
– capital allocation
– risk management & controls
– re-organise
– systems / data recording
Identify profitable in analysis
– products
– sales channels
– markets
– business sections
– investment strategies
Data consistency in
– form
– source
– grouping criteria
Risk in big data
– reputational
– privacy & data protections
– regulations
– inaccurate / incomplete
– wrong model
– expenses
Analysis of experience in
– expenses
– mortality
– persistency
– investment return
Subdividing data for persistency
– contract type
– duration in-force
– sales method / target market
– premium frequency & size
– premium payment method
– original contract term
– age + sex
Persistency influenced by
– economic
– competitive
– perceived value
Expenses attributed
– proportionate to premium
– proportionate to benefit level
– fixed amounts
Main expense items
– salary + related
– property
– computer
– investment costs
AOS components
– investment
– mortality
– expense
– withdrawal
– (new business impact)
Analysis of EV
– validate calcs / assumptions / data
– reconcile values (yr/yr)
– management info
– executive remuneration
– published accounts
Using results
Update / revise
– pricing
– PD
– product mix / launch new
– u/w process
– RE
– marketing: message / channel / target market
– sales procedures
– policy working
– staffing resources
– actuarial models
– systems + data recoring
– investment strategy
– profit distribution
– reserving basis
– raise capital
– alter capital allovation
– risk management governance + controls
Main PD + pricing steps
– formulation of product structure
– assumption setting
– profit test
– sensitivity test
– vs competitiors
– run office model
Different parties
– current PH
– potential PH
– SH
– sales channels
– management
– marketing
– actuary
– RE
– competitors
– supervisory authority
– tax authority
– government
Policyholder needs
–meet requirements
– understandable
– min hassle
– tax breaks
– large benefit give prem
– savings (inflation protection)
– max security
Shareholder needs
– return (> risk discount rate)
– low risk
– smooth dividends
– financial info
Sales channel
– max remuneration
– good service
– suitable products
– happy customers
Outperform competitors
– lower premium
– better investment performance
– better admin
– quicker / simpler underwriting
– brand awareness
– different target market
– specialist products
– simpler PD
– higher bonuses
– greater security
– sales incentives
– PH incentives
Risk Management Areas
- expense
- commission
- persistence
- new business mix + volume
- manage options
- systematic risks
- ERM
Reasons for AOS
- financial effect of divergencies
- financial effect of writing new business
- ID non-recurring (profit distr.)
- regulations
- management info
- check on the valuation data & process if carried out independently
