Valuation of Group Life and Health Policy Liabilities Flashcards
1
Q
Challenges in valuations for group life and health business (8)
A
- ) Group insurance encompasses different LOBs with different features
- ) There is a wide variety of benefits and financial arrangements
- ) For groups beyond a certain size, contracts are usually customized and contain side agreements
- ) Record keeping and admin practices for 3rd party admin don’t always meet actuary’s need
- ) Statutory experience refund reserves may not equal the group’s surplus due to a diff in valuation bases.
- ) Wide variety of benefit types, contract provisions, and rating practices
- ) Group contracts are traditionally short-term, but some liab may be long term
- ) There are often data issues
2
Q
Considerations in assessing trends in disability termination rates (6)
A
- ) Changes in mix of disabilities by cause, by severity, or by geographical region
- ) Changes in level of benefits provided
- ) Changes in claim admin practices
- ) Economic cycles
- ) Material changes in inflation or benefit indexation
- ) Changes in gov plan def of disability (impact offsets)
3
Q
Common types of reinsurance for group life and health business (3)
A
- ) Coinsurance - insurer cedes a portion of the business to one or more reinsurer. Each reinsurer holds the policy liab on its portion of the business.
- ) Modified coinsurance - insurer cedes portion of liabilites to other insurers, but retains the assets backing the policy liabilities (as an amount owing to reinurers)
- ) Excess of risk reinsurance - coverage amounts above the insurer’s retention limit is ceded to a reinsurer who holds the policy liabilities related to the coverage.
4
Q
Pricing risk
A
Results as premiums reflect incorrect incidence rate assumption and claims reflect currently expected incidence rates
5
Q
Longer period of rate guarantee results in greater exposure to what type of risks? (2)
A
- ) Pricing risk
2. ) Interest rate risk
6
Q
Interest rate risk
A
Results is interest rates declined which makes the current benefits greater than premium.