Week 2

Question 1

What is an actuary and what is an underwriter?

Answer 1

Both collaborate close, the actuary analyses the data (likelihood of this or that happening) which they pass onto the underwriter who finds out ways they can apply the data to the customers (accept and declines applications from customers.

Question 2

Give me 3 internal and external factors of insurance

Answer 2

Internal- shareholder dividend, operating cost and profit

External- Claims, general inflation, competition

Question 3

What is the goal of an insurer not in terms of profit but by the way they operate?

Answer 3

To accurately forecast the probability of an outcome

Question 4

Insurance groups cannot tell if something will happen, what are ways that they can use to predict?

Answer 4

Years of past experience, they have enough money to cover themselves in loss of profit and from other investments that they make and years of trail and error policies (underwriting)

Question 5

What is an underwriters main insurance process?

Answer 5

Assess the risk (any hazards involved), decide their risk (some or all is risky), scope the over all cover (cover all they can offer like limits or deductibles) and then the premium they want to charge (take all into consideration).

Question 6

How do underwriters calculate premium in basic?

Answer 6

Assess the risk, how much risk they want and scope the overall cover of the offer

Question 7

What does personal insurance cover?

Answer 7

Personal items like car, home or holiday insurance

Question 8

insurance prices fluctuate rather than going smoothly, who might this affect?

Answer 8

It could affect markets stakeholders

Question 9

What does an underwriter want to do?

Answer 9

Underwriters want to keep profits whilst the environment is unpredictable.

Question 10

What is the aim of actuarial science?

Answer 10

To predict product prices and future liabiliy.

Question 11

Why do your life premiums not increase as you get older?

Answer 11

Because insurance groups charge you the same amount when you were younger to when you are older and the money collected from when you were younger is used for when you are older.

Question 12

Explain why life insurance is not an indemnity?

Answer 12

Because the goal is not to put you back to a financial situation but to cover your health, and provide you with financial aid as to your pre-agreed amount.

Question 13

What is meant by base rate and premium rate?

Answer 13

Base rate allows for example a car to have a rate, premium rate is base rate but adjusted by underwriters when taken into consideration of age, experience, location, past convictions etc

Question 14

Explain in basic what an actuary does and what an underwriter does?

Answer 14

Actuaries bucket data and historical figures, underwriters work with policyholders to pick a bucket to put them in essentially and gives them a price.

Question 15

Acturial science produces what for underwriters to use?

Answer 15

Acturial science produces table with info such as gender, age, income with different rates, underwriters use this to price policies for customers.

Question 16

Insurer gains more information, prior to this their prices were based on an educated guess, what might they do?

Answer 16

Use actuary to provide the data to underwriters to change the price since they have a more accurate representation of the risk they may be taking.

Question 17

Relative frequency of occurrence does what and where do the limitations lay?

Answer 17

Its looking at the possibility of the same thing to occur again, the limit is having a small amount of data as it can significantly skew results.

Question 18

What is the example of relative frequency of occurrence?

Answer 18

In 2018, Saudi Arabia allowed woman to drive. Due to no historical data, insurance groups struggled to price for policies.

Question 19

In basic how does the law of large numbers work?

Answer 19

The larger the number, the more accurate it becomes

Question 20

What do insurance use to defend themselves from adverse selection and suggest how they do so?

Answer 20

They use underwriters, underwriters can look at past data, charge a higher premium and may have set out criteria you must have to conform to the policy.

Question 21

Picture in your head the general insurance process

Answer 21

its the blue boxes with pink arrows (assessing risk, how much risk, scope over all and then calculate the premium)

Question 22

What is meant by ease of underwriting and where may it apply with an example?

Answer 22

Its the idea some things are easier to price than others, for example, a flower shop has less hazards than a bakery to insure.

Question 23

A flower shop has less hazards than a bakery to insure, this is an example of?

Answer 23

Ease of underwriting