Monitoring

Question 1

Indicators to look for at the initial stage

Answer 1

New business volumes
New business mix
Withdrawal/lapses
Quote volumes and take-up rates
Quote distribution/mix
Comparison with competitor’s rates
Early claims experience, including declined claims

Question 2

Importance of monitoring

Answer 2

Adjust the assumptions and pricing of exisiting
Adherence to regulatory requirements
Identify new risks and allow for corrective actions to be taken
Strategy was set to meet certain objectives

Question 3

Reasons for monitoring

Answer 3

Update method and assumption to be more relevant
Monitor trends, especially adverse trends to take corrective actions
Provide management information
Identify new risks and allow corrective actions
Ensure strategic objectives are being met
Key component of ACC

Question 4

What data and information would you need to perform a claims analysis

Answer 4

Exposure data on all schemes:
type of industy
benefits offered
age and gender details
size of scheme
membership profile

Data on all claims made:
claimant data
what benefit was being claimed for
cause of claim
date of claim
date of notification of claims event

at least data for the past or a few years

pricing basis for all the different products offered (mortality/morbidity/disability rates)

reinsurance structures

changes to claims processes

any previous investigations done

Question 5

How would you analyse the actual and expected claims experience

Answer 5

calculate the expected claims

allocate the actual claims to scheme

allow for claims that might be outstanding

different benefits treated separately

one can aggregate the experience and start looking at where deviations from expected claims are the largest

Question 6

procedures of analysis of claims

Answer 6

is the insurer large - volumes of data

split the data into homogeneous groups

what are the likely groupings of data

consider the frequency/severity of certain types of claims

include the premiums earned

performed to cover the experience for each year to include trends

experience = claims / exposed to risk

critical that claim data and exposed to risk data correspond

measurement of delays between event and settlement

exposed to riskcould be average of in-force policies

data by need to be grouped together for credibility

take into account benefit definition or limit

declined may be included and IBNR claims

Question 7

validation that should be carried out on an internal experience analysis

Answer 7

Data integrity
ensure basic validity checks on the data
data from accounting department corresponds from admin department
check that policy count builds up corretly
needs to be done for each major product class
check if the results/input for the report are consistent with previous reports
check the data for the report reconciles with other reports

Correct and consistent exposure and claim amounts
policies are correctly classified as lapsed based on last premiums received
potential distortion to the results
consistency/correspondence between exposure and claim data

validation of process and results
check for errors in the data transfer manipulation process
check the grouping of data
actual experience consistency with expectation
check analysis of surplus
check for changes in business mix