Chapter 26 Nature of risks (3) Flashcards Preview

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Flashcards in Chapter 26 Nature of risks (3) Deck (15)
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1
Q

the key aim of a healthcare insurer’s management is to do what?

A
  • Maximise (or optimise within an acceptable level of risk) the profits of the insurer, whether these go to shareholders or to mutual policyholders.
  • maximise( or optimise within an acceptable level of risk) the return that the insurer achieves on its available capital.

-these go hand-in-hand but Board will want to be sure that the capital in the insurer is being used to the best advantage, particularly where it needs to decide between a number of competing uses of capital.

2
Q

The actuary will maximise profit but in the context of:

A
  • insurer’s risk profile
  • the resources available to the insurer
  • the public interest need for the insurer to avoid insolvency
  • requirements of applicable legislation
3
Q

The problems that confront the actuary in achieving his/her aims relate to:

A
  • policy data
  • product design
  • product marketability
  • pricing
  • return on capital
  • profitability of in-force business
  • supervisory reserves and solvency capital management
  • investment
  • capital management
  • risk management
  • claims
4
Q

Policy data

A

-Is the data accurate and complete.

5
Q

Product design

A
  • what contracts should the insurer offer.

- what benefits and features should be included, given its risk profile and resources available.

6
Q

Product marketability

A

-How can the company optimise the balance between price and volumes of business, taking into account competition.

7
Q

Pricing

A
  • what is the expected profit, and its variance from selling new contract at particular premium rates or with particular charges.
  • will the insurer have the resources to sell the contract on those terms
8
Q

Return on capital or members’ funds

A

-what return on capital will the insurer expect to make by investing its capital in the development and issue of a new insurance contract.

9
Q

Profitability

A
  • what is the expected profit and its variance from the existing business.
  • if business turns out to be unprofitable insurer needs to take actions such as:
  • altering current benefit levels
  • altering withdrawal payment scales if possible
  • altering the expense, sickness or mortaility charges
  • reducing renewal expenses
  • ensuring contracts currently being sold are not likely to suffer the same fate
10
Q

Supervisory reserves

A

-What assumptions should be used so that the reserves and SCR provide adequate security for policyholders.

11
Q

Invesment

A

-How should the insurer invest its assets so as to maximise expected return within the resources available to it.

12
Q

Investments: Two conflicting aims a health and care insurer may face

A
  • to meet guaranteed benefits with high degree of certainty

- to adopt an adventurous investment policy in pursuit of best returns.

13
Q

Capital management or funds or the mutual

A
  • Will the insurer be able to achieve its short, medium and long-term plans given the resources available to it?
  • this can be done by projecting expeted future values of assets and liabilities then investigate investment policy, business plans, etc and whether these represent a coherent & achievable product.
14
Q

Risk management

A

-How can underwriting and reinsurance be used to manage risk so that the insurer can increase profits, whilst keeping its risk profile within the resources available.

15
Q

Claims

A
  • are the claims procedures adequate
  • are the claims functions being properly followed
  • are the effective fraud control measures in place