Chapter 34: Further Risk Management

Question 1

How can insurers control expenses?

Answer 1

1. Monitor experience
2. Monitor competitors
3. Commission levels
4. Control staffing and salary levels
5. Sell more business without increasing cost base
6. Improve efficiency
7. Increase premiums

Question 2

How can insurers improve persistency?

Answer 2

1. Change dbn channels
2. Set up alternative commission structures (clawbacks)
3. Improve sales methods
4. Restrict payment methods

Question 3

How can insurers manage NB volume and mix?

Answer 3

High volume= inadequate capital
Low volume = reduce profit , increase in per-policy cost of overhead expenses

Control:
1. Appropriate marketing for target dbn channels
2. Product design

Question 4

How can an insurer control new options?

Answer 4

1. Increase charges/loadings paid on the option
2. Alter the benefits or terms of the option
3. Remove the option from new business

Question 5

How can an insurer control existing options?

Answer 5

1. Appropriate reserving
2. Strict interpretation of terms
3. Using derivatives
4. Buy back from policyholder