amp You 10122010 N K Parikh Efficient Management Sound Underwriting Excellent Marketing which produces results Luck Ingredients of Success Luck external environmental attitudinal ID: 409977
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Slide1
Actuary& You
10-12-2010
N K ParikhSlide2
Efficient ManagementSound UnderwritingExcellent Marketing which produces resultsLuck
Ingredients of SuccessSlide3
Luck -external, environmental, attitudinal -political attitudes, social attitudes, client’s attitudes, market movements including competition, technological changesSlide4
Directors’ and Officers’ liability policy where the perils included are:Allowing a company to continue operating in circumstances when it should have been declared insolventAny act resulting in the insured being declared unfit for his or her roleAllowing false financial statements to be published.Slide5
Lengthy ReportsSlide6
Valuation affects the incidence and quantumSlide7
Why Actuaries are highly paidSupply and DemandWild and Sane Slog for many years Quality ValuesSlide8
Quality ValuesLong-term thinkingUnderstanding of data and modelsMulti-dimensional thinking Problem-solving abilityContinuing Professional DevelopmentSkilled in the 2 principles of actuarial science The first working principle of Actuarial Science - what gets measured, gets managed and more importantly priced Models – 36-24-36 Slide9
The second working principle - E Peretia Ratio or the use of past experience to reason solutions for future. Slide10
Technical AspectsGeneral Insurance predates ActuariesEvents overtook – New risks with industrialisation – nuclear, satellite, terrorism, engineering, professional indemnity, LOP,
Nature of risk
magnitude of risk changed – compare World Trade Centre. Other factors - Competition, rate cutting, investments, consumerism, PRE, high inflation, change in outlook,
globalisation
, regulatory restrictions.
Quantitative data, Statistical Theory, computers, storage devices
the actuary arrived on the scene. Without him, priced out of the global market?Slide11
Actuary in 2 packages – Consultants and In-house ActuaryConsultants - Partners-in-progress In-house Actuary - Cause-of-progressSlide12
What is Insurance Insurance is a technique of sharing of risks or spreading of losses. In the words of the Elizabethan Act of 1601, “by means of which policies of assurance….. the loss lighteth rather easily upon many than heavily upon few”. Slide13
- Insurances of rare risks , granting of NCD & experience- ratingRare Risks the nails of an artist or the eyelashes of an actress, the legs of a dancer, the tongue of a taster, disappearance of a TV artiste, ‘cutting a sorry face’ insurance of a speaker or even the insurances of sputniks and satellites and the like. NCDExperience Rating 60% ± 7.5%. Slide14
The service that insurance performsBest of both the worlds 400 InsurersSlide15
2 problems posedSlide16
Risk – Actual - ExpectedCyclical Nature of Risk - Life on this planet Slide17
working of General Insurance StaffSlide18
working of General Insurance TrainingMotivational Literature CounselingTo speak on - -What life has taught me
-My Obituary
-Underwriting considerations for rating of a rare risk, like say, ‘cutting a sorry face’ insurance of a speaker.
Programmed Learning Text-booksSlide19
Underwriting Considerations for writing a Rare Risk - ‘cutting a sorry face’ insurance of a speaker
(responses received at an earlier Training session)
Insurable Interest - Speaker or the Organisation or Both. Venue?
Open Policy or Individual – special contingency policy
Assessment of the Risk – Applause Quantified by Number of claps and hackles.
Third Party Risk – Personal Injury risk to the speaker or organisers
Past Experience
Partial Claims
Moral Hazards
Salvage
Medical Examination – Fitness Condition
Abandonment – Man made or Natural cause
Abandonment in between
Cover – Worldwide – Currency
Cancellation due to various causes
Consequential Loss – Speaker - Organisers – Venue
Clauses to be attached – drafting of the policy.
Deductibles
Extempore or prepared
Claims Minimisation – to smuggle in 5 to clap
Reinsurance
Premium – 50 per 1000?
Prize
* for
anyone extending the List to 25 or more – put it in proper order and add some notes explaining the u/w consideration – 2 pages *
FOUNDATIONS of Casualty actuarial science – Fourth Edition – Part I & IISlide20
working of General Insurance cont..Development Officers on the Administrative side remunerated by Salary and Profit Commission. -The officer/agents developed a stake in good business. -Quality and Quantity of business increased. -Frauds disappeared.
-Policy holders dissuaded by the development officers from claiming things not payable.
-Awareness increased that the insured did not pass on junk business.
- Suddenly the approach changed - the development Officer assumed the role of an underwriterSlide21
working of General Insurance cont..Miscellaneous Credit card business and warranty businesses .Payment of premium within 60 days.Persistency ratio
Reinsurance expertise and reinsurance capacity
RetentionsSlide22
AccountingCash Basis Accounts on three year basisFrom cash to accrualTechnical ReservesOutstanding claimsUPR
URR /AURR - Premium Deficiency Reserve
Legal Claims
Claims Equalisation
Reserves
IBNER
IBNRSlide23
IBNERS.No. Sub-Class Claim No.
Provision as on
31-12-2008
01-01-2009
(1)
(2)
(3)
(4)
1
Fire
F/..../…
2
3
4
.
.
.
1998
Motor
M/.…/….
1999
Motor
2000
Motor
________
TOTAL
3,000,000Slide24
IBNER cont.S.No. Sub-Class Claim No.
Provision as on
31-12-2008
01-01-2009
Amount paid during the year 09 / Outstanding at the end of the year 09 for
Difference (4) - (5) with sign + / -
(1)
(2)
(3)
(4)
(5)
(6)
1
Fire
F/..../…
₊
2
₋
3
4
.
.
.
1998
Motor
M/.…/….
₋
1999
Motor
₊2000Motor ________ ________ ________TOTAL 3,000,000 Slide25
IBNER cont.Claim No.Provision for as on 31-12-2008 01-01-2009
Progress during the year
Difference
(1)
(2)
(3)
(4)
1
1000
paid for 1050
-50
2
2000
paid for 827
1173
3
3000
repudiated - paid for 0
3000
4
4000
outstanding for 6780
-2780
5
5000
No development 5000
0
TOTAL
15000
13657
1343 over provision
Difference =
15000 - 13657 =
1343 - overprovisionSlide26
IBNRNon-mathematical and mathematical techniques Compare the actual past results for the last 3-5 years and take the highest percentage or draw a graph and project the trend.Mukerjee committee Report in India based on the NEP classwise.Public Sector Undertakings in India’s method based on the Claims Outstanding.Triangulation/ BF /Average claim amount and Average no. of claims/ Expected loss ratio - statistical.
The emphasis has shifted from IBNER/IBNR - holistic approach - reliance is placed on Risk Management models.
If the companies close their accounts after 4 months, bulk of the IBNR would have been reported.
By not providing for IBNR every year - only difference is the error.
The various methods result into a range of values. Hence before finalizing the IBNER/IBNR, the other non-mathematical factors taken into consideration are:
Whether the Company declaring dividend for the last 3 years.
Whether the Company making U/W profit on a stand alone basis
Whether the Company be making U/W profit only after taking proportionate credit for the investments of Technical reserves.
Whether the Company be making profit after taking the credit for full investment income.
Finally the Actuary takes a middle path to
finalise
. – actuaries religious at heart - believe in practicing compassion - He wants a living thing to go living, he wants a going concern to keep going.Slide27
Outstanding Claims – General observations Claims outstanding for more than 2 years - Claims Clearance FortnightsMotor Accident Claims TribunalOn the Spot Settlement SystemClaims Minimisation Department - Cover for Motor Own Damage
- maximum amounts for various surgical operations Slide28
General – additional RecommendationsPre-payment of premium Dividend Equalisation ReserveRating by an accredited international agencyFinancial Condition report10 years’
summarised statistics in every Balance sheetSlide29
Actuary can help Pricing, Reserving, modelling. Underwriting/Administration/Development/ Expense investigations/ Investments/ Catastrophe Modelling and what not…Ideal Risk Management Future of General Insurance Life Insurance - a special and much simplified case of General Insurance?Future of ActuarySlide30
PrayerTo wish everyone happiness, good health, good fortune, and no suffering from pain or miserySlide31
Amen !Slide32
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