Actuaries need data for 3 main purposes
- premium rating
- reserving
- determining the level of capital to hold
2 Main reasons lack of data is more of a problem in general insurance than other areas
- actuaries are relative newcomers to general insurance, so there have been fewer years to establish appropriate data collection for actuarial applications.
- range and scope of the data needed is greater, in particular given the rapidly changing and competitive nature of general insurance and the complex statistical models that are used to set accurate premium rates.
2 Main categories of data sources
- Internal data
- External data from industry sources
5 Possible reasons for heterogeneity in industry-wide data
- companies operate in different GEOGRAPHICAL or socio-economic sections of the market
- policies sold by different companies are not identical
- companies will have DIFFERENT PRACTICES, eg underwriting, claim settlement and outstanding claim reserving policies.
- NATURE of the data stored by different companies will not always be the same.
- CODING used for the risk factors may vary.
Problems with using industry-wide data (5)
- heterogeneity
- much less detailed and less flexible than those available internally.
- often much more out of date than internal data.
- quality will depend on the quality of the data systems of all its contributors.
- Not all companies contribute, unless it is compulsory to do so. Thus the industry data may not be a true reflection of the industry’s experience as a whole.
Why might external data be much more out of date than internal data?
Because the data takes quite a while to
- COLLECT,
- COLLATE
- and then DISTRIBUTE to the insurers.
12 Main uses of policy and claims data by a general insurer
- reserving (including unexpired risk assessment)
- premium rating and product costing
- administration
- financial control and management information
- experience statistics
- analysing performance
- marketing
- informing investment strategy
- risk management
- capital modelling
- preparing accounts
- preparing statutory returns
Factors that influence the quality and quantity of data (6)
between organisations:
– SIZE & AGE of the company
– the current DATA SYSTEM in use, including the use of legacy systems, the integrity of the data system(s)
– the management and STAFF responsible for collecting and maintaining data
– the nature of the organisation, eg direct insurer vs reinsurer.
within organisations:
– depending on the distribution method of the business
– between the different classes of business.
Impact of size and age of company on data quantity
Large companies will have much MORE DATA available than smaller ones.
They are likely to make more use of their own data, rather than rely largely on industry-wide data.
Impact of size and age of company on data quality
Large company may have BETTER DATA SYSTEMS in place than a small one.
However, a large well-established company’s computer data system may be outdated and difficult to amend,
while a new small company on the other hand may have a modern system that can be readily adapted to change and allowing better quality data to be recorded.
3 Main distribution channels for insurers
- DIRECTLY to customers
- through BROKERS (intermediaries)
- through AGENTS (eg banks or building societies that sell a certain insurer’s buildings and contents insurance)
3 Reasons for variation by different classes
principally due to the different nature of risk, which leads to the following:
- big variations in claim frequency between classes affects the quantity of claims data
- the length of the tail of some classes means that it takes considerable time to collect the necessary claims data
- subjectivity used in underwriting influences the ability to capture risk details.
5 stages required in the establishment of a good information system to ensure that good quality data is captured and stored
- consideration of the users’ requirements
- careful design of appropriate proposal and claim forms
- ensuring that features of premiums and claims can be recorded
- consideration of policy and claim information to be collected
- adequate training of staff
4 features of premiums that should be recorded
- amounts
- timings
- adjustments to premiums, such as premium discounts and commission paid
- cross-selling information.
6 Features of claim information
- type / cause of claim (peril)
- the description of the claim event
- claims paid to date
- the estimated outstanding claim amount
- claims handling expenses
- reinsurance recoveries.
attainment of majority
where a payment is made once the claimant reaches a CERTAIN AGE that is pre-specified by the courts.
case estimate
When a claim is notified to the insurer, if the full amount of the claim is not paid immediately then it is common practise to estimate the amount that will still be paid on that claim - referred to as the case estimate.
5 Different types of claims payments will include
- indemnity payments made to policyholders
- compensation payments made to third parties
- payments to claimants’ solicitors
- payments to loss adjusters
- payments of interest
4 Reasons for some claims having to be reopened
- it may be purely due to the closure definition used by the insurer (for example, where claims are closed when it is deemed unlikely for there to be future payments relating to the claim)
- a FURTHER LIABILITY for payment came to light
- RECOVERY AGAINST a 3RD PARTY was made
- an ERROR was made in closing the claim originally.
9 data requirements for each POLICY record
- unique policy identifier (policy number)
- person number / code to link to policyholder information (name, ID, sex, etc.)
- risk definition and details of cover.
- policyholders’ risk factors should be recorded.
- status of present record (in-force / expired / cancelled).
- control dates (policy inception date, cancellation date, date of endorsement etc.)
- relevant amounts and currencies (exposure/sum insured, premium, excess, etc.)
- payment dates where applicable
- administrative details
What might the risk definition include (2)
- class and subclass of business
- details of cover (sum insured, excess, etc)
9 data requirements for each CLAIM record
CLAIM DETAILS
- unique claim identifier (claim number)
- details of claim.
- control dates (dates of incident, date of reporting)
POLICY
- status of present record.
- rating factor details.
- policy number / code to link to policy information
PAYMENT
- dates and amounts of payments (including claim payments and recoveries from reinsurance and salvage)
- payment type
- dates and estimates of amounts outstanding, including movement data as estimates are changed. Records may include estimates of dates of settlement
- currency of both payments and outstanding claim amounts
What might the details of a claim include?
- TYPE of claim (eg in motor, bodily injury or property damage),
- a claim CAUSE code (type of peril, eg in household, storm damage or burst pipes)
- an EVENT DESCRIPTION
3 Possible payment types (on a claim record)
- indemnity cost,
- lawyers’ fees
- adjustors’ fees
-
Chapter 0: Introduction to General Insurance40
-
Chapter 1: Insurance Products - Background (F203 Appx. 1)48
-
Chapter 2: Insurance Products - Types (F203 Appx. 2)141
-
Chapter 4: Accounting: Methods and Interpretation53
-
Chapter 5: Reinsurance products - background (F203 Appx. 3)32
-
Chapter 6: Reinsurance products - types (F203 Appx. 4)43
-
Chapter 7: Determining appropriate reinsurance (F203 Appx. 8)20
-
Chapter 8: General Insurance Markets67
-
Chapter 9: The External Environment24
-
Chapter 10: Risk and Uncertainty (F203 Appx. 5)32
-
Chapter 11: Data49
-
Chapter 12: Actuarial Investigations79
-
Chapter 13: Reasons for estimating reserves and different reserving bases15
-
Chapter 14: Best estimate reserves54
-
Chapter 15: Quantifying uncertainty in reserves42
-
Chapter 16: Assessment of reserving results16
-
Chapter 17: Reinsurance reserving (F203 Appx. 9)24
-
Chapter 18: Rating Methodologies and Assumptions (F203 Appx. 6)30
-
Chapter 19: Methods of calculating the risk premium57
-
Chapter 20: Further Considerations When Rating (F203 Appx. 7)18
-
Chapter 21: Investment principles and ALM40
-
Chapter 22: Capital Modelling Methodologies72
-
Glossary264
-
Q&A Bank Part 145
-
Q&A Bank Part 210
-
Q&A Bank Part 346
-
QA Bank Part 47
-
QA Bank Part 532
-
Past papers 201436
-
Past papers 201536
-
Past papers 201633
-
Past papers 201727
-
QQ2
