Chapter 13 - data

Question 1

relevance

Answer 1

implies a similar class of lives and policy conditions to those expected for the product in question

Question 2

Projection to the midpoint of insurance usage

Answer 2

• the actuary will need to gather all information available from the local market on trends and developments in order to project this experience forward for the product’s lifetime
• each cohort of policies issued will continue until they terminate or until a premium review date. The assumptions must stay valid for an average of:
  [expected shelf-life of proposed premium rates] + [expected duration of policy to termination or next review date]

Question 3

Why own experience generally forms the best base for prediction

Answer 3

Many influences affecting the amount to be paid out in benefits that are specific to the insurer in question and so may not be reflected in numbers taken from internal sources

• approach to underwriting and acceptance
• policy conditions
• claims management
• distribution channel
• target market

Question 4

Drawbacks of population data

Answer 4

• the accuracy and reliability may be questionable, especially in healthcare where definitions may be subjective and the scope for double counting is significant
• data may not always be available electronically or in the appropriate formal
• the population experience may be somewhat out-of-date before it becomes published
• the national experience may not be relevant to the subset of lives that will be accepted for insurance (this is improved if population analysis is split between groups)
• the circumstances of the onset and continuation of a sickness or incapacity are unlikely to coincide with the definition of a claim under the insurance policy

Question 5

Advantages of industry information

Answer 5

• it represents the insured experience
• it is generally of sufficient volume to be statistically credible
• it reflects local companies (reflecting market experience) and has been compiled by experts

Question 6

Disadvantages of industry information

Answer 6

• may take time to compile tables
• remains a market place average and hence not relevant to any one company.
• the strictness of underwriting and claims management may be reflected in similar ratios used for life insurance tables. Caution should be exercised if this is a launch into a new healthcare insurance product.

Question 7

Other sources of data

Answer 7

• overseas data
• actuarial consultants
• rate table software
• trade magazines

Question 8

Rate table software

Answer 8

there may be some companies that issue software that compare market premium rates for similar products of a given class

Question 9

Trade magazines

Answer 9

Source of statistics to assist in the risk projection process. Will give info about the types and levels of benefits offered and the premium rates that companies charge.

Question 10

Requirements of data

Answer 10

• relevant
• credible
• available
• reliable for the purpose intended

Question 11

What must the different health care products be projected by?

Answer 11

LTCI - in total
CI - by cause of claim
PMI - for each benefit or treatment category