Chapter 13 Data

Question 1

Sources if data: (5)

Answer 1

• company’s own data
• population data
• reinsurer’s data
• market data including i sured lives data and publlished returns
• other sources (trade magazines, actuarial consultants etc)

Question 2

General data considerations: (3)

Answer 2

• data availability and criteria
• making adjustments for credibility and relevance
• projection to midpoint of insurance usage

Question 3

5 reasons why external sources may have different experience than own data

Answer 3

1. Approach to underwriting and acceptance
2. Policy conditions
3. Distribution method and channels
4. Claims management
5. Target market

(Effect of heterogeneity in insirer data can also give rise to spurious trends in experience observed over time)

Question 4

5 drawbacks of population data:

Answer 4

1. Accuracy and reliability of national statistics may be questionable, especially in HC where definitions may be subjective and the scope for double counting is significant
2. Data may not always be available electronically or in appropriate format
3. The population experience may be somewhat out-of-date before it becomes published
4. National experience may not be particularly relevant to the subset of lives that will be accepted for insurance
5. The circumstances of the onset and continuation of a sickness or incapacity are unlikely to coincide exactly with the definition of a ‘claim’ under the insurance policy

Question 5

Advantages of information of insured lives data (a subset of market data): (3)

Answer 5

1. Represents insured experience
2. Generally of sufficient volume to be statistically credible
3. It reflects local companies and has been compiled by experts

Question 6

9 reasons why adjustments may be required to overaeas data

Answer 6

1. Different subsets of lives take out insurance policies in different countries
2. Different policy conditions will make claim rates different
3. Overseas population morbidity data may be compiled differently from home population statistics
4. Underwriting standards may be different
5. Claims management process may be different
6. Market practices eg relating to market disputes may be different
7. Legislation/ regulation
8. Data may ot relate to same time periods
9. Overseas industry data are likely to be very heterogeneous, so it is unlikely that any single company’s experience will reflect industry average