What are the criteria for evaluation for social protection systems?
RAMSEA
- economic growth – PAYG may not promote economic growth
- adequacy – meet needs of citizens
- minimise labour market distortions – high taxes distort
- affordability
- robustness – withstand major economic, demographic and political shocks
- sustainability – stay financially healthy for long period (for future generations)
National Institute of Healthcare Effectiveness criteria
My neice went to the clinic where she was accosted because she brought her budgie with her. This was recorded in a massive patient issue book which had an equal number of lines per patient was divided by race for equity purposes. My niece brought up how ethical that was but the nurse responded at least they were being transparent about everything. She needed to take evidence to the court because the clinic needed to be compared to the constitution to be prosecuted.
- Clinical effectiveness (CEA): treatment ability to reduce morbidity and mortality, and address the condition it is intended to treat.
- Cost-effectiveness (CUA). Often using the cost per QALY gained.
- Issues important to patients and the public: Input from patients and the public on issues like patient preferences, quality of life, and the impact of health conditions on individuals and their families.
- Clinical need. Where high priority is given to interventions that address conditions with significant health and social impacts.
- Equity. Considering factors, such as the potential impact on health inequalities and whether the intervention benefits different population groups fairly.
- Comparative effectiveness to existing treatments or alternatives. Assessing whether the new intervention offers superior clinical benefits or cost-effectiveness.
- Availability of evidence. NICE relies on a robust evidence base, including clinical trial data and economic evaluations, to make its recommendations.
- Budget impact. Considering both short-term and long-term costs and savings.
- Ethical and social values.
- Transparent and accountable processes. The processes are transparent and accountable, with opportunities for stakeholders to provide input and challenge recommendations.
What is EET system?
The EET system (Exempt-Exempt-Taxed) refers to the taxation model applied to retirement savings or pensions. Under this system:
Contributions (E): Exempt from tax when made to a retirement plan.
Investment Growth (E): Exempt from tax as the funds grow (interest, dividends, capital gains).
Withdrawals/Benefits (T): Taxed when money is withdrawn during retirement.
What does tax depend on?
For tax on entities, it depends on:
- the ownership structure e.g. mutual insurer, proprietary insurer
- the insurance license e.g. ST insurance different to LT insurance
For tax on products and schemes, it depends on:
- the type of entity e.g. retirement fund, life insurance company
- the structure of product e.g. unit-linked vs. conventional
- the product e.g. savings product vs. risk product
What are the different behavioural biases?
I am a person who has myopia which is why I have such think spectacles. One day I thought I lost them when trudging through sinking quick sand, which came at a huge cost to me. Luckily there was some huge discount on them and they had one more available for me to buy. In hindsight, I probably would’ve chosen a different pair of frames, but at the time choosing the same pair just made the decision a lot less complex.
- Myopia: This bias happens when people focus too much on short-term gains instead of the long-term impact.
Example: Many retirees choose a level annuity, which provides a higher short-term benefit, over an inflation-linked annuity that would better maintain purchasing power over time. - Loss Aversion (Prospect Theory): People fear losses more than they value gains, leading to overly cautious choices to avoid potential losses.
Example: Investors may choose low-risk, low-return investments to avoid any chance of loss, missing out on better returns over the long term. - Sunk Cost Fallacy: When people stick to decisions they’ve already invested in, even if it’s not in their best interest.
Example: Someone might keep money in a poorly performing fund rather than moving it, simply because they’ve already invested in it. - Hyperbolic Discounting: This bias causes people to prefer immediate rewards over future ones, often leading to procrastination on long-term goals.
Example: Individuals delay saving for retirement, believing they’ll start later, but keep putting it off to spend on current needs. - Availability Heuristic: People judge their financial readiness based on what’s easily available in their mind—like what they see in the media—rather than their actual situation.
Example: A person may feel overly secure about retirement savings after hearing stories of high returns, overlooking their personal savings and needs. - Hindsight Bias and Law of Small Numbers: People tend to think they made great investment decisions if they got lucky with a high-risk investment, even if success was unlikely.
Example: An investor might feel overly confident in their abilities after a high-risk stock performs well, despite the low probability of success. - Framing Effects: The way information is presented influences decisions.
Example: When a retirement fund lists conservative options first, people are more likely to choose them, assuming they’re recommended. - Complexity Avoidance: When faced with too many options, people tend to avoid making any choice at all.
Example: An overwhelming variety of retirement fund choices can discourage individuals from selecting a fund altogether. - Inertia: People often stick with their initial choices, even when their situation changes.
Example: After joining a retirement plan, many don’t update their investment allocations, even if their financial circumstances change significantly.
Different ways to deal with risk
- reduce risk: small death benefit rather than large death benefit
- transfer risk: to reinsurer/to PH through design
- avoid risk: don’t use that distribution channel, or don’t invest in foreign assets
- diversify: offer lots of products, or cross-subsidise between risk pools
- retain risk: political risk just needs to be accepted
Objectives of an insurance regulator
- protect policyholder - regulate contract types sold, benefits and premiums, treating customers fairly, solvency
- provide confidence in industry
- ensure private sector interests and public sector interests are aligned e.g. protect nations health, fulfil political promises, balance the budget.
Differences in levels of healthcare
primary healthcare
- predominately out-patient care
- focus on curative treatment for acute diseases or chronic disease management
- located in local communities
- medical professionals: primary care physicians (GPs, family physicians), physiotherapists, nurses
secondary healthcare:
- in and out patient care
- services include medical imaging, specialised consultations, acute care, skilled maternity care
- provided in urban areas
- provided by medical specialists usually by referral
- medical professionals: cardiologists, dermatologists
tertiary healthcare
- mostly in-patient care
- highly specialist consultative healthcare including plastic surgery, neurology, and palliative care
- usually provided in metropolitan areas
quaternary healthcare:
- most specialised and advanced level of care
- handles very rare cases
- administer experimental treatment
- only one facility in province/continent usually
- highest level of expertise and facilities
Different cost-benefit analyses
CA - useful to determine budget and whether something is affordable/sustainable
CEA - effectiveness may be decreased poverty or lower infant mortality rates
> benefits related to costs easy to understand
> don’t have to convert benefit into monetary terms
> one measure used for all system
> could have multi-dimensional effects (decreased infant mortality due to improved education)
> CEA will underestimate value
> CEA does not account for utility of benefit
CUA - utility if QALY or DALY (combines quantity and quality of life)
CBA- controversial
Willingness to pay - direct (interviews) and indirect (observing)
Longevity risks mitigation
- mitigated through buy-in/buy-out/longevity swap
Risks
- consider which risks are transferred (longevity, investment, expense)
- consider the risks which are created (credit risk, liquidity risk [need cash to execute and could be used for returns], price risk [more expensive due to profit loadings])
Purchase
- could be too expensive (rather than just retaining risk)
- may not find appropriate annuity/swap
- consider the crystallisation of losses
Pensioner
- consider the relationship with customer (disappears vs. not)
- consider influence over pension increases
- consider communication and admin hassles with customers
Different regulation types
Prudential - ensures RBC is held and minimizes risk of defaults
Market conduct - how conduct relationship between providers, third parties and customers
> whistleblowing is important
> sales process must prevent mis-selling
> monitor customer complaints
> customer communication (know how much cover they have etc.)
Market structure
- licensing
- demarcation of benefits that can be sold
Product
- supply side: PMBs must be provided, must have pension increases on DB benefits, cannot decline those with PECs
- buy side: cannot buy unregulated products e.g investment restrictions
