Monitoring experience

Question 1

Reasons for monitoring experience

Answer 1

• develop earned asset shares
• update assumptions as to future experience
• monitor any adverse trends in experience so as to take corrective actions
• provide management information.

Question 2

Data required for monitoring

Answer 2

• ## reasonable volume of stable, consistent data, from which future experience and trends can be deduced.

Question 3

mortality investigations

Answer 3

Analyse data, where relevant, by
- type of contract
- age
- sex
- duration from entry
- smoker / non-smoker status
- medical / non-medical status
- source of business,
- location
- occupation
Consider at most a 5-year time interval as a basis due to mortality changes because of:
- advances in medical science,
- changes in cultural attitudes,
- improvements in standard of living,
- new diseases,
Time interval should be large enough to not be affected seasonal changes but not too large because we wish to respond to the above changes

Question 4

Reasons for AoS

Answer 4

• To determine the financial effect of writing new business

-To identify non-recurring components so that e decisions on surplus distribution to with profits policyholders can be made

• Provide a check on the valuation data and process, if carried out independently
• To provide management with information on trends experience,
• To determine the financial significance of actual experience deviating from expected experience, so to determine drivers of profit.
• To comply with regulation

Question 5

Reasons for analysis of EV

Answer 5

• validate assumptions, calculations and methods.
• To provide information for published accounts
• ## To provide information for executive remuneration schemes

Question 6

General Reasons for losses after AoS (10)

Answer 6

Actual expenses higher than the expected expenses

Lower new business volumes than expected, leading to less income relative to fixed acquisition expenses.

Higher exits than expected (such as surrenders).

Overly generous surrender values (or insufficient surrender charges).

Higher than expected expense inflation.

Unexpected once-off costs

Reinsurer default (if any)

Losses due to new business strain

pricing may have been aggressive (low charges), in order to attract business.

There could be an error in the analysis.

Cross-subsidies assumed in pricing between bigger and smaller policies not coming to fruition.