In my last blog discussing Gen Re’s work on decision biases, I shared how something called the fundamental attribution error inclines us to overweight the contribution that individual attitude and skill makes to our performance and underweight the role of the context in which we work.
In recent years, life insurance companies have started offering acceleration of a portion of the face amount of the life insurance policy to those who are chronically or critically ill. This article discusses the more common form of the chronic illness riders found in the U.S. marketplace today, as well as considerations to control the risks under that rider.
If you could find out when you were going to die, would you want to know? A groundbreaking research aims to tell patients exactly that, with a test to determine how long you have left to live poised to hit markets in Britain.
The Product Development Section and Committee on Life Insurance Research announce the release of a new report that examines the results of a company survey on select period mortality assumptions used in the pricing of individual life insurance. Performed by Al Klein and Michelle Krysiak of Milliman Inc., the study illustrates a variety of assumptions utilized in the marketplace and provides insights into practices for setting the assumptions.
The problem with this narrative—and the focus of this article—is the very real risk management costs associated with the increased complexity, efficiency and overconfidence in the predictive power of models.
Recent studies have addressed particularly the relationship between glycemic control (typically measured using HbA1c) and complications of type 2 diabetes mellitus. Those findings are reviewed in this article in the context of underwriting and risk management.
Enjoy a lively menu of the topics that underwriting executives are facing today: balancing production and quality, determining the correct underwriting requirements, risk management, simplified or non-bloodtested business. And for dessert, some advice about career development and opportunities for future underwriting executives.
Genetic testing: it’s the crystal ball of health predictions. Are you more likely to develop cancer, Alzheimer’s or Huntington’s disease later in life? With a few strokes of a cotton swab, you can have that information. And life insurers argue they should have it, too.
Big data can be an incredible competitive differentiator for insurance companies -- or could be the source of their demise, if they allow other businesses to gain the upper hand in the use of analytics and data to better manage and price risk and create new, more profitable products.
Pandemic risk is one of the most important tail risks for life (re)insurers and to a lesser degree, for non-life (re)insurers. Estimated losses from a 1-in-200 year pandemic event could be equal to or even greater than major property and casualty events such as a major earthquake or major tropical storm.
The Preferred Structures Survey Subcommittee of the Society's Committee on Life Insurance Mortality & Underwriting Surveys has completed its report on the results of a survey to capture the current state of preferred risk underwriting practices in the US life insurance market. This Survey was sent to Canadian and US life insurance companies that write preferred risk business in the US.
Labs serve an essential role in life insurance underwriting by providing information about relevant medical markers in blood and fluid panels for underwriters’ use in risk assessment. In recent years, labs have expanded these services, capitalizing on data collected through life insurance applications to create mortality scoring algorithms.
Stratification of mortality risk in prospective insured individuals is a central function of underwriters, but one upon which the performance of actuaries’ pricing projections is ultimately dependent. Until recently, life insurance underwriting was a relatively unsystematized offshoot of clinical medicine, tending to reflect the diagnostic preoccupations of practicing physicians concerned with the diagnosis and treatment of discrete medical conditions.
When we think of predictive analytics in insurance, perhaps it calls to mind weather risks, earthquake exposures or other types of disasters, but newly-reported research indicates that a form of predictive analytics will be of great use to health insurers, who should be able to geographically localize the spread of diseases, and in turn, better assess health risks.
Solvency II, the imminent new European Union (EU) capital and regulatory regime for insurance and reinsurance, will have many and varied impacts outside the EU. This RGA brochure presents you with an overview of these impacts and attempts to place them in an understandable and practical context.
More than $7 billion in transactions related to life insurance-linked securities (life ILS) were completed in 2010, and the market saw a number of additional life capital market transactions as well. Redundant reserve financings are likely to continue to drive the life ILS market in 2011. The move toward principles-based reserves, the introduction of term universal life products, and Iowa's new collateral regulations are other issues to watch in 2011.
Insurance and actuarial organizations seem more likely than banks to use the term ERM, even when all discussions really pertain to the functions and responsibilities of enterprise risk management. Banks seem sensitive today to the critical need for better management of risks they undertake. But at least some insurance-related organizations see the broader, firm-wide nature of ERM. To them, traditional silos must be overturned so that the entire organization is committed. Emphasis on “risk management,” as such, runs the danger of being much too narrowly focused. In other words, ERM is indeed still three words. (Article begins on p. 11)
The Patient Protection and Affordable Care Act (PPACA) mandates that states establish one or more health insurance exchanges by January 2014. Under this business paradigm, private health insurance carriers will compete on price and quality in order to attract this new pool of insured consumers. People who have previously been under- or uninsured may find exchanges an attractive option when purchasing health insurance. But claim experience, including cost and utilization patterns, of the under- and uninsured population are mostly unknown to private health insurers at this time. This paper examines the adequacy of current risk adjustment systems when applied to a wholly new type of enrollment—the "all-population risk pool"—and offers considerations and explores options for exchange designers.
Risk adjustment, a method for adjusting healthcare costs to reflect the health status of a given population, will take on new significance under healthcare reform. In order to harness the true potential of such a powerful tool, critical stakeholders like governmental agencies, health plans, provider organizations, and employer groups must understand how to properly select, implement, and evaluate risk-adjustment models. Using the appropriate risk-adjustment methodologies in the correct context will contribute to more accurate healthcare pricing, more efficient utilization, and improved quality of care.
Societies are becoming more vulnerable as the risks they face become more interconnected. Integrated risk management approaches can help countries identify and prepare risks. A country risk officer could act as a focal point in the process of systematic risk management and provide a public face.
Milliman and LIMRA conducted a joint study to identify emerging operational and strategic risks to the life insurance industry. Using data from interviews with senior executives from 15 U.S. insurance companies, the study applied Millman's CRisALIS methodology in order to assess the risks and offer strategies for managing them.
As the regulatory landscape shifts, insurers and reinsurers should take the opportunity to remain alert and aware as efforts to modernize and streamline the industry unfolds. This Deloitte “point of view” examines the discussion and outlines the current and proposed initiatives between international insurance regulatory authorities around the world.
Fewer than 3% of life insurers faced regulatory action in 2009 as a result of low risk-based capital levels.
The percentage of life insurers with RBC levels triggering regulatory action fell to 2.32% in 2009, from 2.83% in 2008, staffers at the National Association of Insurance Commissioners, Kansas City, say in a new report.
The European Commission's draft technical specification for the fifth Solvency II Quantitative Impact Study (QIS5) indicates how the standard formula is likely to be set for QIS5. In order to determine how the new rules will affect solvency positions under the standard formula for Europe's life insurance market, Milliman analyzed the potential impact of QIS5 in several European markets: France, Ireland, Italy, the United Kingdom, Poland, Romania, and Slovakia.
"Widespread distribution of financial products that contain a minimum guarantee” could increase the risk of insurers crashing the financial system, according to the International Association of Insurance Supervisors.
The SOA Health Section is pleased to make available a research report that describes the current state of Enterprise Risk Management practices for health organizations. The report was prepared by Max Rudolph of Rudolph Financial Consulting, LLC.
As an overhaul of financial services regulation is debated in Washington, the American Academy of Actuaries is throwing its support behind creation of a federal systemic risk regulator for the entire financial services sector.
Swiss Re outlines its recommendations for risk management in relation to each of the main elements of the Solvency II framework directive: risk and capital modelling, governance as well as disclosure and transparency.
Fundamentally, there is no new story to tell about the bewildering array of inter-related risks facing our world. What is new – and troubling – is that the linkages between them have reached unprecedented levels of intensity.
Insurers know well that using a consistent approach to managing and measuring diverse risk portfolios is an ERM essential that can help them make informed decisions about pricing, product strategy, capital budgeting and linking pay to performance. And yet most insurers use any number of measurements to gauge financial results across varied businesses.As part of Towers Perrin's ongoing series on embedding ERM in insurance, this new article sheds light on a consistent analytical framework that can be applied to an insurer's internal measurement and management system to align value assessment, risk and capital management.
In April 2009, Guy Carpenter's Financial Intelligence Team published a briefing entitled Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness. That briefing included definitions of Risk Profile, Appetite and Tolerance and how these concepts fit into an Enterprise Risk Management (ERM) framework. It also presented the results of their initial Risk Tolerance Benchmarking study, which summarized the information publicly disclosed in this area.
The CAS, CIA, and the SOA's Joint Risk Management Section Research Team and the SOA's Committee on Finance Research are pleased to make available a research report that examines the subprime mortgage crises and related financial consequences from the perspective of the insurance industry. The report was authored by a team led by Shaun Wang of Georgia State University.
The Insurance Studies Institute (ISI) and Professor Kent Smetters of The Wharton School of the University of Pennsylvania will work together on Designing a Systemic Risk Regulator, a research project to study the need and optimal design of a systemic risk regulator in light of the recent financial crisis.
Swiss Re’s new Focus Report: “The Globalisation of Collective Redress: Consequences for the Insurance Industry” provides an update on the global spread of collective actions and assesses both the risks and the opportunities that this development carries for insurers.
According to Swiss Re’s new sigma study, “The role of indices in transferring insurance risks to the capital markets”, both (re)insurers and investors benefit when clearly defined and regularly updated indices are used in insurance-linked securities (ILS) and other risk-transfer instruments. These instruments provide (re)insurers with an additional capital management tool, while investors gain access to an attractive, diversifying asset class.
The World Health Organization (WHO) has declared the H1N1 flu a pandemic.
This marks the first global flu epidemic in 41 years. In response to this development, members from the Society of Actuaries are advising businesses to revisit and/or create business continuity and preparedness plans.
Every life insurer is exposed to catastrophe risk. The largest carriers, of course, tend to have the capital on hand to absorb substantial losses and can rely on economies of scale to make reinsurance more affordable. Smaller life insurers, on the other hand, do not always have the same risk management tools available at a proportionate cost. Thus, they may feel forced to retain risks which, if realized, could imperil solvency. Fortunately, there are products on the market that make cover attainable for smaller life insurers.
PricewaterhouseCoopers shares research conducted by the Centre for the Study of Financial Innovation (CSFI). It questions insurers on three areas: current risks, future trends, and their preparedness to respond to the risk environment. With 403 insurers and industry observers responding from 39 countries at a difficult time for financial services, they see significant change in how risks are perceived and prioritised.
Managing the risks, liabilities and solutions associated with electronic processes and interactions related to conducting business over the Internet is a challenge for every insurance company today. The exposure to online risks is pervasive, potentially affecting most aspects of an insurance organization, including assets, operations, finances, legal, regulatory compliance and even reputation. Exactly how serious is the threat of cyber attacks on insurance operations, and what currently are the most dangerous cyber threats to carriers' systems?