Chapter 45: Risk Management Tools II Flashcards Preview

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Flashcards in Chapter 45: Risk Management Tools II Deck (8)
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1
Q

6 Risk Management tools

A
  • Reinsurance
  • Alternative risk transfer
  • Diversification
  • Underwriting at the proposal stage
  • Claims control procedures
  • Management control systems
2
Q

How might you diversify business?

A

Across:

  • different classes
  • different geographical areas
  • different reinsurers
  • different asset classes and stocks
3
Q

What is underwriting?

A

Underwriting is the assessment of potential risks to charge a fair premium.

4
Q

Why do providers underwrite business?

A

S - identifying and offering special terms to SUBSTANDARD risks
A - avoiding ANTI-SELECTION
F - reducing the risk of over insurance by FINANCIAL UNDERWRITING
E - ensuring that EXPERIENCE follows that expected in the pricing basis
R - using RISK-CLASSIFICATION to ensure that all risks are treated fairly

5
Q

Main ways in which special terms can be applied

A
  • additions to premiums
  • reductions to benefits
  • exclusion clauses

Alternatively:

  • risk may be declined
  • insurance may be deferred.
6
Q

3 Different types of underwriting used by life insurance companies

A
  • medical
  • lifestyle
  • financial
7
Q

Claims control systems can also be used to help manage risk.

What do claims control systems do?

A

They mitigate the consequences of a financial risk that has occurred, guarding against fraudulent or excessive claims.

An example of a claims control system would be the management of ongoing income protection or permanent health insurance claims.

8
Q

What are the 4 types of management control systems used to reduce risk?

A
  • data checks
  • accounting and auditing
  • monitoring liabilities
  • taking special care over options and guarantees

Decks in Actuarial CA1 Revision Class (46):