Date post: | 30-Jun-2015 |
Category: |
Economy & Finance |
Upload: | siosanglei |
View: | 533 times |
Download: | 0 times |
Actuarial Case Competition
Presented to you by Group 3
Presenters:Sio LeiFelix LiangAmy ZhangIris Zhang
The Health Care ReformGoal of the reform: To deliver more affordable and higher-quality care to more individuals in the U.S.
Children/Young Adults:- Pre-existing conditions ≠ no coverage - Government program partial coverage for uninsured young adults with pre-existing conditions- < 26 can stay on parents’ insurance plan
Women:- Pre-existing conditions ≠ no coverage- No different premium for gender difference
Others:- Medicaid/Medicare: - more inclusive Medicaid - incentives to provide quality and more efficient care- All insured: fully-covered preventative care- Cannot be dropped from policies when sick- 2014: no one can be denied of coverage for pre-existing conditions
Beneficiaries:
- Unrealistic budget projections: increasing budget deficit?
- Public option private sector’s pressure?
- Freedom of Choice? unconstitutional to require insurance?
Major controversies:
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
The Health Care ReformChallenges to insurance companies:- Pricing differentiation = prohibited generic pricing- Full coverage of “essential” care moral hazard- More regulations exposed to more risks-Minimum Loss Ratio (MLR) Less profit margin
Year Event % Uninsured
Increase of insured pool from 2009*
2009 Reference year 16.7% N/A
2014 1% income fine if fail to buy insurance (min. $95) 8%* ~27 million*
2016 2.5% income fine if fail to buy insurance (min. $695) 5%* ~ 36.3 million*
*Predictions based on available information, compare with 32 million predicted by National Underwriting Company
Opportunities:- Consulting firms: Clients eager to learn the change New group benefits requirements- Insurance companies: Expanding insured pool from req. Subsidized insurance state health insurance exchanges: Platform to reach potential clients
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Retirement Plans Defined Benefit and Defined Contribution
Challenges
Philosophy
Entitlement
Self-Responsibility
Risk/Costs
• Employers Bear Market Risk
• Changing Costs
Employees Bear Risk
Predictable Costs
DB
DC
Design
Employer Invests and PaysWorker’s Work History
Employee InvestsEmployer Matching
PV(benefit) =FV(contribution)
Tax, inflation, retirement age, life expectancy
Employees’ Investment Abilities
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
The Optimal Plan
1980 1985 1990 1995 2000 2005 2010 20150%
10%
20%
30%
40%
50%
60%
70%
80%Participation in Retirement Plans (Private Industry)
DC DB
Years
Part
icip
atio
n Pe
rcen
tage
Retiring Today
Next?Hybrid
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Term Insurance & Whole Insurance- Compared with whole insurance, term insurance has: - shorter term - lower premium - Companies make profit in a term insurance, when the contract expires without paying out if the insurant doesn’t die within the coverage period. - easier way to price the premium present value of expected compensation that insurers need to pay each year in coverage period- Whole insurance
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Whole insurance- We price the whole insurance through solving two equations:- There are two variables:
X the amount of premium.α the proportion of premium allocated to cash value account1- α the proportion of premium allocated to death benefit account
- Let the death benefit be $250K and the policyholder buys the insurance at age 23- (1)…..Expected compensation insurers need to pay for those die before age 65= X(1- α) (Q23+P23*Q24+P23*P24*Q25+P23*P24*P25*Q26+…….+ … P62*P63* P64*Q65)* ($250K) = X(1- α)*(65-23)
- (2)…..The amount of cash value account at age 65 is equal to the death benefit =
$250K= X(α) * {[(1.026) 65-23 -1] / 0.026} where {[(1.026) 65-23 -1] / 0.026} is the accumulative factor-Who should buy whole insurance?1. Have urgent money (e.g. for business) in the future2. Have a large estate3. Own a business and want to take of succession during life4. Want to leave children money when they pass away5. Have medical concerns6. Are not too old
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
What is Loss Triangle?-A table of loss experience showing losses for a certain period at regulate dates, reflecting the change in amount as claim matures-There are many types of loss triangle, such as paid loss, accumulated paid loss, accumulated incurred loss, average closed claim, etc. - Actuarial Development factors: Loss Development method, Expected Loss Method, Bornhuetter/Ferguson Method and Frequency/Severity Methods.
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Development Factors and Projection
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Comparing Results and Monitor
- Easy to present the data
- Convenient way to see the pattern-More accurate reflection of the entity’s specific loss development patterns
- Hard to understand from a first glance- Loss triangle itself cannot help actuaries
to make accurate estimation
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Questions & Answers
Health & Group Benefits Retirement Benefits Individual Life & Annuities Property & Casualty Q & A
Health & Group Benefits: Amy Zhang-- [email protected]
Retirement Benefits: Iris Zhang-- [email protected]
Individual Life & Annuities: Sio Lei-- [email protected]
Property & Casualty: Felix Liang-- [email protected]