Meeting cum-Seminar on Preparedness Towards De-tariffing Non Life Insurance Hyderabad March 14, 2006 Pricing Microinsurance Products An Overview Denis Garand Consultant BearingPoint Inc. denis@garandnet.net www.bearingpoint.com - PowerPoint PPT Presentation

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PPT – Meeting cum-Seminar on Preparedness Towards De-tariffing Non Life Insurance Hyderabad March 14, 2006 Pricing Microinsurance Products An Overview Denis Garand Consultant BearingPoint Inc. denis@garandnet.net www.bearingpoint.com PowerPoint presentation | free to download - id: 494fdd-ZmRjN



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Meeting cum-Seminar on Preparedness Towards De-tariffing Non Life Insurance Hyderabad March 14, 2006 Pricing Microinsurance Products An Overview Denis Garand Consultant BearingPoint Inc. denis@garandnet.net www.bearingpoint.com

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Title: Meeting cum-Seminar on Preparedness Towards De-tariffing Non Life Insurance Hyderabad March 14, 2006 Pricing Microinsurance Products An Overview Denis Garand Consultant BearingPoint Inc. denis@garandnet.net www.bearingpoint.com


1
Meeting cum-Seminar on Preparedness Towards
De-tariffing Non Life Insurance
Hyderabad March 14, 2006 Pricing
Microinsurance Products An Overview Denis
Garand Consultant BearingPoint
Inc. denis_at_garandnet.net www.bearingpoint.com
2
Presentation Outline
  • What is microinsurance
  • Importance of data
  • Rate components and key determinants
  • Health insurance- additional considerations
  • Modeling techniques
  • Examples
  • Conclusions

3
What is microinsurance?
  • An important financial service
  • Expect good management practices
  • Properly designed data base
  • Regular review of results
  • Data managed as valuable resource
  • Microinsurance mostly community rated

4
Importance of Data
  • Credible data is the foundation of MI pricing
  • Data must be complete, consistent, timely,
    accurate
  • Best specific data for the target group.
  • -Demographics
  • -Claims experience, etc.
  • -Exposure to risk
  • Without specific data, actuary must rely on
  • -Population statistics (census, WHO population
    mortality, etc.)
  • -Theory statistical, risk, life contingencies,
    etc.
  • -Experience data from similar MI programs (if
    available)
  • -Reasonable assumptions

5
Minimum Data Requirements
  • Institutional and branch information
  • MI participants information (DOB, gender, photo,
    promoter, address etc)-
  • Dependents and beneficiaries information
  • Coverage history for each product
  • -each person, each product used to reconstruct
    exposure to various risks
  • Transactions history for each product
  • -to determine who is covered or lapsed, time
    value of money considerations, etc.
  • Product rules history for each product
  • -used to reconstruct exposure to various risks,
    for administration reasons, etc.
  • Claims history
  • -for health, record all costs whether covered
    or not, split by benefits category
  • -need cause of claim for health use ICD codes

6
Price Main Components
  • Claims cost
  • Mortality cost- by age, sex, region, etc.
  • Morbidity cost- by age, sex, region, etc.
  • Dropout costs (lapses, surrenders) and
    reinstatements
  • Risk premium- provision for adverse deviation
    from expected claims, or PAD
  • Uncertainty premium- if data isnt credible
  • Profit-
  • Expenses- marketing, administration, claims
    payment, depreciation, etc.
  • Investment earnings- use to discount expected
    claims and expenses

7
Price Important Factors
  • Product features and benefits, maximums,
    co-payments
  • Timing and frequency of premium payments
  • -expenses, interest earnings
  • Group size- scale of economy, expenses, risk
    premium needed, etc.
  • Participation and renewal rates- affects
    expenses, mortality, morbidity
  • Projected MI growth
  • -affects trends in mortality and morbidity since
    it affects demographic mix
  • Stability of the group- affects expenses,
    renewals, etc.
  • Occupations, livelihoods of the
    members/participants
  • -affects mortality, morbidity
  • Premium collection system
  • -affects expenses, lapses, investment earnings
  • Communication of benefits
  • -affects claims
  • -client satisfaction which in turn affects
    dropouts and renewals
  • Exclusions and pre-existing conditions- affects
    claims
  • Inflation- expenses, claims, investment earnings

8
Health Additional Considerations
  • Expected claims by benefit incidence, claim
    amounts
  • Trends in utilization
  • -pricing should anticipate
  • High inflation rates
  • -need benefit maximums
  • -need to negotiate tariffs.
  • Changes in treatment, advances in technology
  • -need treatment protocols
  • Claims management
  • -determines how well moral hazard is
    controlled.
  • Co-payments deductibles, co-insurance
  • -will reduce rates
  • Geographic location
  • -affects access to provider, mortality,
    morbidity, etc.
  • Rates should be reviewed every 6-12 months if
    possible

9
Actuarial Modeling Techniques
  • Models are not a substitute for data.
  • Models enable more effective use of existing
    data.
  • Models outputs are indicative in nature, are not
    promises.
  • What if scenarios possible

10
Difficulty in pricing
  • Rank from easiest to hardest
  • Accidental death
  • Life insurance, tied to loan
  • Life insurance, community based
  • Hut insurance
  • Health (prevention, links with medical
    professionals important) and livestock
  • Crop insurance

11
Example 1
12
Example 2
  • Child health insurance Benefit Rs 2,000 per
    household
  • Voluntary
  • Hospitalization
  • Claims per family
  • Year 1 Rs 97
  • Year 2 Rs 85
  • Year 3 Rs 70
  • What happened?
  • Percentage of households with insurance increased

13
Example 3
  • Health insurance Surgical benefit
  • Voluntary
  • Claims per insured
  • Year 1 Rs 65
  • Year 2 Rs 95
  • What happened?
  • Increased communication
  • Large variations by region
  • Monitoring found one hospital had high rate of
    hysterectomies

14
Example 4
  • Creditor Life insurance
  • Claims per insured certificate
  • Year 1 Rs 22
  • Year 2 Rs 59
  • What happened?
  • Initially women covered for loans, in second
    year coverage was added for their husbands.

15
Conclusions
  • Data is important and should be managed
  • Pricing requires an understanding of the whole
    plan, management, administration, claims, etc.
  • Periodic monitoring
  • Health insurance requires more skill to price
  • Microinsurance requires good management skill and
    can lead to success in many other markets
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