Tutorial 1

Question 1

List 4 groups may life insurance actuaries carry a responsibility

Answer 1

• Client / employer
• Policyholders
• The actuarial profession (incl. public interest)
• The regulators

Question 2

Explain how the early life insurance companies tried to reduce lapse rates in the industrial branch

Answer 2

By making commission related to premiums collected rather than basing it on new business sold.

Question 3

Outline the risk for the individual in respect of a contract of indemnity insurance

Answer 3

• Has reduced exposure to risk
• The chanse of the insured event occurring is unchanged, but the individual has exchanged the uncertainty of a large loss for the certain loss in respect of premium payments

Question 4

Outline the risk for the insurer in respect of a contract of indemnity insurance

Answer 4

• Has accepted the risk of having to pay out more than expected
• The larger the group insured the more predictable the outcome should be
• The insurer is also exposed to risks such as high running expenses, moral hazard, etc.

Question 5

Outline the risk for the country as a whole in respect of a contract of indemnity insurance

Answer 5

• The total number of occurrences of losses will be (approx.) unchanged
• Total costs will have increased as insurers will have expenses and profit requirements (individuals less careful)
• Presence of insurance benefits the country as it aids the development of businesses
• Insurance should be a more efficient way of managing the problem than each individual setting aside enough capital to cover any risks.