Never mind the stats, actuaries need to get talking to their colleagues in claims to understand the people, skills and experience, says Alex Isted
The skill of the experienced claims professional, therefore, is in helping the pricing actuary understand why, for instance, trends in certain occupational groups are worse than in others.
Termination rates have also worsened in recent years across some age groups and the government’s proposed welfare reforms may impact upon claims experience.
Precisely the same considerations should apply to actuarial reserving and valuation. If these are incorrect, then a disability portfolio can be either under or over reserved both of which can be costly to a business.
What other areas are there where claims know-how can ensure a better likelihood of profitable business? There are at least two others.
The first is working with the product development actuary. The mantra is that:
“Claims helps at the start of the game and the start of the game is product development.”
Claims input to the product actuary when developing a disability product can provide a practical bent to what a disability product means and its implementation.
For example, from their working knowledge, claims can help ensure the product ‘Treats the Customer Fairly’ and enable a practical interpretation of the policy at the point of claim (so that it is less likely to lead to an FOS challenge because of poor policy wording).
Conversely, if this involvement does not occur, then there could be an adverse impact on claims experience and profitability as well as upon the media image of the company.
The second area worth considering is working with the marketing actuary. Claims should be at the centre of the sale, just as much as underwriting is.
The ability to handle claims efficiently, fairly and promptly is at the centre of adverts for selling almost any line of non-life business. Why is this less the case with IP business?
The perception of the claims message with IP in the media can sometimes be a negative one.
We need to turn this on its head and emphasise the way that claims assists the policyholder or claimant in many more ways than just paying the claim.
Trick Number 1 should be an integral part of the sales message.
Alex Isted is head of claims at Munich Re
