1 SP1 – HEALTH AND CARE WEEK 01 Komal Shah, FIA Content 2 Introduction Course structure: overview, weekly plan Week 1 material: General business environment Distribution Channels State Healthcare Provision Stakeholders – recorded lecture Introduction: SP1 3 SP1 – Health and Care Specialist Principles NOT UK specific Key outcomes: Knowledge (25%) Application (50%) Higher order skills (25%) Introduction: you 4 Name, background, other SP’s? Any work experience? UK/Overseas? Your expectations of this course? Anything else? Course structure: overview 5 10 weeks of lectures: + up to 1 hr of recorded lectures On Moodle, each week: Lecture slides Detailed lecture notes IFoA past exam questions relevant to each week’s material (up to 2020) Assessed by: 2 coursework – 20% of the module – ALL DATES ON MOODLE 1 group coursework (counts for 70% of coursework) 1 individual coursework (counts for 30% of coursework) – IN-PERSON 1 exam – 80% Ask questions at any time Course structure: diagram 6 Think of this course in terms of a company’s structure... Sales force (Channels) Legal Product design Marketing Regulation External Underwriting General Business Environment Tax e.g. PRA/FCA External Admin Products Internal Claims Data Quality Control Competitors Pricing Risk mgmt Internal Monitoring experience Assumptions Research Finance Reinsurance Reserving Investments Models Course structure: weekly plan Weekly plan on Moodle Market Awareness 8 Market awareness – health insurance making headlines Where? When? How did you come across it? DISCUSS ITS IMPLICATIONS 9 SP1 Week 1 General Business Environment Learning Objectives 10 Students finishing this lecture should be able to: Understand the operating environments in which health and care insurance products and services are traded, in terms of: Distribution channels Regulatory and taxation regimes Professional guidance, and Economic and political influences. Propensity of consumers to purchase products 11 Buy or sell? Meeting needs State vs private Changes in the propensity of consumers Economic & Legal Environment 12 Economic Inflation Business optimism Employment security Political stability Legal Source: https://www.rateinflation.com/inflation-rate/ukinflation-rate/ Written contract Policyholders’ Reasonable Expectations vs terms and conditions Regulatory environment 13 Restrictions License to sell Premium rates Terms and conditions Channels used Ability to underwrite Minimum level of reserves + capital requirements Types/amounts of assets held Level of mismatch Fiscal environment 14 Taxation Annual profits Investment income Premium income Tax concessions Differences among countries Different treatment for products Professional guidance 15 Framework to follow Contract design Valuation of liabilities Distribution of profits Guidance on the interpretation of government regulations 16 SP1 Week 1 Distribution Channels Distribution Channels 17 Main Channels Insurance intermediaries (brokers) Tied agents Own sales force Direct marketing Worksite marketing Distribution Channels (continued) 18 Questions to ask Who are they? What do they do? How are they remunerated? Who initiates the sale? Distribution Channels (continued) 19 Insurance intermediaries Independent Provide client with best / cheapest products Commission or fees Distribution Channels (continued) 20 Tied agents Tied to one or several insurers E.g. bank Products often mutually exclusive Commission / salary / both Distribution Channels (continued) 21 Own sales force Employees of insurance company Commission, salary or both Salesperson initiating sales? Distribution Channels (continued) 22 Direct Marketing Mail shots Phone selling Press advertising Internet Who initiates sales? Distribution Channels (continued) 23 Worksite marketing Broker/insurer representative At worksite Products provided? Benefits to employer? Benefits to insurer? Benefits to insured? Distribution Channels (continued) 24 What are the effects of using different channels (to an insurer)? Distribution Channels (continued) 25 Commissions Indemnity commission (allow for earnings period and commission clawback) Level Renewal Distribution Channels: exercise 26 Channel characteristics Customer characteristics to Channels Link insurer IFAs Tied/Banc Own Salesforce Direct Marketing Worksite Marketing Remuneration Who initiates sale? Financial General sophistication health Product Lapse rate complexity 27 SP1 Week 1 State Healthcare Provision Learning Objectives 28 Students finishing this lecture should be able to: Explain the role of the State in the provision of alternative or complementary health and care protection, in particular: Objectives of State healthcare provision Methods of State healthcare provision, and Funding approaches. State healthcare provision 29 The objectives of any government’s provision of healthcare might be considered as one of the following: Protecting the nation’s health Subsidising the poor Balancing the budget Following social culture and/or political promises State healthcare provision (continued) 30 Role of the insurer Optional alternative Optional complement Compulsory alternative Compulsory complement State healthcare provision (continued) 31 In what ways can a State provide/differentiate its State benefits? State healthcare provision (continued) 32 Funding methods Pay as you go Forward funding Incentives for self provision Examples? 33 SP1 Week 1 Stakeholders Learning Objectives 34 Students finishing this lecture should be able to: Describe the interests of the various stakeholders (for health insurers). Stakeholders 35 Employer An employer is an individual or an organisation responsible for directing or supervising a business e.g. a partner in a partnership. They have an interest of making sure the company is operating profitably. Employees Employees are those who work within a company; the people who run the company. Their roles can range from a manual worker to the chief executive. They are generally concerned about their job security, the benefits offered and the general working environment. Stakeholders (continued) 36 Actuaries – pricing / reserving / capital / risk management Generally, actuaries are responsible for providing financial information for the insurer. They generally work in pricing, reserving and capital management. Recently, actuaries have been recognised for their understanding of the business and have started getting involved in risk management. Actuaries in a life and health insurance company often have senior roles due to their understanding of risk and the operation of an insurance company. Accountants Accountants are essential for any financial institution. They are responsible for preparing the financial information for reporting purposes and for management information. Stakeholders (continued) 37 Board of Directors The Board’s role is to provide direction for the company. It is generally not involved in the day-to-day operations; it is responsible for recommending and approving strategic decisions and setting the vision for the future. It is sometimes responsible for any failures in the company. Sales team The sales team is responsible for selling policies to the general public. It is very important to the company as it brings in the main revenue. Often, the members of the sales team will require training to sell insurance business and will need to ensure that they adhere to the guidelines set by the regulator. Stakeholders (continued) 38 Policyholders Policyholders are those people who have purchased a product from the insurer. They are interested in the financial security of the company. With-profits policyholders will be interested in not only the financial security, but also the ability of a company to generate enough surplus. They will also have formed certain expectations of what they will get from their product. Underwriters They are responsible for underwriting different policies by assessing the risks of these policies. They are likely to be more involved when large benefits are paid out and / or for policies with difficult medical histories. They are involved during the on-boarding stage and may also provide support to the claims team. Stakeholders (continued) 39 Intermediary / broker The intermediaries or brokers, are the people or companies who act as the middlemen between an insurer and the public. They provide a service to the insurer and the consumers. They sell policies of the insurer to the consumers/corporates and also provide after-sales service to them, especially at the time of a claim. They are interested in an insurer’s financial security and its operation. General Public/Prospective Customers The general public may not have any direct interest in the insurer. However, they will still be interested in the general state of the financial market. The failure of an insurer will have a detrimental impact to the general public. Also, there is a chance that a member of the general public may become a customer in the future. They are more likely to go with a company they know about, that is financially sound and that has not had any bad press. Stakeholders (continued) 40 Auditors They are responsible for evaluating the accounts of a company. Most insurance companies are required to have external auditors to ensure their accounts represent a true and fair view of that company. They report their findings in the company’s annual report, and to the regulators. There are also internal auditors. They focus more on the governance and risk processes of the company. As they are employed by the company, they tend to be able to provide more detailed reports and actions to various departments and the Board in the light of their internal audit exercises. Pensioners There are two types of pensioners. The first type is those pensioners who are taking pensions from an insurer’s pension scheme (e.g. former employees). The second type is those pensioners who purchased some form of annuities from an insurer. Both of them are interested in the insurer’s financial security. Stakeholders (continued) 41 Regulator The regulator is an agency, which can be established by the government, which oversees the operation of the market according to public interest principles and criteria. In the UK, they are the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). Their aims are to ensure that insurers have a sound foundation. The collapse of a company is likely to have a huge impact to the confidence of the financial market, so their main aim is to ensure the security of the insurers, whilst being fair to the policyholders. Credit Rating Agencies Credit rating agencies are responsible for deriving a credit rating for an insurer. Their interest in a company is to ensure that the credit ratings they give to the company are sustainable. They will be interested in understanding the business as well as how it is being operated. In light of any changes, they will be able to revise their ratings and give their view to the public. Stakeholders (continued) 42 Dependants of the insured / employees They have no direct interest in the insurer. However, they will be interested in the security of the insurer. The dependants of the insured would want to ensure that the policy pays out as required, and the dependants of the employees would like to ensure that the employees get paid to meet the needs of the family. Competitors Competitors are naturally interested in the business of other insurers. There are various reasons of that; knowing what the others are offering is vital to ensure competitiveness. They would want to know the other insurers’ products, premiums, commission structure, etc. This is to ensure that they are positioning themselves to where they want to be. Stakeholders (continued) 43 Reinsurance companies Reinsurers insure insurance companies. They are interested in covering insurance companies for risks that the insurer may not be willing to take. Also, they would be interested in the operations of the insurer if they are doing business with them. This is to ensure that the insurer’s risks are in line with what the reinsurer signed up for. Government The government will be very interested in the life and health insurance industry. This is to ensure that their policies are in line with what the citizens/residents are being offered. For example, if the government would like medical insurance to be purchased by the general public in order to reduce some of the burdens on the budget, they may want to talk to various medical insurance providers to discuss such policies. They may offer some level of protection and/or tax relief for the insurers and/or the insured. Stakeholders (continued) 44 Tax office The tax office is interested in the insurers’ financial position as well as the products available. It would like to ensure that the insurers pay tax according to their financial performance. It would also like to understand the products offered by the insurers, especially those claiming to be tax efficient, to ensure no tax avoidance has taken place. Investors / Shareholders They want to ensure that the company is performing as indicated in their annual reports and other publications. They also want to get the best return on their investment. Stakeholders (continued) 45 Creditors They are the people or organisations who the insurers owe money to. They are interested in the repayment ability of the insurers. Professional Bodies They are responsible for the conduct of any professionals employed by the company, such as actuaries, accountants, lawyers, financial advisors, etc. They are there to ensure that standards are maintained. Also, they are there to ensure that individuals comply with the relevant regulations and conduct codes. Where necessary, sanctions would be enforced.
0
advertisement
Related documents
Download
advertisement
Add this document to collection(s)
You can add this document to your study collection(s)
Sign in Available only to authorized usersAdd this document to saved
You can add this document to your saved list
Sign in Available only to authorized users