Sept 14

Hi,
I was just going over the most recent past paper (Sept 14 paper 1) and was having a little difficulty with question 1 - not a great way to start a paper!

I looked though the notes and am I right in thinking this is testing chapter 38?

If so, the methods of controlling expenses explained here are:
- periodically review expenses
- Keeping charges premiums flexible
- ensuring that claims expenses are commensurate with the claim size.

However the examiners reports lists a variety of answers that aren't detailed in chapter 38. I presume I'm not looking at the correct chapter. Can anyone help by pointing me to the right bit of the notes?

Thanks

 

Hi Indy007,

I'm not sure there is one single bit of bookwork that will answer this question in its entirety. So it becomes more of an applications question - idea generation - and we need to think about what other parts of the course may be applicable.

Perhaps also the material in Chapter 38 may be helpful along with the chapters on risk control (esp 45) and maybe expenses (32).

Hope this helps

Best wishes
Stuart

Stuart Underwood
ActEd Tutor

 

Hi Stuart,

Thanks for getting back to me. That makes me feel a bit better as I was sure I'd missed an important piece of bookwork!

I noticed that a lot of my answers weren't included in the suggested answers. Would you be able to give me your opinion on the validity of the suggestions I made?

To control expense risk an insurer could:
- Attempt to reduce legal expenses by settling claims more quickly. However, doing so would likely push the amount at which claims are settled up and so the overall impact of this approach should be analysed.

- In the event of a catastrophe or large accumulation of claims their may be logistical issues that cause expenses to rise. Including:
- An increase in the wages being paid out to staff due to overtime work being necessary. This could be offset by having an agreement with an outsourcing company to aid handling in the event of an unexpected influx of calls.
- A catastrophe could push up the demand for external suppliers (e.g. loss adjusters, builders, mechanics, etc). The impact of this could result in the expenses involved with claims to increase. By having pre-agreed contracts and terms with contractors an insurer can help to keep a handle on these expenses.

- By moving towards embracing the internet to sell insurance products an insurer can reduce the level of commission paid to brokers. It should be noticed that the set-up expenses involved in setting up an internet sales channel are likely to be high, however it is likely to be offset by the future commission savings.

Thanks again for your help

 

Hi Indy007

The points you made below are all true ...

... however, if you are marking your own attempts at past paper questions, to avoid any false sense of security it is better to apply the following principle ...

... err on the side of caution and assume that only the points in the Examiners' Report would have scored credit (and this is stated for example on the front page of the Examiners' Report for the September 2011 and April 2012 papers).

So I would take the Examiners' Report (or the points in ASET) to be your guide.

Best wishes
Stuart

Stuart Underwood
ActEd Tutor