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Showing posts from 2011

Sorry, no resources...

While reading " The Savings and Loan Crisis and Its Relationship to Banking " (about the S&L debacle incurred in US in 1980s), a paragraph really caught my attention: " ...Accordingly, when much of the S&L industry faced insolvency in the early 1980s, the FHLBB’s examination force was understaffed, poorly trained for the new environment, and limited in its responsibilities and resources .7 Qualified examiners had been hard to hire and hard to retain (a governmentwide hiring freeze in 1980–81 had compounded these problems)... " (Page 170) Does this sounds familiar to you? If you never heard of anything like "limited resources" from your management or your boss, you must be happily working in your current company and working on long OT is once in a blue moon. Many bosses think that their staffs are " supermen " - they introduce new workloads to the existing staffs, decline to provide sufficient resources and still expect for marvelous ...

Nuclear Power Station Accident, Tsunami... No longer Improbable

When I went through a few chapters of " Catastrophe, Injury, Insurance: The Impact of Catastrophes on Workers Compensation, Life, and Health Insurance " published by Risk Management Solutions (RMS) in 2006, two paragraph about nuclear power stations and tsunami caught my attention - the first paragraph commented the chances of a major radioactivity release from the nuclear power station: Scenarios that fall into these plausible mass casualty events but are improbable include a large-scale accidental release of radioactivity from a nuclear power station. Estimates suggest that such an event could affect several million people and make many hundreds of thousands sick. Operating safety standards for nuclear power stations require that the chances of a major radioactivity release are maintained at below 1 in 10,000. The second paragraph commented large-scale tidal waves: A tsunami or coastal tidal wave affecting a major stretch of coastline on either the ...

Government Servants' Retirement Age Extended to 60

The Prime Minister’s Department presented the following government bills for first reading at Dewan Rakyat of Parliament Malaysia on 8 November 2011, which related to the retirement benefits (including pension) for the government servants: Pensions (Amendment) Bill 2011 Statutory and Local Authorities Pensions (Amendment) Bill 2011 Pensions Adjustment (Amendment) Bill 2011 Judges’ Remuneration (Amendment) (No.2) Bill 2011 As revealed in the recent Budget 2012, the retirement age of the government servants will be extended to  60 years old starting next year (2012). Currently, the retirement age is at 58 years old - although they can opt to retire earlier at age 55 or 56. Furthermore, in the event of a retiree passes away during 20 years (previously 12.5 years) after his retirement, his family members will continue to receive the full amount of his pension and other relevant retirement benefits. According to Budget 2012, the government expenditure on pensions and gratuitie...

GST in Malaysia... Around the Corner?

The Malaysian Deputy Finance Minister Dato' Donald Lim Siang Chai has recently told the press that the government is expected to gradually implement Goods and Services Tax (GST) by end of 2012, and followed by the full implementation in 2013. Hopefully Dato' Donald's comment is the real indication of the implementation date of GST in Malaysia. The government has been discussing GST for quite some years - the Royal Malaysian Customs even set up a GST dedicated website to educate public on GST. Again, the 2012 Budget did not mention on the GST implementation - perhaps this may not be a good time for the Barisan Nasional government as the general election is around the corner. Different from the current single stage sales tax and service tax, GST is a multi-staged consumption tax that covers most supplies and goods. Since the GST implementation is once delayed, those corporates which are not ready yet should take this opportunity to revamp their systems (including their ...

Everyone Assumes Health Plans are the Bad Guy

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When I read " Everyone wants to assume that the health plans are the bad guy ", I couldn't help keep nodding my head. This interesting statement was written by David Axene (President & Consulting Actuary, Axene Health Partners) in his article " Is California leading states in health care reform? ", posted in  SoA Blog . Many people have an perception that insurance companies are the greedy devils which always look for opportunities to get excessive profits by increasing the health insurance's premium rates - but do they really complain on the increasing medical costs charged by the medical providers (like private hospitals)? They do not understand the premium increase is mainly attributed to the increase in medical costs, or they refuse to understand? "Public" here refers to those public who have bad perception on insurance companies selling health insurance Perhaps this disappointing public behaviour can be explained by the above cha...

Spreadsheet Tips (1): More Flexible MOP Template

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In case you are looking for some Excel / Spreadsheet tips on how to make your templates more efficient, perhaps you can get some ideas from the tips I share below. Afraid of bombastic command or VB coding? Don't worry, the tips I share below are very simple and you don't need to be an expert to use the tips. The following tips use examples from the template I used to compile movement of policy (MOP) statistics (i.e. new business, in force business & termination/alteration) . However, you may apply the same ideas for other types of templates as well. Tips (1): Produce results by plan code level, not product group Normally, the MOP statistics are reported in specific product groups, such as "Whole Life", "Endowment", "Temporary" etc. in BNM Form L6-L8 (Conventional Insurance) / FT5-FT7 (Takaful). It is common for us to group our data by the required product groups using data processing applications (e.g. FoxPro, Data Conversion System ...

FoxPro for Actuarial (2)

I started to learn FoxPro when I started my first actuarial career after graduating from the university. My mentor in the actuarial department, Madam L, was also my FoxPro  shifu (i.e. master / teacher / guru). Madam L was the reinsurance administrator in the department - by using FoxPro, she managed to do necessary reinsurance administration work for the entire individual life insurance business (more than 1 million policies) by her own, alone ! By going through her programs and guidances, I picked up necessary skills to use FoxPro and create FoxPro programs for my reporting and experience studies tasks (my manager resigned three month after I joined the department - all his tasks became my tasks!) - until now I am still grateful to the guidance she provided to me previously. When I was promoted to a team leader with junior staffs, similarly I needed to teach them the relevant FoxPro knowledge so that they had necessary skills to do the assigned tasks. At that time, there ...

FoxPro for Actuarial (1)

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Recently when I helped my client to set up process to compile movement of certificate statistics (MOP) (i.e. new business, in force and termination/alteration), I advised them that Excel is not an ideal tool to do such actuarial exercise which requires a lot of data manipulation. "Then what is the better tool?" They asked me. Without any hesitation, I answered: " FoxPro ". Why do I recommend FoxPro as a good tool to be used for actuarial exercises that require a lot of data manipulation & matching (such as MOP reporting, experience studies and reinsurance administration)? What are Excel, MS Access or Data Conversion System (DCS) (a supplementary application comes together with Prophet) not considered good tools for actuarial exercise? Among the reasons are: Ability to do data matching / joining - as FoxPro uses SQL (Structured Query Language) as the primary programming language, we can combine the selected fields from 2 different tables/data easily base...

Medical Insurance for All Malaysian?

During a seminar on health care reform held recently in Kuala Lumpur, Malaysian Health Minister Liow Tiong Lai mentioned that the government would refer to the healthcare model in Taiwan (one type of social insurance, i.e. National Health Insurance (NHI)) as one of the bases to reform Malaysian health care system. The government will develop the National Health Financing Authority (NHFA) to manage the fund under the National 1Care Health Scheme (1Care) - which is expected to be funded by government, private sector, employers and the people. Theoretically, it is a good idea to have a structured healthcare system that can provide healthcare services to all citizens in the country. In my view, expensive medical cost is one of the key financial risks that everyone should really concern on - almost everyday we can read news about unfortunate folks with serious illnesses begging the public to fund for the expensive medical costs. According to Liow, starting from 2004, the medical ...

Is "Claim Contingency Reserve" Necessary for Takaful Business?

When I worked with one of my previous client, I came across " Claim Contingency Reserve " (CCR) in their operation model. According to "Takaful and Retakaful - Principles and Practices" written by Tobias Frenz, CCR (also known as Special Reserves or Equalisation Reserves in some markets) acts as a buffer against an adverse or volatile claims experience. My client and I have a few discussions on CCR, especially on whether it is necessary to establish CCR in the participant risk funds. Normally, CCR is funded by surplus arising during the year and setup as a % of tabarru' or technical provision (This reminded me of the old days when I calculated solvency margin using 4% of reserves, ...). It was a a challenge to determine an appropriate % to be used and the approach to releasing CCR over time. Well, there is no prescribed % or approach available. 15% or 10%, which is better? Should we release over 3 years or 5 years? Should we release linearly or staggered (like...

Movement of Policy (5): Termination / Alteration

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Note: Please note that the following discussion is only for movement of policy (MOP) of individual life/family takaful products only. Among the three statistical reporting forms (L6, L7 & L8 for life insurers; FT5, FT6, FT7 for takaful operators), the termination / alteration statistics are considered as the most complicated. As all three forms need to be reconciled (please refer to the above diagram), many people have no choice to put the differences that cannot be reconciled as "Others" (another popular word to be used is "balancing item"). In fact, it is not complicated if you follow the correct approach to do these termination / alteration statistics. If you re-arrange the formulas in the above diagram, you can easily see that actually these statistics intend to explain the changes/movements occur previous month in force policies and new business incepted in current month, by comparing to the current month in force policies. So, what is the best way...

Movement of Policy (4): In Force

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Note: Please note that the following discussion is only for movement of policy (MOP) of individual life/family takaful products only. Compared to new business statistics, in force statistics are much simpler - basically, what we need to report are the policies as at end of particular period (month-end / quarter-end / year-end) which are considered as "in force" (i.e. the coverage is still valid). Depending on the policy admin system we use, we can identify the in force policies by referring to their policy statuses. In one of the system I used previously, the "in force" business are those policies having the following policy statuses: In Force : Normal premium paying policies. Paid up : Applicable to the limited payment products only; policies which all required premiums have been paid. Reduced Paid Up (RPU) : The policyholders decide not to continue paying the remaining premiums (or by other scenarios defined in the contracts) and covert the policies to...

Movement of Policy (3): New Business

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Note: Please note that the following discussion is only for movement of policy (MOP) of individual life/family takaful products only. When we create a new entry in a policy admin system, normally we will create a " proposal " - so that the underwriters can perform necessary assessments and decide the proposed life can be accepted or request for additional information (such as medical checkup). After all the underwriting requirements have been fulfilled (and of course we have received "adequate" premiums), the proposal will be converted to an " in force " policy - and our agents will be happily informed their clients: "Congratulation! You are now covered by Company ABC!" In simple words, our " new business " statistics are used to report the proposals that have been converted to in force policies in a particular period (month/quarter/year). How frequent we should prepare the statistics? I would recommend to prepare new business st...

Movement of Policy (2): Actuarial? Data Warehouse?

If someone asks me: "Who should be the most appropriate person in charge in doing movement of policy (MOP) reporting - Actuarial or Data Warehouse (or IT Department)?" After some hesitation, I shrug my shoulders: "Frankly, I'm sorry that I don't know..." Ideally, MOP reporting is basically summarizing & categorizing the data available in the policy admin system. If the system data are "clean" (what a luxurious wish), we can just apply some rules to segregate the available policies into "new business", "termination/alteration" and "in force" - just like what we do using Excel, FoxPro or DCS (Data Conversion System). Furthermore, the rules are actually easily understood by even non-actuarial colleagues. Now, it sounds like it is a bit too expensive to as Actuarial Department to do MOP reporting. However, in reality, the data in the policy admin system in many companies are not clean - especially those with group ...

Back to Basic - Movement of Policy (MOP)

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If you ask me what a fresh graduate should learn first when he joins your actuarial department, I will definitely answer he needs to learn  movement of policy  (MOP). In my view, MOP is the basic of all actuarial studies - it is about how a policy " behaves" during the entire life cycle, i.e. from when the policy is set in force until the policy is terminated (including maturity / expiry). By having a good understanding in MOP, it will be easier for us to visualize the relevant cash flows occur during policy term - especially when we setup an actuarial model to project cash flow. When I setup the Takaful Library for my client, the "base" variables I setup first are MOP related variables. From what I learn from friends in the industry, many companies are struggling to get the " correct " MOP statistics - which are known as L6, L7 & L8 for conventional insurers and FT5, FT6 & FT7 for takaful operators (namely "New Business", "Termi...

It depends...

If you ask someone: "Do you think you can complete all required tasks by this evening?" and the answer you get is "Well, it depends... ", do you feel irritated? I would say most of us will answer "Yes", as it is not much different compared to not getting any answer at all! This was one of the most valuable lesson I learned from Mark Saunders , the speaker of Presentation 4: " Actuaries and communication skills -- an oxymoron? Some thoughts and tips ", during Jointly Regional Seminar 2011 recently held in Kuala Lumpur, Malaysia (19-20 July 2011). I totally agree with Mark that "it depends" is a really bad answer that does not give any meaningful / value-added feedback to the person who is looking for answer - especially if we would like to make the CEO upset. I posted Mark's "it depends..." in my Facebook and my friends shared with me other irritating ways of answering a questions, such as: " I will get back to y...

Talking about Claim

I have a great discussion with the HOD of life claim department this afternoon, and I have learned plenty of things. I always like to talk to the HOD of claim department (either in the previous company or current company I work), as he/she shares a lot of real life examples which make make me know better how insurance works in reality, and the problems and challenges he/she faces in managing insurance/takaful claims. Actually, the main purpose I had the discussion with the HOD was to understand how the claim process is carried, so that later the system development team starts working on the claim module enhancement, the problems the claim assessors facing now (that related to system) can be resolved together. Well, I am glad that he shared some real life cases with me during the discussion, helping me to understand better how he & his staffs assessed claims. I always agree that claim department is an important “gatekeeper” of insurance/takaful companies, apart from the underwri...

Chat with an Actuarial Junior Staff

I have a chat with my ex-staff, J, last Friday in UAT Room. I was assisting the Business Analyst (BA) in supervising the new product User Acceptance Test (UAT), and Jeff was one of the user from Actuarial Department. Since J joined the company, he has been working in the system implementation team – well, in short, most of his work is to carry out UAT for new products and migrated products. I asked him: “How long you have been here already?” He answered 2 years, and he hasn’t had any chance to really involve in other actuarial works like pricing and valuation. I was a bit worried with his limited experience – I told him it was high time for he to start to learn other types of jobs, as he doesn’t even have any experience in preparing the statistical reporting (like new business report & termination report) or experience studies (like mortality study and persistency study). The situation will be more difficult when he becomes a senior executive but doesn’t know how to really do a j...

Prophet Modeling (4): How did I setup my Takaful Library?

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Hooray, I finally completed the Takaful Library! Working together with Ms. H, we finally setup the Takaful Library from scratch and created 32 “Products” (and another 19 “Same As” products). I am glad that the Valuation Team (headed by my ex-boss Mr. R) can now using a consolidated workspace to do the actuarial studies, especially asset share study and reserve & liabilities capital charges for new valuation basis and Risk-based Capital (RBC) submission. After around 4 months of hard work, finally I can really sit down and “document” this exercise. I will share the experiences I have in this article and several subsequent articles later – hopefully they can help to provide some ideas to you… The above flow chart summarizes the approach I used to complete the Takaful Library project for my Client: Approach Papers I started the project by preparing documentation (Excuse me, I think I heard someone just shouted “Oh no!!”…), which I generally called them as “approach papers” fo...

More Heart Attack during World Cup Tournament?

Are you a hardcore football fans? Are you extremely stressed when you are watching the match which the team you support is about to lose? If your answer is "Yes", you better take care your heart well during the World Cup Tournament... I learned an interesting fact during a seminar yesterday, i.e. a study reported that during World Cup Tournament time, hospital admission from people having heart attack  increases tremendously due to emotional stress - the example given was when Argentina beat England in a penalty shoot-out during the 1998 World Cup, there was a 25% increase in hospital admissions for heart attacks in England ( You may refer to " Can Watching Soccer Give You a Heart Attack? " for details ). Oops, look like football can appear as a hazard which affect the losses arising for health / critical illness insurance...? (I never understand how the emotional stress is because I have no interest in football...)

Prophet Modeling (3): Something About Documentation

I was a bit surprised when Ms. Z called me. She asked me for a favor if I could provide a brief explanation on how actuarial modeling is done, especially related to Prophet – because she needed to review of the actuarial modeling processes. “OK, I can only share with you whatever I did in the past. But you need to check with Actuarial Department for the latest practice they have.” I am no longer with Actuarial Department, hence I couldn’t say on behalf Actuarial Department – furthermore, there is a new leader for the Modeling Team. What I could do was only sharing my past experience when I did my reserve workspace and simplified asset share workspace. I met Ms. Z the next day, together with her colleague (Oops, I didn’t ask what her colleague’s name is…). I explained how Prophet works in a very brief way, so that they could have some ideas how Prophet helps actuarial people doing the job. “Then what were the documentations you had when you setup the actuarial model in Prophet?” Y...

Prophet Modeling (2): How to Organize Variables?

During my discussion with Mr. L & Ms. H on Prophet modeling, I briefly touched about how to organize variables more efficiently into various Variable Groups (from A to Z). In the existing reserving workspace and simplified asset share workspace (deterministic models) which set up by Ms. H & I (also Ms. B) previously, we also split the Variable Groups into “ core variable groups” and “ input variable groups”, which is similar to the standard Conventional Library. The major different between our approach and the standard Conventional Library is we have the same type of classifications for both core variables & input variables – i.e. A-M for core variables, and N-Z for input variables. For example, we have created Variable Groups for decrements like mortality rates – say we used Variable Group “D” (the 4th alphabet starting from A) for core variables (D – Decrements (C)), and similarly we use Variable Group “Q” (the 4th alphabet starting from N) for input variables (Q –...

Prophet Modeling (1): Some Thoughts on Setting Up Takaful Library

I had an hour chat with Ms. H & Mr. L on Prophet Modeling yesterday. Ms. H is my ex-staff when I was the leader for the Modeling Team, she is quite brilliant in helping me setting up the Prophet models (simplified) the Valuation Team currently uses; while Mr. L is my replacement. The objective of the short chat was to exchange some thoughts on how to proceed the work to model a comprehensive cash flow projection model for the Takaful business. Well, although I have partly did the projection model before I resigned from Actuarial Department, I suggested to Mr. L that he should start setting up the model from scratch – instead of continuing from my partially complete model or doing amendments from the Conventional Library. Well, doesn’t this consume more time? This sounds correct if we only have a quick thought, but if we really make a thorough consideration, actually setting up the model from scratch is easier and more efficient. Let’s talk about doing amendment from Conventional Li...

Already Graduated for 10 years…

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“We have graduated for almost 10 years…” During the “pre Chinese New Year” dinner I have with a few Actuarial Science (normally we call “QA”) course-mates yesterday (20.01.2010) at Purple Cane Restaurant (Chinese Assembly Hall, Kuala Lumpur), I made the above remark. Yes, time flies, we have graduated from Universiti Kebangsaan Malaysia (UKM) for almost 10 years already. It was really a great time to catch up with my old friends who I have known for more than 10 years. We also talked about other course-mates who were not there – I did hope that I was able to invite more (especially who work in Kuala Lumpur / Selangor), but unfortunately I do not have all contacts. Some of them work in oversea, such as Bee Chuan, Fong Siong (I just knew that he got married already!), Bee Chee and many more; some of them are we have totally lost contact (not even via Facebook), such as Eng Keong. I really appreciate the time I studied in UKM with these course-mates and it was a great thing that we ...