ACST152 NOTES

Utmost good faith

In the insurance market, the doctrine of utmost good faith
requires that the PARTY SEEKING INSURANCE discloses all
relevant personal information.
For example, if an individual is applying for life insurance, they
are required to disclose any previous health problems they
may have had.
Customers must disclose all facts that are "material" (or
relevant) to the risk for which they are seeking cover.
If a customer fails to disclose (or misrepresents) a material
fact and this induces the insurer to accept the proposed risk,
the legal remedy is to "avoid" the policy. This means the
insurer is entitled to treat the policy as though it never
existed.
Non-forfeiture provisions (provision = supply)
Non-forfeiture provision is a provision of life insurance policy,
or of a statute (regulation/law) applicable to such a policy,
whereby a life insurance company is prohibited from
issuing a policy, which provides for the forfeiture of the
same upon failure of the insured to pay a loan on the policy or
interest thereon.
A clause is an insurance policy that allows for the
insured to receive all or a portion of the benefits or a partial
refund on the premiums paid if the insured misses premium
payments, causing the policy to lapse (expire).
Twisting
The act of inducing or attempt to induce a policy owner to
drop an existing life insurance policy take another
policy that is substantially the same kind by using
misrepresentations or incomplete comparisons of the
advantages and disadvantages of the two policies.
Most states have enacted legislation making twisting a crime.
IBNR (Incurred but not reported) claims
A type of account frequently used in the insurance industry to
refer to reserves that are established for claims and/or events
that have transpired, but have not yet been reported to an
insurance company.

 In these instances, an actuary will estimate the potential

damages to a region; the insurance company may decide to
set up reserves to allocate funds to those expected losses.
To an actuary, these types of events and losses are incurred
(sustained), but not reported.
IBNR claims are a claim that an insurer has not yet paid.
Incurred but not reported losses do not show up in the
insurer's expenditures (savings) because of the non-payment.
However, they do form part of the insurer's liabilities
(responsibilities).
Claim - formal request to an insurance company asking
for a payment based on the terms of the insurance policy.
Excel is popular because it is flexible and easy to learn. But
it does have some disadvantages. Briefly describe 3 possible
disadvantages of using Excel for actuarial work in the
workplace (3 marks).
The statistical functionality in Excel is limited: there are many
analyses that you just can t do, without programming from scratch
yourself. In addition, the analyses that are there don t use the best
available algorithms, or use non-standard definitions. Distributions
are not computed with sufficient precision, missing data is handled
incorrectly, and there are numerous other problems