FACULTY OF COMPUTER SCIENCE AND

MATHEMATICS
MARA UNIVERSITY OF TECHNOLOGY

INTRODUCTION TO ACTUARIAL SCIENCE

ASC302 GROUP ASSIGNMENT

TOPIC: WEDDING INSURANCE

PREPARED FOR:
MADAM SARAHIZA BINTI MOHMAD

PREPARED BY:
1 SITI FATIMAH BINTI MOHAMED SALLEH 2016569595

2 ZAYYANI ANITH BINTI MOHD NASIR 2016375817

 TABLE OF CONTENTS

1.0 Introduction.............................................................................................................2

2.0 Background of Product..........................................................................................3

3.0 Underwriting............................................................................................................5

4.0 Pricing......................................................................................................................6

5.0 Reserving................................................................................................................8

6.0 Investment...............................................................................................................9

7.0 Conclusion............................................................................................................10

8.0 References............................................................................................................11

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1.0 INTRODUCTION

A wedding ceremony is a celebration that is most anticipated by any couples who are
getting married. As extravagant as it may sound, preparations for the event, however, acquire
extra efforts and details to ensure a smooth execution of what has been planned. In Malaysia
especially, weddings are one of the social events that vary across different customs and cultural
traditions. These may also possess some financial risks when people are faced with unforeseen
circumstances along the way.

Wedding insurance products are not uncommon among other countries but are still absent
in our country. During recent years, there have been constant issues in this country where people
experienced financial losses due to failures by wedding planners, vendors, suppliers and even
videographers. This indirectly paves way for a new possible market of wedding insurance in
Malaysia since there are obvious needs for a particular target market, inclusive of all the future
brides and grooms. Diagram 1 shows the rate of marriages in Malaysia to further prove the
gradual increase in weddings conducted in our country. By 2018, there should at least be 200,000
marriages in which some may demand for their wedding insurance as to avoid unexpected losses,
especially during the ‘big day’.

Diagram 1.1: Number of Marriages in Malaysia

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 Thus, our primary objective is to reduce the number of people being left out of pocket due
to unexpected losses during preparation of wedding. This is because there are a lot of cases in
Malaysia where the bride and groom had to cancelled or reschedule their wedding due to
problems like event planner and vendor failure. We can look at Nur Izzati Zulkifli which is one of
the victims for cases of vendor failure problems that are happening in Malaysia. 15 th February of
2018 was supposed to be the happiest day for Nur Izzati but that day turns out to be nightmare
as the vendor failed to show up during her wedding reception. Nur Izzati tried to reached the
vendor but failed and the atmosphere on that day was tense and chaotic for her and her family
when the wedding planner failed to turn up. Nur Izzati had paid RM17,350 for the package that
included meals for 1,200 guests and bridal dishes for the wedding reception to the wedding
planner company. It was learnt that Nur Izzati was among nine victims who were deceived by the
wedding planner company, occurring almost RM500,000 losses. Nur Izzati and her family only
wanted their money back as they did not came from a wealthy family, her siblings are still studying
and her dad suffered from heart disease so they needed the money. This incidents only added
more burden to them. This is only one of the hundreds cases of event planner or vendor failure
that are happening in Malaysia. We can see that when this kind of incidents happen if affects the
bride/groom financial a lot as most of the time they will not received the deposits that has been
paid. This is why wedding insurance is needed in Malaysia.

2.0 BACKGROUND OF PRODUCT

Generally, a wedding insurance comprises of two types which are liability coverage and
cancellation coverage. Policies that offer liability coverage basically compensates for the losses
of a third party that are caused by policyholders. Examples include property damage and injuries
that are inflicted towards other parties during the event and require payment from the
policyholders. Contrarily, cancellation or postponement policies pay for losses that result from
failures of other parties such as vendors and photographers. The infamous case where people
lost their deposits when their wedding planner or bailed them out falls under this type.

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 The benefits that we offer under this product involves coverages due to venue cancellation
or postponement and cancellation due to injury, sickness or death of a bride/groom. For example,
the planned venue is cancelled due to double booking or the reception are cancelled because the
bride/groom involved in an accidents, when this happen we will pay for expenses incurred such as
the deposits when your wedding is cancelled or postponed. For failure of event planner or vendor
and, we will pay the non-refundable deposits that you have paid for any booked goods or services
that fail to meet their contractual obligations due to bankruptcy, liquidation or non-appearance but
the policyholders must have a signed agreement with the supplier in order to make a claim.
Meanwhile for failure of photographer or videographer, our wedding insurance policy provides
cover against the photographer failing to turn up, or the films failing to be developed, and will even
cover the cost of re-taking the photographs at a later date. The benefits for personal liability are
we will indemnify the bride and groom, or any person for which the bride or groom would be legally
liable for. We will also pay for legal costs and expenses in defending any claim in respect to injury,
loss or damage.

On the other hand, there are also general exclusions of this wedding insurance such as
cold feet or change of heart. Unfortunately, we will not cover if the bride/groom-to-be decided not
to go through with the wedding. We will not provide any coverage for honeymoon expenses as
this insurance are for wedding event only. We also did not cover cancellation due to bad weather
or natural disaster and wedding event held abroad because as a new company we are not
financially stabilised yet. Our main focus now is to provide coverage for any wedding within the
country.

The terms and conditions in regard of the policy are the policy can be purchased within 30
days - 18 months prior to the wedding date and the coverage period is until the end of the wedding
reception only, anything that happens afterwards will not be covered. Next, policyholders must
keep written records for claims settlement as a proof that it really happens. We will not approved
or proceed with the claims if no proof are to be found, so it is important for policyholders to keep
all the receipts. Any illness suffered by policyholders and their partners must not be caused by a
pre-existing condition and the losses incurred to or by policyholders must be fortuitous in order
for it to be insured.

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3.0 UNDERWRITING

The job of the underwriter is to protect the insurance company from acquiring non profitable
business. But this cannot mean that every risk should be declined and the decision has to be
balanced with the necessity of accepting well understood risk to grow the business. Thus,
underwriting is an important process. Underwriting is the process of evaluating risk to determine
if it's profitable for the insurance company to take the chance on providing insurance. After
determining the risk, underwriter will sets a price and establishes the insurance premium that will
be charged in exchange for taking on that risk. Underwriting is a process of accurately classifying
insurance applicants according to those rating variables. In essence, underwriting strives to
charge the right rates to the right applicants.

In the process of selecting the applicants, we will take into consideration about applicant’s
age, health condition, income and types of event planner or vendor. We will reject the applicants
if they already have pre-existing illness, this is to avoid our company from experiencing losses
that could have been avoided. Under this process as well, we will do some research regarding
event planner or vendor that already has a bad name or cases. From that research, we will have
a list on the event planner or vendor that should be avoided for example like ”Mahligai Impian”
but this list will not be shown to public in order to avoid from fraud cases. If it turns out that our
applicant’s wedding planner or vendor is on our black list then we will likely reject the applicants.
We also have a list of trusted wedding planner that we can suggest to the applicants if they did
not have any event planner or vendor yet.

Since our estimated yearly payout which includes the total amount of claims payment
made is RM2.1 million, the premium for this product will then be decided as to charge our
policyholders accordingly. Our operational overhead is assumed to be 70% of the yearly payout
amount due to the newness of this product in the market. We will then have total cash outflows of
RM3.57 million by adding up the total claim payment with the overhead cost. If we were to make
a 70% profit in return, we would have to collect RM6.069 million from our policyholders. By dividing
this amount with 15,000 policyholders, we get RM404.60. Hence, we set the amount of average
annual premium payment at RM405 with 10 distinct classes of premium payment.

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4.0 PRICING

Pricing is the determination of rates charged by insurance companies. The benefit of rate making
is to ensure insurance companies are setting fair and adequate premiums given the competitive
nature. Wedding insurance is a new product in Malaysia, therefore there are no past data that can be
used to estimate the price of the products. The price of the products are estimated using data from
other country, this is actually where the need of assessability are met as we are able to access data
from other country.

We provide two types of package which is the basic coverage and additional coverage.
Under the basic coverage we provide coverage for the cancellation or postponement of venue,
cancellation due to injury, sickness, death of a bride/groom and failure of event planner/vendor.
The difference between the basic coverage and additional coverage is that under the additional
coverage we covered cancellation due to venue problems or due to injury, sickness, death of a
bride/groom and failure of event planner same as what is covered in the basic coverage but we
provide two additional coverage which is coverage for a failure of photographer or videographer
and personal liability. We created two products so that policyholders has a variety of coverage to
choose from, policyholders can go for basic coverage if they only want coverage if any unexpected
losses happens due from cancellation of the reception. If the policyholders want their wedding
covered from A to Z then they can go for the other option which is additional coverage.

There are five classes of coverages that are provided for both package, the classes are
divided into bronze, silver, gold, platinum and diamond. Each classes have different sets of
premiums and coverage. Basically, we price our premium based on different classes taking into
account the wedding size or the total cost involved for the wedding. Our premiums are a little bit
pricey because we do not have any excess and deductibles under this policy. Unlike any other
type of policy where premiums are paid monthly, our premiums are a one off payments which
means that policyholders only pay once. Table 4.1 and table 4.2 below shows the product overall
coverage.

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 Class of Bronze Silver Gold Platinum Diamond
Coverage (RM) (RM) (RM) (RM) (RM)

Premium 105 180 225 330 405

Coverage 10,000 20,000 30,000 40,000 50,000

Maximums
Table 4.1: Basic Coverage

Class of Bronze Silver Gold Platinum Diamond

Coverage (RM) (RM) (RM) (RM) (RM)

Premium 205 380 555 730 905

Coverage 20,000 40,000 60,000 80,000 100,000

Maximums

Cancellation/ 20,000 40,000 60,000 80,000 100,000

Postponement

Supplier 20,000 40,000 60,000 80,000 100,000

Failure

Photographer/ 5,000 10,000 15,000 20,000 25,000

Videographer

Personal 10,000 20,000 30,000 40,000 50,000

Liability
Table 4.2: Additional Coverage

Generally, bride/groom will choose a level of cover based on their total budget. This way,
if the worst were to happen and everything had to be cancelled or rescheduled, the bride/groom
would not be left out of pocket. The reason for the multiple classes of coverages is that we want
to create a product that are affordable for everyone. Usually, we would suggest the lower income
couples to go for the bronze option as it is the least expensive policy, while the higher income
group can go for any option that they desired depending on their wedding cost. This way a lot of
people will want their wedding to be insured as they find that our wedding insurance are
affordable.

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5.0 RESERVING

Reserves are percentage of premium set aside to fulfill future financial obligations
specifically the payment of claims to our policyholders whenever they are due. This actuarial role
is closely interrelated with the other departments. When we are able to provide an estimation of
the value of annual payouts and reserves, we are then capable of setting the appropriate amount
of premiums to charge our policyholders. This will help underwriters to price different classes of
policyholders with different level of risk exposures and coverages. Apart from that, a known
reserves value would allow us to estimate the investment returns that we need in order to make
profits and avoid losses from the development of this product. Hence, several significant figures
are estimated to calculate the amount of policy reserve specifically for this wedding insurance
product.

The first value of estimation that is calculated would be the total annual premium payments
made by our policyholders. From the 10 different classes of coverage, the average price of
premium is RM405. We then estimate the number of policyholders paying for the premium to be
15,000. Thus, the estimated total annual premiums is RM6,075,000.

Next, the value of total annual claims payment is estimated assuming the average chance
of a claim is at 0.7%. We expect that 105 out of our 15,000 policyholders would claim for their
insurance coverage for an average amount of RM20,000. Thus, this makes the estimated value
of total annual claims payment to be at RM2,100,000. Based on this estimation of our yearly
payout, we are then able to calculate the insurance premiums and the minimum amount of
reserves needed in order to meet our future payments.

The estimation of reserves amount involves the basic formula of financial mathematics to
calculate present value of a particular accumulated value. At an effective annual interest of 7%
and accumulated value of RM2,100,000, the amount of reserves is then RM1,962,617. This is the
amount of money that we need to set in a reserve fund to ensure our capability of paying out
future losses. The calculation is as follows:
RM2,100,000 X (1+0.07)^(-1) = RM1,962,617

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6.0 INVESTMENT

In order to achieve our estimated profit and to have enough reserves at any given time,
our investment portfolio shall speak louder than the other three roles. Investments allow the
generation of money through our assets by profiting from compound interests. Income from
investments is critical in reducing the cost of insurance to policyowners in order for our policies to
seem affordable. As this wedding insurance would be a new product in the Malaysian insurance
market, it is important for us to gauge more interest among our target markets by offering quality
product at an attractive price. On the other hand, our investment profit would be crucial to offset
any unfavorable losses thus making this a significant role in our product development.

The amount of money that we would like to generate through our investment portfolio
should at least be the amount of reserves being set earlier on. Therefore, we estimate our
investment returns in a year to be at least RM2.1 million. The premium payments made by our
policyholders would be invested to ensure capital gain from our investments.

Instruments that we are likely to invest in long-term include real estate investment trusts,
less risky unit trusts like the products of Amanah Saham Nasional Berhad and bonds. These
would offer a decent amount of return but are less risky in nature. As for short-term investments,
we would opt to invest in the stock market of Bursa Malaysia. Though the capital market is
generally riskier and does not ensure capital gains, however high amount of returns is possible to
be projected with proper investment analysis and market understanding.

9|Wedding Insurance
7.0 CONCLUSION

Throughout the process of designing this wedding insurance, it is of our utmost priority to
ensure financial viability for this product apart from meeting the needs of our target market. It
would be a great pleasure if the number of unforeseeable losses from a wedding event and its
preparation can be minimized in Malaysia. As a wedding is usually a one-time event and can be
an extremely costly one, we visualize this product as a need for people who do not want to flunk
the ceremony and lose money.

Every actuarial role involved plays a crucial part to fulfill this vision. After much
brainstorming and reasoning, it occurred to us that underwriting, pricing, reserving and investing
are all interrelated in a particular way. One cannot function well without a great influence of the
others. It also came as a realization of how important the accuracy of numerical values and
mathematical models are in developing a product in ensuring the profitability of an insurance
business.

There were several limitations in the process of developing our products. For instances,
there were not enough latest statistics on the rate of marriage in Malaysia for us to recognize the
volume of our target market. On our parts, there were also a lot of estimations by us and these
may likely lead to errors. Alas, towards the end of the process, we are more than hopeful to craft
this new product in the existing insurance market of Malaysia for the betterment of the industry.

10 | W e d d i n g I n s u r a n c e
8.0 REFERENCES

A few sources have been referred to during the completion of this assignment such as:

I. https://www.renowngift.com/blog/compare-malaysia-marriage-statistics/
II. https://www.nst.com.my/news/crime-courts/2018/01/328354/wedding-planner-back-
court-answer-more-cheating-charges
III. https://www.worldofbuzz.com/man-pays-photographer-rm8000-to-capture-wedding-day-
photos-turn-out-horrendous/
IV. https://www.theknot.com/content/wedding-insurance-101
V. https://www.thebalance.com/what-is-wedding-insurance-and-what-does-it-cover-
4165273
VI. https://www.imoney.my/articles/how-to-plan-your-wedding-budget-like-a-pro
VII. https://www.nst.com.my/news/nation/2018/03/350407/wedding-reception-becomes-
chaotic-wedding-planner-fails-turn

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