{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.title}}
{{item.text}}
The art of foreseeing the ultimate costs of a product with limited data
In the complex world of insurance, it’s difficult to predict how much a product will actually cost. Your job as an actuary is to make educated guesses about the costs involved, using a variety of data to make predictions on things like life expectancy and the likelihood of accidents. Given the need to plan for the future, this is especially important for life insurance and pension funds.
To distinguish between profitable and loss-making contracts, you need to understand the trends in life expectancy and policyholder behaviour. But making these educated guesses can be difficult. Old systems or flawed processes can sometimes make it hard to get an accurate forecast. This is where PwC can support you. Our team can help you improve your methods and assumption-setting processes, drawing on industry knowledge and cutting-edge proprietary analytical tools.
How we can help you
Our approach is holistic. The goal is to help you establish best-in-class assumption processes by setting up an assumption methodology and governance framework that aligns with your company’s overall landscape. We draw on cutting-edge industry knowledge and actuarial expertise to help you implement technical solutions tailored to your specific industry.
We have also developed proprietary tools that enable us to derive assumptions directly as a service. Alternatively, we can help you set up your own demographic tools.
Our services are designed to empower your organisation with the knowledge, tools and expert guidance necessary to ensure sound governance, accurate assumptions and effective reviews. Whatever approach you choose, we’re committed to helping you navigate the complexities of assumption management and stay at the forefront of industry best practices.
“Our tailored solutions empower clients to overcome challenges and make accurate, robust demographic assumptions.”
Alexandre Allegrezza
Senior Manager, Actuarial Services, PwC Switzerland
Governance & methodology
We can help you issue new assumption guidelines to close potential governance gaps and establish robust calculation methodologies. In addition to our expertise in industry standards such as the SVV, we also draw on publications from various actuarial societies around the world to develop a best-in-class approach.
Assumption review
We draw on our extensive audit and industry expertise to help you monitor the development of your assumptions as new experience emerges. We can use our own proprietary tools to provide a third-party opinion on the adequacy of your in-force assumptions.
Assumption-setting
We can also use our proprietary tools to produce specific demographic assumptions directly for you. Based on R and PowerBi, our solution can visualise demographic trends and provides an interactive experience. Alternatively, we can help you develop your own internal experience analysis tools.
The assumption-setting process
The growing importance of assumption-setting is summed up perfectly by the Actuarial Standards Board (ASB):
“While the setting of assumptions has always been an important part of actuarial practice, the importance of disclosing assumptions is increasing with the move to more principles-based financial reporting measurements and the increased focus on whether entities are properly funded or reserved to meet their obligations. Financial audits, reviews, and examinations also have evolved significantly in recent years.”
This means that the assumption-setting process is fundamental to the actuarial profession. It’s what underpins financial projections, pricing decisions, risk management practices, regulatory compliance and stakeholder confidence. As an actuary you must exercise diligence, expertise and judgment to ensure that assumptions accurately reflect the underlying risks and uncertainties inherent in insurance operations.
We have created a systematic approach to help you do just that.
.jpg)
Source: American Academy of Actuaries
Let’s quickly walk you through the most important steps of the process:
Analysing experience
Demographic assumptions depend on numerous factors that are continuously changing. So monitoring assumptions is a key part of the actuarial control cycle. You need to consider conducting additional reviews and making additional adjustments on a scheduled basis. For each specific assumption, you must do the following on an ongoing basis:
- Define the review cycle
- Monitor the evolution of external factors
- Monitor the emergence of experience
- Monitor the appropriateness of the assumption-setting parameters and methodology
Data management
Your priority when developing demographic assumptions has to be to utilise data effectively and assess the availability and reliability of data for the assumption-setting exercise. It’s crucial to use appropriate data for the specific purpose of the assumptions. If such data is unavailable, not relevant or lacks credibility, you should consider benchmarking industry assumptions, using assumptions from comparable sources or referring to other published assumptions.
The assumption you ultimately choose can be a combination of both internal and external sources.
Monitoring experience
Demographic assumptions depend on numerous factors that are continuously changing, and thus monitoring assumptions is a key part of an actuarial control cycle. The actuary needs to consider conducting additional reviews and making additional adjustments on a scheduled basis. For each specific assumption, the actuary must, on an ongoing basis:
- Define the review-cycle
- Monitor the evolution of external factors
- Monitor the emergence of experience
- Monitor the appropriateness of the assumption-setting parameters and methodology
Contact us
https://pages.pwc.ch/core-contact-page?form_id=7014L000000IICBQA4&embed=true&lang=en
Contact us
Alexandre Allegrezza
Martina Berta
{{filterContent.facetedTitle}}
{{contentList.loadingText}}
{{contentList.loadingText}}