The Four Actuarial Risks (IAFP Symposium 2015: Insurance Issues)
•
2 recomendaciones•485 vistas
This is the slide deck used at The Trusted Advisor Symposium 2015 of the Institute of Advanced Financial Planners (IAFP at http://www.iafp.ca). A studio recording of the presentation is embedded. For the first time, actuary Promod Sharma (https://ca.linkedin.com/in/promod) publicly shares his approach to measuring and managing financial risks which can be transferred with insurance or pensions. The case study mentioned was provided to symposium attendees. You can follow the presentation without seeing the case study. Question an Actuary at http://www.taxevity.com/qana
Recomendados
Recomendados
Más contenido relacionado
La actualidad más candente
La actualidad más candente (20)
Destacado
Destacado (11)
Similar a The Four Actuarial Risks (IAFP Symposium 2015: Insurance Issues)
Similar a The Four Actuarial Risks (IAFP Symposium 2015: Insurance Issues) (20)
Más de Promod Sharma
Más de Promod Sharma (6)
Último
Último (20)
The Four Actuarial Risks (IAFP Symposium 2015: Insurance Issues)
- 1. Promod Sharma | FSA, FCIA Actuary | Taxevity Insurance Advisory ps@taxevity.com | 416-938-3711 INSURANCE ISSUES The Four Actuarial Risks The Trusted Advisor Symposium 2015 Sep 30 – Oct 3, 2015
- 2. What Are You Solving? Puzzle? Mystery?
- 3. “Puzzles come to satisfying conclusions. Mysteries often don’t.” Malcolm Gladwell, Open Secrets
- 4. What Insurance Clients Get How products work How advisors behave
- 7. What did 83% of radiologists miss? Harvard Medical School Study
- 8. “They look right at it, but because they're not looking for a gorilla, they don't see that it's a gorilla.” Dr. Trafton Drew
- 10. Insurance Is At The Intersection Of Four Distinct Worlds Risk Acc ount ing Investing Law
- 14. How To Do An Insurance Review 1. Understand the four actuarial risks Significant financial impact Predictable for a population (statistics) Unpredictable for an individual 2. Look at each risk for each person
- 15. Disability Risk Losing Income Income Replacement insurance Long Term Care insurance
- 16. Morbidity Risk Losing Health Health Insurance Conventional Medical/Dental Private Health Services Plan (PHSP) Routine expenses Catastrophic Medical Insurance Waiting time insurance Travel Emergency Insurance Critical Illness Insurance Queue-jumping Insurance
- 17. Longevity Risk Outliving Savings Lifetime Annuity Personal Pension Plan Defined benefit component Defined contribution component Additional Voluntary Contributions Long Term Care Insurance
- 19. STEP 1 Forecast The Financial Loss
- 20. Forecasting The Financial Loss Compare what’s needed with what’s in place May already be included in your financial plan for each type of risk
- 21. STEP 2 Evaluate The Current Insurance
- 22. The Source Of The Insurance Public Government “Free” No control Pooled Employer, association “Free” or “cheap” No control Personal Advisor Full control “Expensive” Person You “Free” Can be the most costly
- 23. The Source Of The Insurance Risk of overestimating what’s provided by The government Waiting time … Rules Employers If you’re still working there … Cost cutting affects quality (e.g., disability insurance)
- 24. The Type Of Insurance Does this match the need? E.g., critical illness insurance for disability risk E.g., permanent insurance for a temporary need Are today’s products materially better?
- 25. The Amount of Insurance Too much? Too little? Inflation-adjusted?
- 26. At bottom, any insurance policy is simply a promise, and as everyone knows, promises vary enormously in their quality. ― Warren Buffett
- 28. Propose Repairs Fill gaps easy Repair weaknesses More challenging Products have pitfalls that may not be evident New aluminum Ford F150
- 29. The Case Study
- 30. Initial Questions Who is the client? What is the scope of the assignment?
- 32. The People Person Morbidity Risk Disability Risk Mortality Risk Longevity Risk Cathy Grate Nick Starr Alex Starr Nicky Starr Peter Starr
- 33. Insurance Discussion Morbidity Risk Disability Risk Mortality Risk Longevity Risk
- 34. Insurance Discussion Morbidity Risk Disability Risk Mortality Risk Longevity Risk
- 35. Insurance Discussion Morbidity Risk Disability Risk Mortality Risk Longevity Risk
- 36. Insurance Discussion Morbidity Risk Disability Risk Mortality Risk Longevity Risk
- 37. Insurance Discussion Morbidity Risk Disability Risk Mortality Risk Longevity Risk
- 38. Questions
- 39. Questions The Expert’s Dilemma The 4 Actuarial Risks The Insurance Review Process The Case Study
- 40. Questions? May also reply on YouTube QanA series
- 41. Your Key Role
- 42. Your Key Role: Insurance Literacy Educate yourself about insurance Explore the risks and remedies Get help with your questions Educate your clients May not realize they need protection
- 43. Far too many people … don’t know what they want because they don’t know what’s available. Zig Ziglar
Notas del editor
- This is a studio version of a presentation for the 2015 Symposium of the Institute of Advanced Financial Planners. I’m Promod Sharma, your actuary at Taxevity for questions about insurance. When you’re working on a financial plan, what are you solving?
- [click] A Puzzle? You need all the pieces. It helps to know what the final picture looks like before you start. [click] Or A Mystery? More information isn’t better. You face high uncertainty. You want the fewest relevant clues. http://timkastelle.org/blog/2012/05/are-you-solving-a-puzzle-or-a-mystery/
- “Puzzles come to satisfying conclusions … [click] … mysteries often don’t. An actuary lives in the world of statistics and probabilities, the world of uncertainty. The world of mysteries. Image source: http://pagehanify.com/7criteria/wp-content/uploads/2011/03/Malcolm_Gladwell.jpg
- How products work [click] and how advisors behave limits what [click] insurance solutions clients get. After designing products and helping advisors sell them, I decided to help the public instead. I’ve provided free education through blogs, podcasts, YouTube and live presentations like this one. You’re welcome to ask questions during this session or afterwards.
- Insurance helps replace the economic value of a machine which is a …
- … a priceless human being. Will the correct risks be identified and treated? Let’s look at a CT scan of …
- … a human lung. Radiologists are trained to spot risks. What did 83% [click] miss? It’s the size of a matchbook — 48x the size of a cancer nodule [click]. Do you see the gorilla? The invisible gorilla is an example of the inattentional blindness that affects experts. In case you’re wondering … http://www.npr.org/sections/health-shots/2013/02/11/171409656/why-even-radiologists-can-miss-a-gorilla-hiding-in-plain-sight
- … that is a real baby on the researcher’s back. [click] http://www.npr.org/sections/health-shots/2013/02/11/171409656/why-even-radiologists-can-miss-a-gorilla-hiding-in-plain-sight https://www.youtube.com/watch?v=l6oQQhhbKpM
- What we see differs from what we think we see. You get different perspectives — and better results — when you have a diverse team of independent experts. Insurance combines four distinct worlds, each requiring different expertise … [invisible gorilla: inattentional blindness] Image source: https://pixabay.com/en/space-illusion-optical-depth-line-35245/
- [click] Risk: what are the probabilities and severities? [click] Accounting (tax planning): Where do the premiums come from? Where do the benefits go? [click] Investing: insurance isn’t free. Could investing the premiums elsewhere give better returns? [click] Law: you’re buying a legal contract. How good are the guarantees?
- When you see the new aluminum Ford F150, do you see better fuel efficiency and more performance. Or do you see … Image source: http://www.alcoa.com/car_truck/en/images/ford_f_150.jpg
- … more damage, more costly repairs and more injuries. We see as we are. We see what we’re trained to see. In my case, that’s insurance … Image source: http://www.alcoa.com/car_truck/en/images/ford_f_150.jpg
- … from the perspective of an actuary. Let’s look at how …
- … to do an insurance review.
- Disability risk is the financial harm from [click] losing income when you’re unable to work. [click] You can get income replacement insurance, often called disability insurance. The benefits typically end at age 65. A client may get better results with the indexed, lifelong benefits available with [click] some long term care insurance plans.
- Morbidity risk is the financial harm from [click] losing health. The common solution is [click] health insurance. [ad lib] There’s also critical illness insurance which provides a lump sum to use as you wish if you’re diagnosed with a covered condition like cancer, heart attack or stroke, and survive 30 days. If you don’t want to wait for treatment in Canada, there’s queue-jumping insurance (e.g., TriAccess). You get quick pre-paid treatment in leading US hospitals for many more conditions than critical illness insurance covers.
- Longevity risk is the financial harm from [click] outliving your savings. You can get an annuity which provides income for life as long as you and your spouse live, ideally indexed for inflation. You can save more than the RRSP rules allow with a Personal Pension Plan. There’s a component for the type of defined benefits we fund for government employees. There’s a component for accumulating contributions as we have in an RRSP. There’s a component for transfers from RRSPs. You can also protect against the costs of long term care with insurance. There are options to get a return of premium at death if there haven’t been claims.
- Mortality risk is the financial harm from [click] dying early with obligations remaining. [click] Life insurance tends to be the focus of insurance discussions even though the other risks are often more likely. You have the choice of protection which is temporary or permanent. We’ve looked at the actuarial risks and the typical insurance solutions. Let’s now look at the three step process which helps a specific client. First …
- … forecast the financial loss
- [read] Next …
- … evaluate the current insurance. Pay careful attention to the source …
- … of the insurance [ad lib] There’s a risk of over-estimating …
- … what’s provided by [read] What about the type …
- … of insurance? [read] Also examine the amount …
- … of insurance [read] As Warren Buffett says …
- Who makes the promise? [the salesperson] Who backs the promise? [the insurer] Who pays for the promise? [your client — especially if poor quality] The final step is to …
- … propose repairs. This means to …
- [ad lib] We are now ready to look at …
- … the case study. This is your opportunity to participate. This case involves …
- … several people. The client pays and decides. [click] Who is the client? [discussion] For insurance, you are the client if you’re taking responsibility for the process. Or you can outsource the insurance work and remove yourself. Your clients are now responsible. What does/doesn’t get done is up to them. Also, [click] what is the scope of the assignment? What problem does the client want solved? [discussion]
- Here are the people in our case. We don’t know much about Elaine (Nick’s ex-wife) or Peter (Nick’s dead dad). For our exercise, we’ll ignore Elaine and look at everyone else …
- For each person, we’ll examine each risk.
- If Peter were still alive, what insurance might he need? Morbidity: health and dental Disability: likely retired; long term care insurance Mortality: no spouse but a son and grandchildren; estate planning (e.g., cottage succession planning) Longevity: lifetime annuity; long term care insurance
- What insurance might Cathy need? Lives on her own. Morbidity: likely has generous health and dental coverage from work; what if she has a critical illness Disability: likely has some coverage from work; could fill gaps; consider long term care insurance (cheaper when younger) Mortality: less important since single; could use UL for more tax-sheltered growth; might want to donate the proceeds Longevity: likely has a nice indexed pension; if she needs long term care, who would look after her? LTC insurance might help with the costs
- Is Nick incorporated or an employee? What causes his motivation to fluctuate? What insurance might Nick need? Morbidity: how good is the health and dental coverage from work? Could top-up and get critical illness insurance Disability: what kind of coverage is available from work? Could cover gaps; consider long term care insurance (cheaper now) Mortality: single with independent adult children; does he have a need? Longevity: what kind of pension is available from work? If he needs long term care, who would look after him? LTC insurance might help with the costs.
- What kind of benefits does a young hair stylist get? How secure is his job? What insurance might Alex need? Morbidity: top-up health and dental and consider critical illness insurance, possibly with return of premium option (a form of retirement savings) Disability: portable plan with indexed benefits and option to increase coverage without underwriting; “own occ” definition? Mortality: single; any immediate need? Longevity: save for retirement (e.g., TFSA, RRSP) Idea: Consider a hybrid 3-in-1 plan with DI + CI + Life (e.g., Manulife Synergy)
- What kind of benefits does a junior car salesperson get? How secure is her job? What insurance might Nicky need? [similar to Alex] Morbidity: top-up health and dental and consider critical illness insurance, possibly with return of premium option Disability: portable plan with indexed benefits and option to increase coverage without underwriting; “own occ” definition? Mortality: single; any immediate need? Longevity: save for retirement (e.g., TFSA, RRSP) Idea: Consider a hybrid 3-in-1 plan with DI + CI + Life (e.g., Manulife Synergy) We’ve looked at each risk for each person based on what we know. We now turn to your …
- … questions on what we …
- … covered. Or something else. Your choice.
- You have a key role …
- … insurance literacy [read] Far too many people …
- [read] Show them. You’re a Registered Financial Planner. Too few know what an RFP can do. Too few know you. Image source: http://newnulled.com/wp-content/uploads/2014/11/zig-ziglar2.jpg