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Banking

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Data Analytics
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General Insurance
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Health Insurance
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Investment and Wealth Management
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Leadership and Professionalism
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Life Insurance
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Risk Management

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Superannuation

Synopses by Practice Area

Superannuation

Superannuation_Icon

Mini plenary: Australia’s compulsory retirement savings rate: inadequate or about right?

John Daley, David Knox

The ongoing escalation in Australia's compulsory rate of superannuation contributions to 12% from its current level of 9.5% is under challenge as never before.

In November 2018 the Grattan Institute published a report which argued that  current levels are enough to provide a comfortable retirement for most Australians.  The Productivity Commission report on Superannuation, while not addressing this question directly, proposes that an independent inquiry into the role of compulsory superannuation be held before any further increase.

This session will explore this critically important public policy issue with two leading experts arguing the case for and against a higher compulsory savings rate for Australians.

Super Plenary: Options for a Better, Integrated System of Retirement 

Anthony Asher, David Knox and Michael Rice

It is timely to consider Australia’s system towards retirement. Although Australia’s retirement income system compares well internationally, there are obvious shortcomings – the system is complex, intrusive, contains anomalies, produces perverse incentives and is sometimes unfair. These shortcomings will become even more apparent as an increasing proportion of the population and member balances move from an accumulation phase to a pension phase. There is also potential fiscal headroom to accommodate some changes, especially when a holistic approach is taken to retirement – one which considers income and expenses, the disparate Age Pension and Superannuation systems and our Aged Care and Health Care systems. The Actuaries Institute seeks to stimulate debate by presenting a range of options and identify landmark reforms which would deliver a better quality of life to Australian retirees in a way that is efficient and fair for all Australians. 

Concurrent: Benchmark Risks in Superannuation Products

Zili Zhu, Monica Chen, Bonsoo Koo, Peter Toscas

In this paper, we propose to create a standard dataset of future uncertain economic scenarios that can be used in the superannuation industry to benchmark and compare products for their risk profiles and performances under these scenarios. By using the same forecasted future uncertain scenarios, different superannuation products from different companies can be benchmarked on a level-playing field, which enhances risk disclosure standard and trust by consumers. 

Currently for disclosure requirement, risk characteristics and expected performances of investment products for superannuation are calculated based on certain economic assumptions made by the companies that design and manufacture these products. These assumptions about possible future economic scenarios can vary significantly depending on the service providers, they are often opaque and therefore it is difficult to compare the risk profiles of investment products from different companies. Not surprisingly, it is confusing for consumers who can easily lose trust in these products if they view these future economic scenarios are set up to help sell the products. To enhance trust with consumers and more importantly for easy comparison of risk characteristics and performances between the large number of superannuation products by different companies, the superannuation industry will be better served by adopting an open and transparent set of future economic scenarios as the benchmark scenarios, against which all superannuation products should be tested to measure the expected but uncertain performances of these products.

Another benefit of using such a benchmark scenario approach is to encourage both consumers and investment product providers to focus more on the large degree of uncertainty intrinsic to any superannuation investment.   

In this paper, we will use the large number of future economic scenarios generated by the SUPA stochastic model developed by CSIRO as a case study to demonstrate how uncertain future economic scenarios can be readily deployed to provide more insights on the risks associated investment strategies for longer-term superannuation investment. For the case study, we will use the future economic scenarios to project the expected superannuation asset for a person starting their working life at the age of 25 years and retiring at the age of 67 years. We then will calculate the how long their superannuation can last after they have entered retirement, and how much pension in total they can expect to receive from government during their life. The case study will focus on the 10 and 25 percentile of worst-case scenarios, rather than the median or average outcomes.

The case study will be used as demonstration to explore and compare the performances of adopting the typical investment strategies used in the superannuation industry.

Concurrent: Spend your Decennial Age: A Rule of Thumb for Retirement

John De Ravin, Estelle Liu, Paul Scully, Rein Van Rooyen, Shang Wu

In Australia, the majority of people retire with lump sum benefits from defined contribution superannuation schemes, and elect to take their benefits either in the form of Account-Based Pensions (ABPs) or lump sums.   Determining the appropriate drawdown from assets in retirement is a complicated and important problem faced by many older Australians.  That complexity and importance mean that preparation of comprehensive, independent advice covering retirement drawdown is critical for the majority who do not necessarily have the financial literacy to navigate the decisions themselves.  Advice is often expensive and therefore not a feasible option for everyone.

This paper addresses the needs of retirees who are entitled to full or part pension, and who usually do not commission comprehensive, independent advice on drawdowns, but rely on other inputs, such as the ABP minimum withdrawal rates covering pension assets in the superannuation system.

The purposes of this paper are to develop some ABP drawdown rules and to investigate how alternative drawdown rules affect pensioner welfare as determined by using a utility metric, taking into account the lifetime interactions with the Age Pension means tests for different asset balances.  We use the legislated ABP minimum drawdown rates as a starting point and explore some previously published drawdown rules. Then, using the results of dynamic programming calculations that produce optimum drawdown rates by age and asset balance, we develop new drawdown rules, including a simple rule of thumb, that yield improved total lifetime utility of consumption for retirees.

Concurrent: Enhancing the Value and Reputation of Superannuation Actuaries

Timothy Simon Jenkins, Louise Campbell and Diane Sommerville

Aim of session is to update members regarding strategies being employed by Superannuation Practice Committee (SPC) to promote the relevance of the superannuation actuary, and obtain input regarding any other areas members feel the SPC should explore.

Concurrent: Motivated Saving: The Impact of Projections on Retirement Saving Intentions

Hazel Bateman, Susan Thorp, Ben R Newell, Isabella Doberscu, George Smyrnis

The implications of current balance information for retirement provision are considerably difficult to grasp or anticipate. We study how balance and/or income projections motivate the voluntary savings intentions of superannuation fund participants over a sequence of ten choices. To this effect, we collect savings intentions from 1,615 respondents aged 25-57 years via an online experimental survey that compares four different formats for retirement account information. The formats are (i) current balance; (ii) current balance and projected retirement balance; (iii) current balance and projected retirement income; and (iv) current balance, projected retirement balance and retirement income. Regardless of information format, merely inviting plan participants to top up their super account prompts substantial increases in savings, especially among older respondents. At the first choice round, the income projection triggers marginally more voluntary saving intentions than the lump sum projection alone. However at both the first choice and over sequential choices, the combination of balance and income projections is what matters most. Furthermore, even though older respondents save at a higher level across all treatments, younger respondents are more sensitive to income balance projections than the older survey respondents.

Concurrent: Optimising the Superannuation Guarantee

Michael Rice, Nathan Bonarius

What is the ideal level of compulsory superannuation guarantee? 

The Productivity Commission have recently recommended an independent public inquiry into the role of compulsory superannuation in the broader retirement incomes system, including the net impact of compulsory super on private and public savings, public finances, distributional impacts across the population and over time, interaction between superannuation and other sources of retirement income.

This paper would bring together high level principles for the purpose of super with actuarial modelling of the impacts for individuals and Government finances to determine appropriate values for an ideal level of SG to meet different policy goals.

The paper will utilise Rice Warner's sophisticated Retirement Outcomes model developed in conjunction with ISA to provide the most comprehensive modelling of this issue to date.  Covering distributional impacts and impacts on Government tax concessions and the Age Pension within a holistic framework.

Concurrent: Safe as Houses?

Richard Lyon

This – unreviewed – paper builds on previous work that I have done in the field of house prices and their drivers. In particular, I have produced a macro price deflator and shown how this explains much of the historical movement in median house prices.

In this paper, I update my deflator and its application to house prices, as well as revising and extending the datasets that I use.

Deflated house prices demonstrate two clear potential price bubbles since 1970, one national and one limited to a few cities. On this basis, neither the 2017 peak nor the subsequent fall is particularly worthy of comment on a national basis – although, again, this is perhaps not the case for all cities.

I have extended my analysis to include apartments since 2002 – i.e., for the period covered by the ABS.

My paper and presentation form the starting point for discussion of matters including:

- How appropriate is my deflator and how reasonable are my conclusions?

- What explains the short-term movements relative to the deflator?

- What explains relativities between apartment and house price movements?

- Where are we headed now, and why?

Largely, these questions are not answered in my paper. They are for discussion at my session at the Summit.

And we also need to discuss the most important question of all: what (if any) actions are required to achieve or maintain housing affordability in Australia?

Concurrent: Simple Ideas for a Complex Retirement: A Blueprint for an Improved Retirement Income System

Anthony Saliba

For at least a decade, there have been countless articles, presentations, commissions and even a Financial System Inquiry pointing out the problems with the current state of Australia’s retirement income system. The issues relating to longevity protection, financial planning, generational inequity and fiscal policy appear to be well understood by academics and practitioners alike, yet here we in 2019 without a clear way forward. Recent consultations show that consensus is hard to achieve within the industry and flaws in ideas are easier to find than viable solutions. Also, there appears to be a default position across the industry that more innovation is required when it comes to retirement income products. This is generally thought to mean opening up the gates to a wide array of drawdown products in an attempt to provide retirees with features they do not currently have access to. However, perhaps innovation can be achieved by taking a contrarian view and constricting rather than expanding possible retirement product sets. By taking such an approach, super trustees providing drawdown solutions may successfully move from a dictating to a facilitating role, as financial literacy is improved and retirees are empowered to make well-informed decisions.

Concurrent: The Protecting your Super Package Insurance Changes - Managing the Pricing Tsunami from a Superannuation Actuary’s Perspective

Angie Mastrippolito, Darren Wickham, Phil Patterson

The Protecting Your Super package legislation will have a significant pricing impact to insurance premiums in superannuation funds.  The uncertainty in relation to the pricing impacts creates challenges for both superannuation funds and insurers in managing these impacts in a way that does not disadvantage members through overcharging or insurers' sustainability.  The session will examine the pricing and insurance benefit design impacts from the perspective on a superannuation fund, the Insurer and the Superannuation Actuary.

Investment and Wealth Management

Invest&WM_Icon 

Concurrent: Benchmark Risks in Superannuation Products

Peter Toscas, Bonsoo Koo, Monica Chen, Zili Zhu

In this paper, we propose to create a standard dataset of future uncertain economic scenarios that can be used in the superannuation industry to benchmark and compare products for their risk profiles and performances under these scenarios. By using the same forecasted future uncertain scenarios, different superannuation products from different companies can be benchmarked on a level-playing field, which enhances risk disclosure standard and trust by consumers. 

Currently for disclosure requirement, risk characteristics and expected performances of investment products for superannuation are calculated based on certain economic assumptions made by the companies that design and manufacture these products. These assumptions about possible future economic scenarios can vary significantly depending on the service providers, they are often opaque and therefore it is difficult to compare the risk profiles of investment products from different companies. Not surprisingly, it is confusing for consumers who can easily lose trust in these products if they view these future economic scenarios are set up to help sell the products. To enhance trust with consumers and more importantly for easy comparison of risk characteristics and performances between the large number of superannuation products by different companies, the superannuation industry will be better served by adopting an open and transparent set of future economic scenarios as the benchmark scenarios, against which all superannuation products should be tested to measure the expected but uncertain performances of these products.

Another benefit of using such a benchmark scenario approach is to encourage both consumers and investment product providers to focus more on the large degree of uncertainty intrinsic to any superannuation investment.   

In this paper, we will use the large number of future economic scenarios generated by the SUPA stochastic model developed by CSIRO as a case study to demonstrate how uncertain future economic scenarios can be readily deployed to provide more insights on the risks associated investment strategies for longer-term superannuation investment. For the case study, we will use the future economic scenarios to project the expected superannuation asset for a person starting their working life at the age of 25 years and retiring at the age of 67 years. We then will calculate the how long their superannuation can last after they have entered retirement, and how much pension in total they can expect to receive from government during their life. The case study will focus on the 10 and 25 percentile of worst-case scenarios, rather than the median or average outcomes.

The case study will be used as demonstration to explore and compare the performances of adopting the typical investment strategies used in the superannuation industry.

Concurrent: Creating Value in Startups

Eric Ranson

A lot of effort has gone into startups without much evidence of investible returns. This concept paper looks at restructuring the industry; to reduce type II errors and reposition it on the risk vs return graph.

Concurrent: Lifecycle investing – protection versus growth

David Carruthers

Lifecycle strategies can provide protection against sequencing risk by automatically lowering exposure to riskier assets as the member ages.  However, this protection can come at the cost of a potentially lower retirement balance.

This session will explore:

  • what is sequence risk and where is the retirement danger zone
  • the lifecycle strategies different superannuation funds have adopted and the range of retirement balances which could result
  • quantify the effects on member retirement outcomes
  • discuss potential improvements to lifecycle strategies and introduce a more radical, individual member focused approach

Concurrent: The impact of Investment Fees on Member Outcome

David Carruthers, Faro Mok, Vivian Yu

This session will discuss the impact of fees and costs, including the disclosure regime, on customer outcomes for superannuation funds. The discussion will include:

  • The importance of fees and the need for consistent fee disclosure
  • Challenges and lessons learned from the latest implementation of fee and costs disclosure (RG 97)
  • Impacts of the fee and costs on the customer outcomes

The Evolution and Disruption of Capital Markets: CAT Bonds, ‘Green’ Bonds ILS & ART – Buy & Sell side opportunities for Insurers & Asset Managers

Jon Tindall

In this presentation we look at recent developments in debt and alternative risk transfer markets globally and what opportunities exist for Australian insurers and asset managers to exploit these on both the buy and sell side. 

We look at how emerging technologies are disrupting many aspects of traditional DCM and Insurance Linked Securities (ILS) origination, underwriting and distribution and how this is impacting the costs associated with issuing securities in these markets.  Australia’s corporate bond market has always lagged compared with its peers overseas, however innovations such as ‘green’ bonds and listed corporate bond trusts are kindling new interest.

Recent regulatory developments have had both positive and negative impact on these niche capital markets and we look at how organisations are approaching issuance and how asset managers are incorporating their unique risk profiles into their broader investment portfolios.

We conclude by looking to the future and how these markets may evolve over the coming decade and what Australian participants need to do to stay relevant and cutting edge.

Data Analytics

DataAnalytics_Icon 

Concurrent: Data Scandals – Lessons for Actuaries and Risk Managers

Chris Dolman, Aaron Cutter, Gavin Pearce

We use a selection of case studies of several recent PR disasters relating to data and analytics in individual customer decision processes to explore the often-overlooked concept of a data ethics breach. Based on these real-world case studies, we provide high level risk management guidance for actuaries, data scientists and risk managers involved in the rapidly evolving world of data analytics and personalisation, who wish to address this risk in the course of their work.

Concurrent: What Happens when Big Data Meets Wellbeing? Improving the lives of New Zealand’s Children

Bridget Browne, Scott Lewis

The New Zealand government’s first “Wellbeing” budget will be announced on 30 May 2019. The concept of wellbeing currently has an unprecedented level of interest within New Zealand public sector. However the concept is not new. Public sector actuaries have been working with big data to better understand wellbeing for some time.

In April 2015, the New Zealand government asked an expert panel to examine ways to overhaul the country’s child protection system. The panel recommended a new child-centred operating model with a stronger focus on preventing harm and intervening early. One of the key building blocks is the adoption of an approach that invests in children’s holistic outcomes.

The Actuarial Services Team, within Oranga Tamariki - Ministry for Children, has partnered with Ernst & Young to develop a model of children’s wellbeing. Firstly we created a framework to define the components of wellbeing. From this we developed the Children’s Wellbeing Model to support the proposed child-centred investment approach. The model uses microsimulation techniques to follow the pathways of all children through their lives and provide insight around current and future wellbeing including service usage and costs.

This approach is made possible by New Zealand’s world-leading Integrated Data Infrastructure. It has anonymised historical data on every person in New Zealand. This includes Census, Social Development, Oranga Tamariki, Health, Education, Tax, Justice and Police data.

Conceptualising and measuring wellbeing has the potential to change the way we think about and support New Zealand’s children, offering a wide array of insights. The Children’s Wellbeing Model has been designed as a tool that the entire social sector can use and benefit from. We can map the wellbeing of all children at a population level and on different sub-populations. It can also model the potential impact of changes to policy settings on different population groups, and help ensure that investment decisions align to the government’s strategic objectives.

In this presentation we will describe the Children’s Wellbeing Model, share some wellbeing insights and show how it is able to guide and support investment in New Zealand’s vulnerable children.

Concurrent: A Data Analytics Paradigm for the Construction, Selection, and Evaluation of Mortality Models

Dilan SriDaran, Andres Villegas, Michael Sherris, Jonathan Ziveyi

Humanity has made, and continues to make, significant progress in averting and delaying death, which has severe implications for the financial sector through increased longevity costs. The main risk, however, is not increasing longevity per se, but rather the inherent uncertainty of future mortality rates, which has brought to the fore the critical importance of mortality forecasting for practicing actuaries. Consequently, numerous discrete-time mortality models have been proposed, with the most popular and commonly-referenced models in the academic literature belonging to a generalised age-period-cohort framework. These models decompose observed historical mortality rates across the dimensions of age, period, and cohort (or year-of-birth), which can then be extrapolated to forecast future outcomes. Recently, a large number of models have been proposed within this framework, many of which are over-parameterised and produce spurious forecasts, particularly over long horizons and for noisy data sets.

In this paper we exploit data analytics techniques to provide a comprehensive toolbox to construct, select, and evaluate these generalised age-period-cohort (GAPC) mortality models, which we make readily available to practitioners through open source R code (R Core Team 2018). This builds on our previous experience with the R package StMoMo (Villegas, Millossovich, and Kaishev 2018) which implements GAPC models. To devise this robust toolbox, we leverage two key statistical learning tools – cross validation and regularisation – to draw as much insight as possible from limited mortality data sets. We first propose a cross validation framework that places an emphasis on out-of-sample performance for model selection. This framework is flexible and can easily be tailored to determine the features of mortality models that are desired for practitioners’ varying applications, which may include period or cohort-based forecasting. With this, we are better able to answer questions regarding the effects of population size and structure, age, and forecasting basis and horizon on the preferred model selection. We also present a regularisation approach to construct bespoke mortality models by automatically selecting the most appropriate parametric forms to best describe and forecast particular data sets, using a trade-off between complexity and parsimony. We illustrate this using empirical data from the Human Mortality Database and simulated data sets.

Concurrent: Algorithmic Fairness: Some Practical Considerations for Actuaries

Dimitri Semenovich, Chris Dolman

In this paper we review recent work on fairness of decision making algorithms and highlight some important relationships between recent proposals from the computer science literature and traditional concepts such as actuarial fairness. We also explore some practicalities and implications of the use of fairness constructs within real world pricing systems to provide guidance for members who wish to adopt these ideas in their work.

Concurrent: Does your Occupation Affect your DI Termination Experience?

Aloysius Lim

This presentation looks into the Australian Disability Income termination experience against the FSC-ADI 2007-2011 table, with a focus on termination by occupations.

The purpose will be to help practitioners better understand the experience and make better decisions through a better understanding. Various data analytics techniques will be adopted for greater insights. Challenges of looking at experience by occupations will also be discussed.

Concurrent: Digital Innovations in Life Insurers and the pursuit of personalisation

Catherine Edgar
William White

Digitalisation and personalisation are key 'buzzwords' in the life insurance space with many other industries and financial sectors well ahead of the life insurance industry in adopting these new technologies.  

The changes that they offer has the potential to completely up-end the way insurers interact with their customers at all stages of the customer lifecycle, including marketing, sales, product and retention activities.

In this session, we discuss what digitalisation and personalisation are and how they can be utilised throughout the customer value chain for a life insurer.  Many established companies have significant hurdles to implement such change which we explore and offer some strategies to overcome them. 

We also look at different examples from around the globe from insurers that are using personalisation to differentiate in the market.  We conclude with identifying what insurers should be thinking about today to either prepare for future changes or start making them.

Concurrent: How Statisticians and Data Scientists Could Learn From Each Other

Xavier Conort

Data Scientists have been highly successful at automating modeling through Machine learning, and continue to build capabilities to extract powerful insights at an impressive pace. On the other hand, Statisticians have been attempting to manually build complex and robust models with features from Generalized Linear Models (GLMs), such as p-values, exponential distributions, link functions, offsets and mixed models. These GLMs functions are little-known by Data Scientists while Statisticians may dismiss Machine Learning tools that they find too complex, calling them “black boxes”. Are Statisticians missing something here that could present important opportunities to help them find patterns and build solutions for the increasingly larger and more complex ranges of data?

This presentation will show that Statisticians and Data Scientists can complement, and learn important practices from each other. The Xgboost package, one of the most popular open source projects, is a good example of such collaboration.

Concurrent: Insurtech – Opportunities for both Insurers and Actuaries

Blair Nicholls

In his presentation, Blair will explore the rapidly evolving Insurtech landscape and discuss the opportunities that are emerging in this space for both insurers and actuaries.  Using some real case studies, from both Australia and overseas, and leveraging his own experience as an actuary who is building an Insurtech business, Blair will share his unique perspectives of a sector that is increasingly likely to enable the future success of insurers, and other financial services organisations.

General Insurance

GInsurance_Icon

Concurrent: Data Scandals – Lessons for Actuaries and Risk Managers

Chris Dolman, Aaron Cutter, Gavin Pearce

We use a selection of case studies of several recent PR disasters relating to data and analytics in individual customer decision processes to explore the often-overlooked concept of a data ethics breach. Based on these real-world case studies, we provide high level risk management guidance for actuaries, data scientists and risk managers involved in the rapidly evolving world of data analytics and personalisation, who wish to address this risk in the course of their work.

Concurrent: IFRS17 (Insurance Accounting)

David Rush, Kieren Cummings, Grant Robinson

This session will provide an update on:

  • Expected changes to the IFRS 17 standard as a result of IASB deliberations from November 2018 to March 2019.
  • The status of APRA’s work in responding to IFRS 17 and their timelines.
  • The status of Treasury and the ATO in considering the impact of IFRS 17 on tax
  • Other issues

Concurrent: IFRS17

Francis Beens, Antony Claughton

This session will discuss the challenges and lessons learned from AASB 17 implementations within the Australian general and health insurance markets building on global insights where applicable.  We encourage active participation from the floor, with a view to gathering input to our taskforce as to what future support might be useful to our members.

The discussion will include:

  • The status of AASB 17 projects in the Australian market
  • The implications for actuarial processes
  • The challenge around data and why actuaries should take the lead on this for AASB 17 projects

Concurrent: Longitudinal outcomes for National Disability Insurance Scheme participants

Sarah Johnson

The National Disability Insurance Scheme (NDIS) was set up to allow people with disability to live “an ordinary life”: to fully realise their potential, to participate in and contribute to society, and to have a say in their own present and future – just as other members of Australian society do.

These aims are embedded in the legislation which established the Scheme, the National Disability Insurance Scheme Act 2013. The Act further indicates that the Scheme adopts an insurance-based approach, which considers the lifetime cost of participants (including early investment), and the outcomes achieved across participants’ lifetimes. Measurement of outcomes and costs is critical in understanding the success of the NDIS and is a legislative requirement.

The NDIS Outcomes Framework questionnaires have been developed to measure progress towards a common set of accepted goals for each participant, so that the results can be aggregated to provide a picture of how and where the Scheme is making a difference. In addition, a common set of goals allows benchmarking to Australians without disability and to other OECD countries. Participants are asked to respond to the outcomes framework questionnaires when they enter the Scheme and at approximately yearly intervals thereafter.

Analysis of responses at Scheme entry provide a picture of how participants are faring at “baseline”. A range of individual and external factors will impact on the experiences of participants at baseline, including the nature and severity of their disability, the extent of support they receive from family and friends, how inclusive their community is, and their general health. These factors contribute to wide variability in baseline responses amongst different cohorts of participants.

Consequently, the success of the Scheme should be judged not on baseline outcomes, but on how far participants have come since they entered the Scheme, acknowledging their different starting points. This progress can be measured by analysing longitudinal responses from the outcomes framework questionnaires.

In this presentation we discuss how statistical modelling techniques have been used to analyse longitudinal responses to the NDIS Outcomes Framework questionnaires, and summarise some key results regarding the one year longitudinal change in outcomes for people who entered the Scheme in 2016-17.

Concurrent: What Happens when Big Data Meets Wellbeing? Improving the lives of New Zealand’s Children

Bridget Browne, Scott Lewis

The New Zealand government’s first “Wellbeing” budget will be announced on 30 May 2019. The concept of wellbeing currently has an unprecedented level of interest within New Zealand public sector. However the concept is not new. Public sector actuaries have been working with big data to better understand wellbeing for some time.

In April 2015, the New Zealand government asked an expert panel to examine ways to overhaul the country’s child protection system. The panel recommended a new child-centred operating model with a stronger focus on preventing harm and intervening early. One of the key building blocks is the adoption of an approach that invests in children’s holistic outcomes.

The Actuarial Services Team, within Oranga Tamariki - Ministry for Children, has partnered with Ernst & Young to develop a model of children’s wellbeing. Firstly we created a framework to define the components of wellbeing. From this we developed the Children’s Wellbeing Model to support the proposed child-centred investment approach. The model uses microsimulation techniques to follow the pathways of all children through their lives and provide insight around current and future wellbeing including service usage and costs.

This approach is made possible by New Zealand’s world-leading Integrated Data Infrastructure. It has anonymised historical data on every person in New Zealand. This includes Census, Social Development, Oranga Tamariki, Health, Education, Tax, Justice and Police data.

Conceptualising and measuring wellbeing has the potential to change the way we think about and support New Zealand’s children, offering a wide array of insights. The Children’s Wellbeing Model has been designed as a tool that the entire social sector can use and benefit from. We can map the wellbeing of all children at a population level and on different sub-populations. It can also model the potential impact of changes to policy settings on different population groups, and help ensure that investment decisions align to the government’s strategic objectives.

In this presentation we will describe the Children’s Wellbeing Model, share some wellbeing insights and show how it is able to guide and support investment in New Zealand’s vulnerable children.

Concurrent: ACTUARIES MANAGING CONDUCT RISK

Mathew Ayoub, Kaise Stephan, Alan Merten

The regulatory landscape demands that organisations have a sound understanding of their risks and frameworks to adequately manage these risks. The Insurance Act and APRA have expectations of CROs and risk management related requirements for Actuaries to include in their FCR and ICAAP. APRA also released a ‘Risk Culture’ information paper in October 2016, and highlighted risk management deficiencies in their Prudential Inquiry into the Commonwealth Bank of Australia’s frameworks and practices in relation to governance, culture and accountability. General community expectations echo these expectations, and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard a number of instances of poor customer outcomes.

This paper uses a survey to glean the maturity level of customer-centred design, and compare and contrast different conduct risk management practices, within the Australian insurance industry. The focus is on customer outcomes and how the risk function balances this with its mandate of assisting the business to achieve its goals within the Board approved risk appetite.

Concurrent: Insurtech – Opportunities for both Insurers and Actuaries

Blair Nicholls

In his presentation, Blair will explore the rapidly evolving Insurtech landscape and discuss the opportunities that are emerging in this space for both insurers and actuaries.  Using some real case studies, from both Australia and overseas, and leveraging his own experience as an actuary who is building an Insurtech business, Blair will share his unique perspectives of a sector that is increasingly likely to enable the future success of insurers, and other financial services organisations.

Concurrent: The Role of the Actuary in Disability and Health

John Walsh

John Walsh is one of Australia’s leading actuaries in the disability space, having worked for over 20 years in the areas of social policy and funding across injury schemes, health and disability.  In his presentation, John will seek to reflect on his own personal experiences of working in disability and health, including most recently with the NDIS, and explore the potential opportunities for actuaries to play a key role in helping shape and support future policy development and execution in these important areas.

Concurrent: How Emerging Technologies and Automation can help Actuarial Teams do more with Less

Abhijeet Agarwal

As insurance companies continually restructure, teams are being asked to do more with less. At the same time, actuarial teams are being asked to delivery more actionable outcomes in an efficient manner, and are sometimes having to compete against internal data science teams that are better versed in new technologies and approaches. In this presentation, Abhijeet will explore some new lenses through which actuaries may need to view their working approaches.

In particular, Abhijeet will look at:

1.         Emerging technologies and how teams are leveraging these to do more

2.         Delivering decision engines, not analysis

3.         Process, data and model automation

4.         Examples of collaboration methodologies that get to actionable answers more quickly

Risk Management

RiskManagement_Icon 

Concurrent: Data Scandals – Lessons for Actuaries and Risk Managers

Chris Dolman, Aaron Cutter, Gavin Pearce

We use a selection of case studies of several recent PR disasters relating to data and analytics in individual customer decision processes to explore the often-overlooked concept of a data ethics breach. Based on these real-world case studies, we provide high level risk management guidance for actuaries, data scientists and risk managers involved in the rapidly evolving world of data analytics and personalisation, who wish to address this risk in the course of their work.

Concurrent: The Tech Revolution and its Impact on the Insurance and Banking Risk Landscape

Elizabeth Baker, Simon Lim, Susan Looi

Technology including the access to data, is having far very reaching impacts on the Life, General Insurance and Banking industries in which we work and the way in which we do business.

Consumers of our service have more access to information and more quickly than ever before They have increasing expectations of their financial institutions. The tech revolution is changing some traditional insurance exposures and creating new emerging risks.

More than ever, actuaries and risk managers need to consider and manage emerging risks from technology

The presentation will cover, with relevant case study examples from across the practice areas, how is the Tech Revolution is

  • Affecting traditional risk exposures that we insure
  • Changing the way that we do things and introducing new risks to manage
  • Making data available and raising the bar for consumers on fairness and transparency in insurance of underwriting and claims
  • Challenging traditional ways or pricing and pooling of risks
  • Changing the insured risk landscape

We will explore the actions we can take to identify and manage these risks.

Life Insurance

LifeInsurance_Icon 

Concurrent: Life Data analytics - Small Acts Maketh the Analysis

Life Data Analytics Working Group

A concurrent at which we could have 3 parts:

  • Summary of the discussions we have had with industry practitioners about data analytics in life insurance;
  • A discussion about techniques that are more applicable to life insurance, though not specific for life;
  • An example of life analytics in practice.

I left the working group with the task of each coming up with at least 1 topic that could be discussed.  We are also going to touch base with the consultancies and academics to see if they have any appropriate life topics.

Concurrent: Life Data analytics

Nick Kulikov

A concurrent at which we could have 3 parts:

  • Summary of the discussions we have had with industry practitioners about data analytics in life insurance;
  • A discussion about techniques that are more applicable to life insurance, though not specific for life;
  • An example of life analytics in practice.

I left the working group with the task of each coming up with at least 1 topic that could be discussed.  We are also going to touch base with the consultancies and academics to see if they have any appropriate life topics.

Concurrent: IFRS17 (Insurance Accounting)

Ian Laughlin, David Rush

This session will provide an update on:

  • Expected changes to the IFRS 17 standard as a result of IASB deliberations from November 2018 to March 2019.
  • The status of APRA’s work in responding to IFRS 17 and their timelines.
  • The status of Treasury and the ATO in considering the impact of IFRS 17 on tax
  • Other issues

Concurrent: Managing and Pricing Existing Protection Products in a Changing World

Kirsty Hogan, Rachel Keaney

It is no secret that we have challenges in our market, both in terms of environment we are operating in, and also with some of the features of our products. But the reality is that the strong underlying need for life insurance protection is as strong as ever. And as actuaries, we should be in a position to provide a leading role.

The presentation attempts to find a pragmatic way forward for managing our existing products in a way that balances the interests of all stakeholders involved.

Concurrent: Genetic Testing: Anti-selection Risk and the Implications for Insurers

Shane Burdack, Johan Rampen

  • The cost of full genome sequencing has fallen exponentially in recent years, so that genetic testing has started to become an integral part of today's clinical practice.
  • Cheaper and faster genome analysis tools have also led to the robust growth of a genetic testing direct-to-consumer market (DTC), allowing individuals access to their genetic profile and obtaining a personal risk assessment for individual traits and diseases.
  • Insurers are supportive of the many advantages genetic testing has to offer in the prevention, diagnosis and treatment of disease. However, insurers are concerned that individuals may not share reliable and risk-relevant information from genetic testing. 

This session will highlight the recent advances in the field of genomics and look at the different regulatory solutions and emerging legal approaches on the use of genetic information for insurance purposes. Furthermore, the session will investigate the extent of asymmetrical information from genetic testing results, present survey results on trends in genetic testing uptake and the effects on health and insurance purchasing behavior across 5 global markets and will look at the research and modeling undertaken to illustrate the potential anti-selection impact from genetic testing on the life and health insurance industry.

Further reading

Concurrent: Getting to Grips with the Lifecycle of Group TPD Claims

Kudzai Gumbie, Mark Smith

Six years later, has the industry fully come to grips with the nature of Group TPD claims and experience or is volatility and uncertainty increasing?  This paper will give a walkthrough of the lifecycle of a TPD claim from the event to closure, focusing particularly on the issues and resulting impacts of extreme tail reporting experience (very long delayed claims) and TPD “reopens” from an actuarial and claims assessment perspective.

Concurrent: Global innovation in Life Insurance

Angat Sandhu

The topic was around Insurtech but focused on life insurance. The reason this would be of interest would be the following:

  1. Most of the industry is interested in the evolution and impact of technology on the business models
  2. Globally, most Insurtechs have focused on the general insurance sector. Life had been ignored but we are starting to see some interest
  3. The objective of this session would be:

    A. Provide an update on what is happening in life insurance Insurtechs globally, including discussing a few innovative examples
    B. Discuss how the incumbent life insurers globally are responding to this. Where are they focusing their efforts and why?
    C. Provide some perspective on local start-ups
    D. Discuss opportunities for local life insurers

Concurrent: IFRS17 (Life)

Briallen Cummings, Ian Laughlin

This session will discuss the challenges and lessons learned from IFRS 17 implementations within the Australian Life Insurance market building on global insights where applicable.  We encourage active participation from the floor, with a view to gathering input to our taskforce as to what future support might be useful to our members.

The discussion will include:

  • The status of AASB 17 projects in the Australian market
  • The various options being considered for CSM calculations and the implications for actuarial processes
  • The challenge around data and why actuaries should take the lead on this for AASB 17 projects

Concurrent: Mental Health and its impact on Group Life Insurance

Richard Land, Didier How Yin Fat

Mental Health and its impact on Group Life Insurance

The 2017 Actuaries Green Paper on Mental Health highlighted a pressing problem from various angles including product definitions, claims management, subjectivity in diagnosis and lack of appropriate data.  Mental illness is now a leading cause of long term incapacity in the developed world and as community awareness gathers momentum, so does mental health’s incidence.

In Group Insurance, mental illness as a cause of claim has relatively poor termination rates for disability income products and it is increasing in prevalence in several funds. Insurers and trustees are facing real challenges to the sustainability and affordability of the disability products.

In line with the theme of this year’s Actuaries Summit, it is now “Time to Act” and this presentation expands on what more can be done in the group insurance space to improve insurance outcomes for members with mental health conditions. This presentation explores new ways around prevention by enhancing engagement with employer groups and developing techniques to identify members susceptible to claim. It then considers the efficacy and suitability of new product definitions as well as looking into the claims management process, providing new ideas on how to improve the overall claimant experience.

This presentation further provides a practical lens to the new recommendations by digging deeper into 3 concrete and different Mental Health Income Protection claims examples from a leading life insurance provider, outlining the whole claiming process and stimulating discussion around whether the outcomes in each case could have been any different.

Concurrent: Navigating Life Underwriting Data

Elizabeth Baker, Adrian Mak, Colin Yellowlees, Kajal Pandya, David Ticehurst, Lucy Jing, Catherine Robertson-Hodder

Relevant data is essential for the appropriate assessment of insurance risk.

The Parliamentary Inquiry report (March 2018) recommended that statistical and actuarial evidence relied upon to reject an application be made available on request.

Furthermore, the Life Code of Practice requires that all life insurers attest that they conform with the Disability Discrimination Act 1992 (Cth) (DDA). The AHRC has guidelines issued in 2016 for insurers setting out what type of actuarial or statistical data is reasonable for insurers to rely upon.

In light of the scrutiny on the life insurance industry in recent years, insurers need to be more transparent than ever to the community in explaining their products, pricing and underwriting approaches and decisions.

Areas of discussion in the presentation will include, with case studies:

  • The current landscape of obligations, laws and guidelines that life insurers operate in
  • How life insurers are currently classifying, analysing and collecting data
  • What individual life insurance products in Australia cover and exclude
  • Useful sources of insurance risk data
  • Next steps for life insurance actuaries

Health Insurance

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Concurrent: IFRS17 (Insurance Accounting)

Ian Laughlin, David Rush

This session will provide an update on:

  • Expected changes to the IFRS 17 standard as a result of IASB deliberations from November 2018 to March 2019.
  • The status of APRA’s work in responding to IFRS 17 and their timelines.
  • The status of Treasury and the ATO in considering the impact of IFRS 17 on tax
  • Other issues

Concurrent: The Role of the Actuary in Disability and Health

John Walsh

John Walsh is one of Australia’s leading actuaries in the disability space, having worked for over 20 years in the areas of social policy and funding across injury schemes, health and disability.  In his presentation, John will seek to reflect on his own personal experiences of working in disability and health, including most recently with the NDIS, and explore the potential opportunities for actuaries to play a key role in helping shape and support future policy development and execution in these important areas.

Concurrent: IFRS17

Francis Beens, Antony Claughton

This session will discuss the challenges and lessons learned from AASB 17 implementations within the Australian general and health insurance markets building on global insights where applicable.  We encourage active participation from the floor, with a view to gathering input to our taskforce as to what future support might be useful to our members.

The discussion will include:

  • The status of AASB 17 projects in the Australian market
  • The implications for actuarial processes
  • The challenge around data and why actuaries should take the lead on this for AASB 17 projects

Concurrent: Longitudinal outcomes for National Disability Insurance Scheme participants

Sarah Johnson

The National Disability Insurance Scheme (NDIS) was set up to allow people with disability to live “an ordinary life”: to fully realise their potential, to participate in and contribute to society, and to have a say in their own present and future – just as other members of Australian society do.

These aims are embedded in the legislation which established the Scheme, the National Disability Insurance Scheme Act 2013. The Act further indicates that the Scheme adopts an insurance-based approach, which considers the lifetime cost of participants (including early investment), and the outcomes achieved across participants’ lifetimes. Measurement of outcomes and costs is critical in understanding the success of the NDIS and is a legislative requirement.

The NDIS Outcomes Framework questionnaires have been developed to measure progress towards a common set of accepted goals for each participant, so that the results can be aggregated to provide a picture of how and where the Scheme is making a difference. In addition, a common set of goals allows benchmarking to Australians without disability and to other OECD countries. Participants are asked to respond to the outcomes framework questionnaires when they enter the Scheme and at approximately yearly intervals thereafter.

Analysis of responses at Scheme entry provide a picture of how participants are faring at “baseline”. A range of individual and external factors will impact on the experiences of participants at baseline, including the nature and severity of their disability, the extent of support they receive from family and friends, how inclusive their community is, and their general health. These factors contribute to wide variability in baseline responses amongst different cohorts of participants.

Consequently, the success of the Scheme should be judged not on baseline outcomes, but on how far participants have come since they entered the Scheme, acknowledging their different starting points. This progress can be measured by analysing longitudinal responses from the outcomes framework questionnaires.

In this presentation we discuss how statistical modelling techniques have been used to analyse longitudinal responses to the NDIS Outcomes Framework questionnaires, and summarise some key results regarding the one year longitudinal change in outcomes for people who entered the Scheme in 2016-17.

Concurrent: What Happens when Big Data Meets Wellbeing? Improving the lives of New Zealand’s Children

Bridget Browne, Scott Lewis

The New Zealand government’s first “Wellbeing” budget will be announced on 30 May 2019. The concept of wellbeing currently has an unprecedented level of interest within New Zealand public sector. However the concept is not new. Public sector actuaries have been working with big data to better understand wellbeing for some time.

In April 2015, the New Zealand government asked an expert panel to examine ways to overhaul the country’s child protection system. The panel recommended a new child-centred operating model with a stronger focus on preventing harm and intervening early. One of the key building blocks is the adoption of an approach that invests in children’s holistic outcomes.

The Actuarial Services Team, within Oranga Tamariki - Ministry for Children, has partnered with Ernst & Young to develop a model of children’s wellbeing. Firstly we created a framework to define the components of wellbeing. From this we developed the Children’s Wellbeing Model to support the proposed child-centred investment approach. The model uses microsimulation techniques to follow the pathways of all children through their lives and provide insight around current and future wellbeing including service usage and costs.

This approach is made possible by New Zealand’s world-leading Integrated Data Infrastructure. It has anonymised historical data on every person in New Zealand. This includes Census, Social Development, Oranga Tamariki, Health, Education, Tax, Justice and Police data.

Conceptualising and measuring wellbeing has the potential to change the way we think about and support New Zealand’s children, offering a wide array of insights. The Children’s Wellbeing Model has been designed as a tool that the entire social sector can use and benefit from. We can map the wellbeing of all children at a population level and on different sub-populations. It can also model the potential impact of changes to policy settings on different population groups, and help ensure that investment decisions align to the government’s strategic objectives.

In this presentation we will describe the Children’s Wellbeing Model, share some wellbeing insights and show how it is able to guide and support investment in New Zealand’s vulnerable children.

Concurrent: How to Make Private Health Insurance Healthier: Actuaries Institute Green Paper

Bevan Damm and Matthew Crane

The healthcare system in Australia is complex. It involves many funders and healthcare providers with competing interests, both from the public and private sectors. However, despite its complexity, the healthcare system in Australia is one of the best in the world and, for a long time, private health insurance has been a part of that system. So, without reducing or expanding the role of PHI in the healthcare system more broadly, how can the community get more from private health insurance?

In this Green Paper, prepared for the Actuaries Institute by EY, industry and stakeholder consultation identified four key areas needing to be called out for change, being:

  • Potential patients should be given a genuine informed choice about their treatment by improving access to the right information, providing patients with an independent advisor on their options (a ‘care coordinator’) and enhancing informed financial consent rules.
  • Insurers who reduce unnecessary claims should be fairly rewarded by changing the industry’s risk sharing mechanism.
  • Inefficiencies in the supply side of private healthcare services should be targeted through a combination of further government reform and more sophisticated contracting between insurers, specialists and providers.
  • All stakeholders should work to improve the health of people with insurance by, for example, providing additional benefits/discounts for healthier people, increasing the rebates, levies and surcharges that incentivise people to take out insurance, and providing health management services to insured people.  

We will take you through the process and into more of the detail of the issues and options.

Concurrent: Health, Defence and Immigration: The Impact of Health Coverage Arrangements for Military, Overseas Visitors and Students on Private Health Insurance

Andrew Gale

The Australian Government provides or mandates compulsory private health cover for current and certain former military service personnel, temporary residents and foreign students. This paper examines the historical and current impact of these arrangements on the resident private health insurance market which is crucial to understanding changes in private health insurance demographics, claims costs and premiums.

Concurrent: Measuring Insurance Risk in PHI – Principles for the Capital Standards Review

Nick Stolk, Jamie Reid

The Institute’s PHI Capital Standards Working Group will share the results of their work in developing principles for assessing insurance risk and insurance concentration risk as part of APRA’s consultation on the Private Health Insurance Capital Standards. The presentation will reflect on historical adverse events in Australia’s PHI market, as well as, lessons learnt from the regulatory treatment of health insurance risk in markets overseas.

Concurrent: The Impact of Innovation on Healthcare – A Tale of Three Countries (Australia, Singapore and People’s Republic of China)

Grace Li, Farheena Ahmad, Dr Raymond Yeow

In recent years, we’ve advanced from discussions on the potential of ‘big data’ to practical applications of ‘artificial intelligence’. Whilst the People’s Republic of China is a developing nation according to the World Trade Organisation, it has made significant progress in its development and use of health related technological innovations in the last few years which has approached and in certain circumstances leap-frogged some OECD countries.

Past comparisons of healthcare systems have often used the UK, Europe and USA as key comparators. In this discussion, we will focus on Asia’s (Singapore and PRC) progress compared with Australia – what learnings can we adopt from one another?

This presentation will:

  • Analyse the evolution of the healthcare landscape (across public and private systems) over time in the three countries - including changes in population healthcare outcomes.
  • Explore the impact of barriers to innovation.
  • Explore recent innovations in the three countries, assessing the impact across key domains including patient outcomes, accessibility, affordability and privacy.

Concurrent: The True Value of Private Health Insurance for Customers

Adam Stolz, Hadyn Bernau

The focus on customer and customer value has never been more important for financial services with the recent Royal Commission, and specifically for Private Health Insurance given current issues leading into a potential Productivity Commission review and 2% price cap.

In this context, the paper will promote discussion on what is the true value of private health insurance for customers.  The paper will refer to a variety of different measures of customer value, with each providing some information but not the full picture eg. Customer perceived value, Participation rate, Premiums less Claims, Sticks and Carrots value, Health outcomes and experience.

The paper will then propose a new approach to measuring the value of private health insurance for customers taking into account a number of identified sources of value, using available information. 

The True Value of Private Health Insurance for Customers

This new approach will be used to assess the value of Private Health Insurance for a range of different types of customers eg. by age.

If this assessment finds that value for some customers is low, is it time to act?  And if so, what could be some of the potential solutions to create better outcomes?

Leadership and Professionalism

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Concurrent: Actuary Reinvented / Educating actuaries for the future

A panel discussion with members of the Diversity and Inclusion Working Group and the Institute’s Actuarial education team.

  • What does it mean to be an actuary in this fast-changing world;
  • What are the biggest challenges facing future actuaries;
  • Why is diversity of thought and background important in this context;
  • What skill sets are necessary to future-proof the profession;
  • How can education assist and how do the Institute’s education changes address this;
  • What can you do as an employer/manager to support your students in their development?

Concurrent: Greed, Rationalisations and Rent Seeking: Too Tempting to Ignore

Anthony Asher

Greed is condemned as a source of corruption and excessive risk taking, especially in the finance sector. It is socially destructive when it leads to crimes or theft and violence, and economically destructive when it leads to overcharging or creates externalities that burden others. Religious, legal and economic institutions – such as ethical codes, laws against exploitation, and competitive markets – have developed to constrain greed’s development and ameliorate its consequences, but rent seeking and regulatory capture on the one hand and complacency on the other create ongoing risks of corruption. Those acting out greed, whether or not they were instrumental in creating corruption, are likely to rationalise their personal or group benefits and resist efforts at institutional reform. Research and policy reform can be misled by such efforts, particularly when cloaked in plausible rationalisations that are strongly argued by vested interests. This article explores the causes and nature of greed, and identifies some of the rationalizations by which is defended. It then considers the parallels and different functions of the institutions that can stand as bulwarks against greed.

Concurrent: Building a Champion Team– Introducing Cohesion Analytics

Douglas Isles

Introducing cohesion analytics to demonstrate a critical element in team success.

Research from business and sport shows stable teams produce better outcomes.  Rather than focussing on individual skill and experience, more attention needs to be given to how teams are built. Purity of shared experience is especially important and should be measured alongside deeper analysis of staffing data. External experience tends to be over-valued, while team cohesion is overlooked. Cohesion’s benefits are particularly apparent under duress, which is when teams need to perform at their best.  Understanding these dynamics are critical for building better teams, or for appraising potential business partners, or investments. Talk will include some specific thoughts on the implications in investment management as my area of practice.

Concurrent: Avoiding Poor Ethical Decisions: What Can We Learn from Recent Failures?

Stuart Turner

The quality of ethical decision-making in our major institutions is being increasingly scrutinized, and in many cases has been found wanting.

We are awash with reports from regulators, analysis by independent reviewers, Royal Commission findings, and academic studies that all seek to understand how these situations arise. It is rarely a case of “a few bad apples” or deliberate malfeasance. Instead, the contributors to poor ethical decision-making are often matters of culture, context and leadership, which can lead to what academics have called “ethical blindness”.

Using the recent studies of institutional behaviour, in conjunction with some basic ethics theory, this presentation will:

  • Examine how poor ethical decisions can arise, even in workplaces or teams that would never consider themselves capable of being “unethical”.
  • Highlight the warning signs that might suggest our workplace is at risk.
  • Consider ethical tools available to us to help navigate difficult decisions.
  • Discuss how our Code of Conduct can support the promotion of better ethical decision-making.

This understanding of ethical conduct and tools enables us, as professionals and leaders, to take action to better identify and manage ethical risks in our organisations.

Keynote and Plenary Speakers