Climate Change: Transition and Liability Risk Scenario Analyses for General Insurers

Sharanjit Paddam, Stephanie Wong, James Yap

The landscape of general insurance is changing, driven not just by the physical impacts of climate change, but also by stakeholders such as regulators and investors concerned about climate change, and economic and technological change.

Such factors include transition to renewables within the energy sector, legal action against fossil fuel companies for causing climate change, and legal action against directors and trustees who fail to disclose and manage climate risks.

This paper considers various scenarios for how these additional drivers may play out in the future, the implications for general insurance, and aims to provide insight into the actions Actuaries could undertake in response to these drivers.

How to Proxy the Unmodellable: Analysing Granular Insurance Claims Data in the Presence of Unobservable or Complex Drivers

Alan Xian, Benjamin Avanzi, Greg Taylor, Bernard Wong

The estimation of claim and premium liabilities is a key component of an actuary’s role and plays a vital part of any insurance company’s operations. In practice, such calculations are complicated by the stochastic nature of the claims process as well as the impracticality of capturing all relevant and material drivers of the observed claims data. In the past, computational limitations have promoted the prevalence of simplified (but possibly sub-optimal) aggregate methodologies. However, in light of modern advances in processing power, it is viable to increase the granularity at which we analyse insurance datasets so that potentially useful information is not discarded. By utilising more granular and detailed data (that is usually readily available to insurers), model predictions may become more accurate and precise.

Unfortunately, detailed analysis of large insurance data sets in this manner poses some unique challenges. Firstly, there is no standard framework to which practitioners can refer and it can be challenging to tractably integrate all modelled components into one comprehensive model. Secondly, analysis at greater granularity or level of detail requires more intense levels of scrutiny as complex trends and drivers that were previously masked by aggregation and discretisation assumptions may emerge. This is particularly an issue with claim drivers that are either unobservable to the modeller or very difficult/expensive to model. Finally, computation times are a material concern when processing such large volumes of data as model outputs need to be obtained in reasonable time-frames.

Our proposed model overcomes the above problems using a Markov-modulated non-homogeneous Poisson process framework. The approach implements a flexible exposure measure to explicitly allow for known/modelled claim drivers while the hidden component of the Hidden Markov model captures the impact of unobservable or practicably non-modellable information. Computational developments are made to drastically reduce calibration times. Theoretical findings are illustrated and validated in an empirical case study using Australian general insurance data in order to highlight the benefits of the proposed approach.

Claims Triage

Andrew Currie, Dannie Zarate, Ben Saunders

WorkCover Queensland’s (WCQ) approach to return to work has been consistent for 15 years.

Currently WCQ doesn’t use a standardised approach to assessing the risk level of a statutory claim. This may result in over-servicing of less complex claims and underservicing of more complex claims.

At times this may also result in a less than ideal customer experience and less favourable return to work outcomes, including longer durations and potentially avoidable common law action.

A project, with the assistance of Monash University, is underway to deliver a solution that systematically and logically identifies claims interventions that could achieve the right outcomes for customers and enable WorkCover to employ efforts and resources more effectively and efficiently.

The project has commenced a control group pilot which has three key stages:

• Triage
• Triage and return to work factor screening
• Triage, return to work factor screening and intervention.

Ultimately the project aims to:

• Provide a customer centered claims management model
• Support injured workers who are at risk of poor return to work outcomes
• Identify biopsychosocial factors that may influence outcomes
• Ensure early claim interventions that will achieve sustainable outcomes.

This presentation will describe the background to WCQ’s need to review its approach to claims identification and interventions.

It will outline the predictive models developed to enable initial claims triage, the approach to implementing and reporting these models, and ultimately measuring and determining the success of the project.

What are your models worth? The economic value of risk cost models

Chris Dolman, Dimitri Semenovich

With innovations in machine learning and computational statistics, many new modeling techniques are being introduced into premium rating. To effectively carry out model comparison and selection in this regime it is important to develop informative metrics to assess predictive power of a given model with respect to the insurance outcome.

Common diagnostics include decile calibration plots, double lift plots, Lorentz curves and the Gini coefficient, however the relationship between these and the economic value of the models is not well known. In this paper we establish a precise connection between the above mentioned diagnostics and the economic value as well as introduce several new metrics that can be used for model comparison. We also remind of the transformations required to effectively apply standard machine learning algorithm implementations to problems with non-uniform per observation exposure.

Whilst the family of metrics related to the Gini coefficient necessitates strong assumptions regarding price elasticity of demand, we introduce several additional non-parametric estimators that provide reliable unbiased estimates of in-market performance of new models without explicitly relying on A/B testing. In doing so we clarify the connection between insurance pricing, so called uplift modeling and the reinforcement learning literature.

The Missing link: squeezing extra performance out of predictive models

Hugh Miller, Tom Moulder

There are a variety of contexts where maximising the performance of a predictive model offers a competitive advantage; a slightly more powerful pricing model or marketing model will add incremental profit to an insurer. The two most common ways are the use of extra variables (such as merging on new data) and the expansion of the model complexity (such as ensemble modelling). We propose a third option that is less common; modifying the ‘link’ function of a model, which converts the model from a linear predictor space to the target function range. Common link functions such as the exponential or logit links are natural in me circumstances, but we argue that there are cases where a custom link function produces superior results. This is particularly true in situations with a high number of dampening interaction effects in the model. We explore this topic through a mixture of theoretical and numerical work.

Model Explainability

Ian Hansel

Machine learning models have been getting more accurate, but also more complex over the past few years. However in many settings actuaries are tethered to Generalised Linear Models because they are easy (relatively!) to explain. Moreover developments in data ethics and governance are increasing the pressure on those working with data to explain their models, and to ensure that discrimination or other unwanted outcomes are avoided. In this talk, Ian will outline some techniques to understand what aspects of the data are driving a prediction from a model and explain why it is a crucial part of the model evaluation toolkit.

The AI GI Actuary

Jacky Poon

There has been much talk of “Artificial Intelligence” and its potential to disrupt many professions and industries, including actuaries. But what is it? “AI” typically refers to models based on deep learning, gradient boosting or regularised, generalised linear modelling – statistical models not too dissimilar to those GI actuaries are familiar with.

As GI actuaries potentially advising management on the financial impacts of AI-based initiatives, it is key to understand the capabilities and limitations of these approaches.

In this presentation, we will review likely applications of AI across a number of functions, including actuarial functions, within a general insurance organisation – in pricing, reserving, claims management, sales and underwriting.

We will discuss how those “AI” models may be structured at a high level, in the context of the aforementioned machine learning techniques, to give the desired outcomes.

Finally, we will also explore the challenges and risks from adopting AI-based approaches, ranging from unavailability of data to sophisticated adversarial attacks, and strategies for dealing with these issues.

Making yourself useful. Business tips for actuaries from a cultural researcher. 

Willem Paling

Actuaries are typically very clever people with a very narrow remit. They must do more.

Over the past decade, marketers have both celebrated and lamented the shift from “mad men to math men” as the perceived balance of value shifts from pure creativity to fine-tuned algorithmic digital targeting and media mix modelling. In digital product development, and customer experience similar excitement surrounds, the realised and anticipated value of increasingly accessible AI and machine learning to anticipate customer needs and to deliver (and extract) more value.

Being embedded at the core of big customer service organisations like banks and insurers, actuaries should be well place to be part of this shift. Is it happening enough?

This talk will explore the application of mathematics and statistical methods to marketing, and customer experience at IAG, and what is required to work effectively, moving from the long standing domains of risk, pricing, reserving and capital modelling to marketing and customer experience.

Marketing are from Mars, Actuarial are from Venus: How Actuarial and Marketing teams can Work Together

Ashish Ahluwalia, Luke Cassar

Consumers are becoming increasingly selective about the messages they receive about products.  This has driven the need for more personalized marketing, where consumers are marketed with a tailored message based on their demographics and psychographics.  This has led to the rise of data-driven marketing, where increasing amounts of data gathered about the consumer is being used to attract new buyers and retain existing buyers.  This is the case across a range of industries, particularly insurance.

Actuaries working in general insurance produce a lot of detailed information that helps insurers understand customer risk, competitive position and customer behaviour.  Much of this information informs product and pricing decisions. However, in our observation, the outputs of this work are under-utilised when implementing marketing and customer experience strategies. There exists a significant opportunity to increase marketing effectiveness through greater collaboration between actuaries and marketing/customer functions.

This paper explores opportunities for actuaries to work with their marketing/customer functions.  We will draw on interviews with leaders and members of marketing and actuarial teams within insurance companies.  We will illustrate current practice and describe the extent of which actuarial insight is used currently, and what the opportunities are for greater actuarial collaboration with marketing teams. 

A review of current marketing practices will lead us to propose a “best practice” for actuarial and marketing collaboration.  We also put forward a “how-to” guide on collaboration between actuarial and marketing, identifying challenges along the journey and proposing methods to overcome such challenges.

This paper should be seen as a “call to action” for actuaries working in insurance companies to foster greater collaboration with the marketing function.  Increased collaboration should see optimum outcome for marketing decisions and greater understanding of the goals of each team.

Diversity and Inclusion Working Group – Gender Diversity – Closing the Gap

Lesley Traverso

The DIWG consists of nine representatives who are keen to make a real and tangible difference to our Institute in understanding and promoting diversity and inclusion. We have agreed that we think of diversity as ‘diversity of thought’, i.e. it is the way that an individual ‘is’ in the world and the upbringing and experiences that they have had that shape the way that they think and this is what brings richness and interest to teams in a professional environment.

D&I is a broad and complex topic, and our focus has been to raise awareness and promote ways we can all make a difference. 

Some examples of our initiatives to date include:

• Encouraging diverse membership of Institute practice committees and working groups
• Contributions towards the highly successful ‘schools program’
• Regular podcasts and interviews on a range of topics
• Regular articles and dialogues in Actuaries Digital

In a recent paper published in Actuaries Digital here Leonie Tickle and Adam Butt provided some data that shows less than 50% of students entering two Universities in Australia are women.  Additional data from the UK has showed evidence of females leaving the profession much earlier than men, and the majority believing it is more difficult to rise up the ranks as a female.

We are also aware of other activities across the Institute such as Young Actuaries Program, which is building a supportive network and so tackling how we can promote inclusion.

There is a lot of work that can be done to promote the actuarial profession as a positive place for all people, regardless of background and how they present to the world, where they can develop long term, rewarding careers.  Additionally, once part of the profession, everyone has equal opportunity to stay in it to achieve their goals.

The DIWG will share the background to current initiatives and host a mini ‘workshop’ to hear your experiences and how we can make a difference. How can we become a truly diverse and inclusive institute and promote leading practices? We want to make sure our efforts are focused on areas where we can make a difference.

If you are interested in contributing to the Working Group (we will welcome new members!), either by volunteering for a particular initiative, or offering your ideas and thoughts, come along to this session and be prepared for lively discussion!

Marked for Life? Should People who have Experienced a ‘Rough Patch’ Pay the Price Forever?

Sue Freeman and Professor Nick Glozier

The new Code of Practice for General Insurance* will include best practice principles and guidance material specific to mental health conditions. The aim is to encourage continuous progress by the industry in expanding access to general insurance for consumers with mental health conditions. 

Blanket exclusion of mental health conditions from products such as travel, consumer credit and accident & disability insurance not only risks falling foul of anti-discrimination laws, but will contravene these new principles.  The Code expects better risk-based assessment, better use of data and greater transparency and disclosure. 

In our presentation we explore the issues and look at what insurers will need to do to meet these expectations.

It must be recognised that people with a past history of a mental health condition are a very large and diverse group – one in two Australians will have a mental health condition at some time in their lives – and there is considerable variation on the impact the condition has on their lives, and their prognosis, not only between different diagnoses but also over time.

We suggest that insurers perceive this as a challenging and difficult area because:

• Mental health conditions are poorly understood
• The anti-discrimination legislation is poorly understood
• The available data is poorly understood and
• The assessment and classification of mental health conditions is poorly understood.

We unpack each of these areas, and conclude that it’s not so difficult after all!

We suggest that the risks associated with mental health conditions can be effectively assessed and products can be appropriately priced to cover these risks.  

To meet their obligations under the Code of Practice and the law, insurers need to rise to the challenge and develop evidence-based product, pricing and claims management approaches that work for people with mental health conditions.

*The new GI Code is to be issued by November 2018. The ICA’s Final Report (June 2018) outlines the proposed approach following stakeholder consultation. The focus is on better meeting the expectations of consumers and the community.

New Zealand’s Children’s Lifetime Wellbeing Model

Daniel Marlay, Abigail Marwick

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 introducing a new child-centered 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. This uses life course modelling and evidence of what works to identify the best way of targeting early interventions, so all children receive the care and support they need.

We created a common framework to understand cross agency combined implications and attribution of effect to drive accountability, response and investment. Following this, we developed the model to support the proposed investment approach, utilising microsimulation techniques to follow the pathways of all children through their lives and provide insight around wellbeing and vulnerability both in terms of service usage and costs.

The child-centered methodology supported by the multi-agency data available in New Zealand’s world-leading Integrated Data Infrastructure aimed at increasing understanding of some of the society's harshest problems including family violence, child and young person criminal offending, and mental health issues. Our work highlighted the importance and benefits of being proactive in the face of complex social issues.

Understanding the multiple facets of wellbeing and the correlations between them is critical if we are to provide the best possible support for children and young people to reach their potential. Our presentation will look at how we are thinking about and measuring child wellbeing in New Zealand, with a focus on the Lifetime Wellbeing Model for New Zealand Children. 

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 lifetime wellbeing model captures data on all children and young people living in New Zealand and has been designed as a tool that the entire social sector can use and benefit from. It enables us to map the wellbeing of all children at a population level and can help inform advice 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.

The model has been built, predicating that new assessment tools will be implemented and aligned to the new wellbeing / outcomes framework. Over time this will act to replace the existing “observational” data that provides correlation to incorporate “assessment” data that is closer to causation. By implementing the data transformation of wellbeing, we are able to maintain the structure of the modelling throughout the planned 10 year transformation period, benefiting from the new information that will be generated from, and demonstrating the success of that transformation over time.

The outputs from the modelling are now being used to support changes to frontline practice in identifying cohorts for new services, including Intensive Intervention and transition support for those ageing out of care. 

The lifetime wellbeing model is also helping to inform the development of the Government’s child wellbeing strategy that is currently being led by the Department of the Prime Minister and Cabinet with the support of Oranga Tamariki and other agencies.

Mental Health - A Case Study with Lessons for Travel and Life Insurance

Bill Konstantinidis, Michael Storozhev

Life insurance and travel insurance have been at the forefront of public discussion in relation to the societal treatment of mental health.

Traditional blanket exclusions have come under greater scrutiny, with high profile cases revealing that more is needed to be done by insurers to develop solutions to provide mental health coverage.

This paper focuses on both the context in recent years, including high profile claims, cases and industry responses. The paper also provides a framework for gathering and validating external data when pricing new benefits such as mental health, based on the actuarial story of the product development journey undertaken by Cover-More Travel Insurance, Australia’s largest travel insurance distributor, to move away from traditional industry practice and provide comprehensive mental health coverage for both new and existing conditions.

Further, taking input from a wide range of expertise, including technical teams, traditional claims data, external statistics and supplemented with medical expertise, the paper aims to show that actuarial and statistical judgement is still possible prior to releasing a new product or benefit.

This session will provide lessons for all insures looking to make inroads in this important customer-centric journey.

Mental Health in the Digital Age: The dark and bright side of technology

Anthea Hickey

The purpose of this paper is to explore the impact of the digital age and mental health, both positive and negative effects. The paper will discuss: (1) prevalence of mental health in Australia; (2) explain how individual behaviour and emotions arise, within a neurobiological framework; (3) account for the contextual variance of the digital age in individual behaviour and emotions over time; (4) individual sense of self-identity within the digital age; and (5) where mental health is going in the digital age.

Recent Trends in Capital Management and Learnings from Other Industries

Chao Qiao, Huda Ansari

The general insurance industry has been undergoing change in recent years, particularly in the use of data analytics in customer interactions, technology enhancements and operational efficiency improvements.  In this changing environment, we assess how capital management has or hasn’t evolved in recent years and whether current practices are fit for the future.

In this presentation, we will present a paper that refreshes the capital management survey conducted as part of the 2016 GI Seminar “How to Improve Capital Management, ICAAP and Capital Performance - A Local and Global Experience”.  This paper (in PowerPoint) will contain an industry survey, covering the most relevant topics today, (i.e. not the same as the 2016 paper).  This paper will be taken as read on the day of the presentation.

The presentation will discuss findings from the paper, containing the industry survey.  We will also conduct informal interviews with industry capital practitioners following the survey, present anonymised context provided by these practitioners and our view of capital management trends of the industry.  Part of our presentation will also assess how ICAAP has evolved or not evolved in recent years, and where the industry sees it will go in the future.  These elements of our presentation will be subject to consent by individual industry participants who we will invite to participate.

Lastly, we will draw learnings from other industries such as life insurance and banking, and international insurers where appropriate, and comment on where the Australian general insurance industry may go.

Royal Commissions – What Have We Learnt?

Scott Duncan, David Whittle

In 2001, Australia’s second largest general insurer, HIH Insurance, collapsed.  This caused significant dislocation (immediate and longer term) to the general insurance industry, and had flow-on effects more broadly, for example through inability to obtain affordable professional indemnity and public liability insurance in some cases.  It inevitably led people inside and outside the industry to ask:

• What happened?
• Whose fault was it?
• How can we prevent this sort of thing from happening again?

The resulting Royal Commission lasted for 18 months, heard from a large number of witnesses and receiving many submissions, and produced a report of approximately 1,500 pages, including  61 policy recommendations.

This led to massive changes in general insurance regulation in Australia, with greatly altered or entirely new standards covering areas including governance, risk management, risk based capital and reporting requirements.  Arguably these changes have influenced legislators and insurance regulators in numerous other countries.

Included in that have been significant changes in the formal and informal requirements placed on actuaries.

In this session we intend to postulate key changes that are likely to come from the ongoing Financial Services Royal Commission.  It’s worth noting that the changes are likely to be much clearer by the time of the Seminar than they are now (mid-2018).

What should the actuarial profession, the general insurance industry and practitioners do in response to these changes?  And where should we be getting ahead of the curve?

In answering these questions we intend to consider the current situation in the light of the experience of the HIH Royal Commission, thinking about:

• How the Institute responded at the time
• What were the key changes, especially those affecting actuaries?
• Have those changes been effective?
• How can our profession best contribute (collectively and individually) to solving the problems that have emerged during the current Financial Services Royal Commission?
• Do our current practices meet community expectations and if not, what do we need to do about it?

Some concepts to consider for actuaries and for the general insurance industry are:

• Equity between policyholders
• The balance between prudential strength of insurers and a fair deal for customers
• Making insurance products fit for purpose
• How can disclosure be effective in describing abstract (perhaps dry) concepts to the public?
• What is the point of actuaries in a world where technical capability is becoming more commoditised?

AASB 17: An Update from the Actuaries Institute Taskforce

Antony Claughton, Francis Beens, and Richard Yee

Representatives from the Actuaries Institute AASB 17 Implementation Taskforce will provide a broad overview and the current status of the new insurance accounting standard and what it means for actuaries practicing in General Insurance. 

The AASB 17 Implementation Taskforce released an Information Note in 2018 which discusses the key issues relevant to actuaries that arise from the new standard.  The Note is updated regularly in light of international and local developments in interpretation, which are expected to continue throughout 2018 and 2019.

AASB 17 replaces AASB 1023 (the current GI accounting standard) for reporting periods starting 1 January 2021.

The role of the Appointed Actuary, other actuaries and actuarial advice framework

Tim Clark

We are in a world where trust in institutions is being fast eroded and existing products & services to customers/individuals are subject to change due to disruption. Institutions need to evolve and be conscious of the change that is happening. Actuaries and other professional bodies are no different.

We have always, like many other professions, seen ourselves as providing ethical and relevant business advice – and we have earned the respect of management, Boards and regulators. 

APRA’s regulatory reform has proposed a requirement that each general insurer, life insurer and private health insurer to establish a framework for the provision of actuarial advice. It gives us a way in which we can help the Board articulate when it wants 

• actuarial advice to be mandated,
• when it would be useful pre decision; or
• when it would be valuable as a review of management’s aggregate decision making

As the saying goes “this is both a blessing and a curse”.

The session will explore how the AAF task force thought about the opportunity presented to the profession and will pose some questions that will challenge us as to if we are being bold enough in this environment. 

Please come with your thoughts

Adapting to an expanding digital threat surface to deliver business cyber resilience

Darren Argyle

• Balancing Hyper-connectivity with information vulnerabilities
• The three foundational pillars of cyber resilience
• Building digital trust through enhanced data security frameworks

D - (&O) Day: Directors & Officers Insurance – A Class in Crisis

Win-Li Toh, David North

Is D&O insurance in crisis? With reports in the news of recent price increases of up to 400%, class actions gaining momentum, and revelations from the Hayne royal commission providing fertile ground for further and more expensive claims, where is this insurance sector heading?

For the best part of thirty years, class actions have been an embedded part of Australia’s legal landscape, as a means of providing justice to individuals and to generate better governance. This has grown rapidly in recent years with the introduction of third party litigation funding – there are now more than 15 litigation funders involved in Australia. However, as insurers start to restrict cover for class actions, introduce ‘royal commission exclusions’ or walk away from providing this class altogether, what does this mean for doing business in Australia?

What is a world like without D&O cover? Do we need a rethink of this insurance? Have we got the right balance between social justice and the call on companies’ resources to defend the current level of class actions?

One large law firm involved in class actions has suggested that a solution is simply for insurers to review their prices allowing for “governance quality”. How can culture and governance be introduced objectively into pricing? Is there an objective measure that would have captured and priced appropriately for the issues that are emerging in respect of AMP, NAB and all the big banks?

In this session, we tackle these questions and more, combining industry expertise and quantitative analysis from several perspectives – actuarial, legal, claims manager and reinsurer.

Customer-Centered Design Maturity in Australian Insurers

Mathew Ayoub, Gavin Pearce and Kaise Stephan

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.

At the 2016 General Insurance Seminar, Deloitte presented Risk Culture: Possibly the biggest risk in the world, which gave principles for collating risk culture information for Management. This paper seeks to continue with that work with a survey to glean the maturity level of customer-centered 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.

For the purpose of this presentation, Conduct risk is the risk of financial loss and/or reputational damage to an insurer resulting from the failed or inadequate delivery of fair customer outcomes due to inappropriate, unethical, unlawful or inadequate processes or behaviours on the part of an organisation’s management, employees or third party/outsourced providers.

Changing Role of the CRO

Corinne Glasby

Financial Service organisations are at an inflection point in their history.  The world is changing, and we need to adapt to changing customer and regulator expectations.  What is the role of the Chief Risk Office in this environment?  How can we help firms through the transition?

A relatively new part of the industry, the CRO is ideally placed to be part of the change.  In this session we will discuss the environment (both in and outside organisations), the current role of the CRO, how this differs between organisations, and propose how the role might adapt both now and in the future.

Reinsurance: What could possibly go wrong?

Ty Birkett

Over the past two decades reinsurance has been used more and more effectively as a tool to manage capital as well as earnings volatility.  Reinsurance decision making is now often the domain of the CFO, CEO and/or Board.  With significant amounts of risk being transferred, the difference between a good and a poor reinsurance strategy could literally be in the billions.

With so much at stake it is important that reinsurance is considered through from a risk management perspective and not just from based on capital and earnings management considerations.

Ty discusses some of the things that can go wrong in reinsurance from his 20 years’ experience in the industry.  This includes the wrong cover, the wrong structure, the wrong reinsurers and the wrong objectives.  As with all of life’s great lessons – some can be anticipated and others with the wonders of hindsight!

Cyber Risk – A General Insurance Perspective

Actuaries Institute Cyber Working Group - Peter Yeates, Susie Amos and Kitty Ho

Cyber risk has a high profile in Australia in 2018, including the commencement of the Notifiable Data Breaches scheme and the debate over My Health Record. Not only are cyber threats evolving in new ways, but in the digital world in which we live, our exposure to them is increasing. Insurers have an opportunity to help businesses manage these risks.

In Australia, the cyber insurance market is in its infancy and there is little data or consistency in the way businesses and insurers are managing cyber risk. There are many questions and concerns for those insuring cyber – Are cyber risks insurable? What should be covered? What benefits should be provided? How can potential risks and exposures be measured? What is the best way to provide cover? How do we price and underwrite? What other types of cover are vulnerable to cyber perils? and; What data is available?

The presentation will provide an update on the previous GIS presentation, together with the Cyber Working Group’s paper.

Superimposed Inflation, or, Actuaries Searching for Brigadoon

Estelle Pearson, Timina Liu, Francis Beens

‘Unanticipated for 17 years in a row?  …  You can say it is unanticipated for one year or two years or five years, but it is not credible to say it is unanticipated effectively 17 years in a row.’ – David Shoebridge MLC, NSW Parliament Standing Committee on Law and Justice First Review of the CTP Insurance Scheme, 17 June 2016, commenting on the fact that NSW CTP premiums contain an allowance for superimposed inflation despite an absence of actual superimposed for much of the past 10 to 15 years.

Australia has had what seems like 20 years of reserve releases in reponse to a ‘benign’ claims environment, and, related to this fact, higher than expected profits in a number of long tail lines over a similar period. 

In this paper we evaluate how superimposed inflation is allowed for by actuaries in Australia.  Is it the actuaries’ ‘Brigadoon’, the mythical village (claims cost inflator) that appears once every century?  Or is it an ever-present threat? 

Building on a range of previous papers presented at GI seminars we consider a number of questions, including:

• How do actuaries understand the concept of superimposed, and how does that contrast with how non-actuaries understand it?
• Are current actuarial techniques adequate to assess and deal with superimposed?  Are we missing anything?
• What real world outcomes can happen when actuaries allow for too much or too little superimposed? 
• How should superimposed inflation allowances relate to risk margins and profit margins?

Beyond Nudging, deconstructing the mental health crisis from a behavioural perspective

Doron Samuell

Dr Doron Samuell will synthesise statistical, philosophical and behavioural insights to deconstruct the challenges facing general insurers who cover mental health conditions and suggest alternative behavioural remedies that go beyond the current paradigms of awareness campaigns, hug-it-out strategies and a bottomless pit of funding that won’t work. In this session, Dr Samuell will argue that the basic principles of science have been abandoned and that insurers are left providing for an evolving social construct. It’s not all doom and gloom, there are opportunities for genuine reform and possibilities for applying behavioural principles to contain the costs.

GPDR: What is it, and will it apply to you? 

Lisa Vanderwal

On 25 May 2015 the General Data Protection Regulation (GDPR)came into effect.  The GDPR introduces a unified privacy approach across the European Union (EU), as well as giving individuals more control over their personal information.  It contains a range of individual rights and protections that can be challenging for those not in the EU to understand and apply.  One of the purposes of the presentation is to explore these rights and protections to make them more accessible to those in the Australian market.

This understanding is important, as the GDPR applies not only to any organisation in the EU that processes the personal information of those located in the EU, but also those that process that information outside the EU.  This presentation will look at how to assess whether the GDPR will apply to you, and if so which elements to focus on.  

Even if the GDPR doesn't apply to you directly as a controller, does it apply to you as a process or a sub-processor?  If so, this presentation will help understand what should you expect.