BRIDGING THE GAP BETWEEN THEORY AND PRACTICE IN INSURANCE AND ACTUARIAL FIELDS Batsirai Winmore Mazviona - Director Centre for Risk Management and Insurance 149 Crystal Hope Close, Goodhope, Harare, Zimbabwe Cell: +263 772 529 852 Email: winmoreb@gmail.com Presentation Outline Insurance World Actuarial World Actuaries in an Insurance World Conclusion Insurance World Basics of Insurance Insurance Functional definition Contractual definition Insurance is a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against the risk Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency Basic Functions of Insurance Primary Functions Secondary Functions Other Functions Primary Functions of Insurance Providing protection – The elementary purpose of insurance is to allow security against future risk, accidents and uncertainty Insurance cannot arrest the risk from taking place, but can for sure allow for the losses arising with the risk Insurance is in reality a protective cover against economic loss, by apportioning the risk with others Collective risk bearing – Insurance is an instrument to share the financial loss It is a medium through which few losses are divided among larger number of people All the insured add the premiums towards a fund and out of which the persons facing a specific risk is paid Evaluating risk – Insurance fixes the likely volume of risk by assessing diverse factors that give rise to risk Risk is the basis for ascertaining the premium rate as well Provide Certainty – Insurance is a device, which assists in changing uncertainty to certainty Secondary Functions of Insurance Preventing losses – Insurance warns individuals and businessmen to embrace appropriate device to prevent unfortunate aftermaths of risk by observing safety instructions; e.g installation of alarm systems in a building Covering larger risks with small capital – Insurance assuages the businessmen from security investments This is done by paying small amount of premium against larger risks and dubiety Helps in the development of larger industries – Insurance provides an opportunity to develop to those larger industries which have more risks in their setting up Other Functions of Insurance Is a savings and investment tool – Insurance is the best savings and investment option, restricting unnecessary expenses by the insured Also to take the benefit of income tax exemptions, people take up insurance as a good investment option Medium of earning foreign exchange – Being an international business, any country can earn foreign exchange by way of issue of marine insurance policies and a different other ways Risk Free trade – Insurance boosts exports insurance, making foreign trade risk free with the help of different types of policies under marine insurance cover Insurance provides indemnity, or reimbursement, in the event of an unanticipated loss or disaster There are different types of insurance policies which cover almost anything that one might think of   Insurance Classification Actuarial World Who is an Actuary? • What ‘they’ think an Actuary is: An Actuary • Actuaries are experts who perform actuarial analysis of insurance rates, rating procedures, rating plans, and schedules of insurance companies These are professionals who are experienced in reviewing and analysing insurance operations, reserves and underwriting procedures and provide technical assistance regarding actuarial matters to policy examiners and other technical staff • Traditionally an actuary worked in the areas of life assurance or pensions • However, actuaries are now using their risk management skills in other areas Their Main Activities • Analysing insurance rates, such as for cars, homes or life insurance • Estimating the money to be set-aside for claims that have not yet been paid • Participating in corporate planning, such as mergers and acquisitions • Calculating a fair price for a new insurance product • Product design • Forecasting the potential impact of catastrophes • Analysing investment programs Where Actuaries Work? • • • • • • • • Life insurance Pension funds General insurance Health insurance Investments Government Academics Consultants firms Role of Actuaries • Evaluating the likelihood of future events • Designing creative ways to reduce the likelihood of undesirable events • Decreasing the impact of undesirable events that occur • Gathering analytical skills, business knowledge and understanding of human behaviour to design and manage programs that control risk Actuaries in an Insurance World Actuarial Functions in Insurance Underwriting and Pricing Claims and Insurance Operations Reinsurance Reserving Actuarial Functions in Insurance Risk and Capital Management Financial Reporting Customer Loyalty Strategy Litigation Support CRMI Insurance Projects in progress • Insurance rating framework for Zimbabwe insurance industry • ICT governance framework for Zimbabwe insurance industry • Corporate governance in the insurance industry • Telematics and usage-based insurance in Zimbabwe • Application of index-based insurance in Zimbabwe • Customer Satisfaction Index for insurance • Solvency II for Zimbabwe • Microinsurance Conclusion • With all that has been highlighted in this presentation, it is clear that actuarial skills are critical in solving a plethora of challenges in the insurance field • Some of the key drivers in achieving a vibrant insurance industry include: • Establishment of a database of various business lines e.g we could start with the Motor Insurance Database such database will assist for instance in product design and pricing (CRMI is ready to partner with the industry in this initiative) • Commitment of the industry to support research and innovation in insurance e.g availing data to researchers, research funds • A practically oriented insurance curriculum which addresses practical challenges • Seminars, conferences and forums to exchange ideas Thank you for listening! 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