A key component of our practice includes the development of various experience studies for our clients. These studies are used for cash flow testing, new product development, product management and as a general management tool. For some clients we complete detail analysis or at least update these studies annually as part of the cash flow testing cycle. “Experience studies” is a broad term and includes the following:
Expense studies are of particular value to our clients. This type of study analyzes all expense elements of the company and develops appropriate unit expense factors on both a marginal and fully allocated basis. As a part of the study we are able to complete “what-if” scenarios related to levels of new business and the impact on the unit factors and ultimately the efficiency of the underwriting and issue departments.
The objective of this study is two-fold: First is to develop the actual per unit, per policy and percent of premium expenses actually incurred for each line of business. The second goal is to put in place a template so that it can be updated periodically to track emerging unit expenses.
Our goal is to provide unit expense factors for each of the various functions (such as sales, policy issue, underwriting, etc.) that can be used not only for development or enhancement of existing products in your portfolio, but that can also be used in the financial reporting process. The results of this study will be available for cash flow testing, expense allocations to be used in financial reporting, illustration actuary work, overall tracking of expenses and management thereof, as well as for determining profitability by line of business.
Mortality & Lapse
Mortality studies identify how the mortality experience of the company is emerging relative to what was assumed in the development of the products. The results of this study along with the trends identified by updating this type of study regularly will allow for more accurate product pricing, better financial representation in the cash flow testing, etc.
Lapse studies are similar to mortality studies. We review the lapse / surrender experience of the company relative to pricing. In addition, when completing this study we are able to identify producers that have more or less favorable experience than expected.