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South African Actuarial Journal Volume 16 (2016)


Changes in mortality of people living with HIV in South Africa and their potential implications for life assurers

Authors: ML Strydom, D Corubolo AND C Nel

Abstract: This research investigates the impact of improved (and improving) mortality experience in South Africa as a result of the increased (and increasing) access to antiretroviral treatment on South African life assurers, the entry-level insurance market and the wider South African economy. The research focuses on various potential impacts on the entry-level insurance market, including new business profitability, product development and pricing, market penetration and the potential for increased savings. This research has been done with the assistance of four of the main South African life offices and also draws on the new THEMBISA AIDS model on which a working paper has been produced. The research is based on the THEMBISA model in order to investigate the potential impact of alternative mortality scenarios on typical entry-level products within the industry where the scenarios have been based on actual current and proposed antiretroviral roll-out strategies by the Department of Health. Potential improvements to profitability, premium reductions, benefit enhancements and cashback benefits are quantified using a profit test model for entry-level market products.

Keywords: AIDS; HIV positive; CD4 count; ART; THEMBISA; entry-level policies; value of new business (VNB); cashback benefits

Changes in mortality of people living with HIV in South Africa and their potential implications for life assurers


 

A method of parameterising a feed forward multi-layered perceptron artificial neural network, with reference to South African financial markets

Authors: ML Smith, FJC Beyers AND JP De Villiers 

Abstract: No analytic procedures currently exist for determining optimal artificial neural network structures and parameters for any given application. Traditionally, when artificial neural networks have been applied to financial modelling problems, structure and parameter choices are often made a priori without sufficient consideration of the effect of such choices. A key aim of this study is to develop a general method that could be used to construct artificial neural networks by exploring the model structure and parameter space so that informed decisions could be made relating to the model design. In this study, a formal approach is followed to determine suitable structures and parameters for a Feed Forward Multi-layered Perceptron artificial neural network with a Resilient Propagation learning algorithm with a single hidden layer. This approach is demonstrated through the modelling of four South African economic variables, namely the average monthly returns on the money, bond and equity markets as well as monthly inflation. Artificial neural networks can be constructed on the aforementioned variables in isolation or, jointly, in an integrated model. The performance of a range of more traditional time series models is compared with that of the artificial neural network models. The results suggest that, on a statistical level, artificial neural networks perform as well as time series models at forecasting the returns for financial markets. Hybrid models, combining artificial neural networks with the time series models, are constructed, trained and tested for the money market and for the rate of inflation. They appear to add value to the time series models when forecasting inflation, but not for the money market.

Keywords: Artificial neural network (ANN); ARIMA; financial application of ANNs; financial forecasting; money market; bond market; equity market; inflation

A method of parameterising a feed forward multi-layered perceptron artificial neural network, with reference to South African financial markets


International benchmarking of hospital utilisation: how does the South African private sector compare?

Authors: S Ranchod, B Childs, M Abraham AND R Taylor

Abstract: We benchmark the hospital-inpatient admission rates and average length of stay of the South African medical scheme population against a set of international comparators. Such a comparison is useful in developing reasonable expectations of the utilisation achievable in the private-hospital sector in South Africa, and as a means of identifying unusual characteristics of the South African environment. Such comparisons should be done on a like-for-like basis, and explicitly adjusted for differences in data definitions, patient demographics and clinical case mix. Structural differences between countries must be considered in interpreting results. We use an economic basis for determining the comparator set rather than a health-systems basis. Detailed case-mix data by country is not available so demographic and broad disease-grouping categories are used as proxies. A further limitation is that day cases are excluded. Considering two separate data sources, South Africa appears to have relatively high admission rates with low average lengths of stay. On a combined basis, the bed days used per 1 000 medical scheme beneficiaries for South Africa appears near the lower end of the spectrum, which suggests that the South African private sector is making relatively efficient use of its hospital resources.

Keywords: Medical scheme; hospital; admission rates; length of stay

International benchmarking of hospital utilisation: how does the South African private sector compare? 

 

The impact of behavioural economics and finance on retirement provision

Authors: N Van Zyl AND DJJ Van Zyl

Abstract: The significant shift from defined benefit to defined contribution retirement funds in South Africa has led to many fund members bearing responsibility for a range of risks. Many of these risks, such as those related to investment, longevity and cognitive deterioration are unavoidable. Another category of risk is that related to the choices made by government, employers, trustees, advisors and/or individuals at either national, scheme or individual level. These choices may also pose a threat to a member’s financial wellbeing in retirement. Behavioural economics and finance helps to explain the choices made by these stakeholders in the retirement industry. The authors explain this concept in the context of industry stakeholders and the unique South African economic and demographic landscape, focusing on defined contribution retirement funds. Key behavioural insights applicable to the retirement industry are explored and, where practical, illustrated by stakeholder behaviour. Possible ways to harness these insights in order to improve retirement wellbeing are then discussed.

Keywords: Behavioural economics; behavioural finance; heuristics; retirement; annuitisation; choice architecture

The impact of behavioural economics and finance on retirement provision 

 

Towards best practice in the actuarial assessment of claims for maintenance against deceased estates

Authors: MW Lowther AND JWT Mort 

Abstract: This paper begins to record best practice in the actuarial assessment of claims for maintenance against deceased estates in South Africa. Although this is a small field of actuarial practice, it is in the public interest that generally accepted standards be agreed upon. The paper applies an actuarial quality framework to identify aspects of the field, and then populates each aspect from the actuarial and legal experience respectively of the authors, and their interactions with other practitioners.

Keywords: Maintenance claims; deceased estates; surviving spouses; duty of support

Towards best practice in the actuarial assessment of claims for maintenance against deceased estates 


The significance of claims fraud in microinsurance and a statistical method to channel limited fraud identification resources

Authors: PJF Agostinho AND CJ Cherry

Abstract: In the past decade, the topic of microinsurance has received much attention from researchers around the world as the drive to alleviate persistent global poverty intensifies. Although microinsurance is a powerful tool that can be used to assist in the fight against poverty by acting as a safety net for policyholders, the problem of claims fraud is a serious threat to its long-term sustainability. Analysis of the existing literature reveals a severe shortage of research into the problem of microinsurance claims fraud, even though we have found that it poses a greater threat in microinsurance than regular insurance. In this paper we highlight the problem of claims fraud in low-income markets and we explain how fraud has the potential to make microinsurance initiatives unsustainable. After establishing that action is needed to combat fraud in microinsurance, we briefly present a number of fraud mitigation techniques that have been successful in conventional insurance. However, certain characteristics that differentiate microinsurance from regular insurance reveal that most of these fraud combating approaches are not appropriate to microinsurance; the proportionately higher costs of identifying claims fraud relative to policy size, the lack of data and the lack of resources experienced by microinsurers render these methods impractical and unaffordable in the context of microinsurance. We proceed to demonstrate the workings of a statistical method known as Principle Component Analysis of Ridit Scores (the Pridit method), initially developed by Brockett et al. (2002) which has been shown to effectively identify fraudulent claims without the need for a training sample. The method can thus easily be applied by microinsurers to assist in the detection of claims fraud. While this method of fraud detection is not without limitations, it may provide a pragmatic and cost-effective way for microinsurers to begin tackling claims fraud. In this paper, the method is clearly explained by means of a worked example to help microinsurers implement the method at low cost.

Keywords: Microinsurance; cost-effective fraud identification; Pridit; unsupervised

The significance of claims fraud in microinsurance and a statistical method to channel limited fraud identification resources


Other Articles

Editorial Meaningful research

Abstract of recent postgraduate theses and dissertations at South African university

Abstracts of articles in other South African journals

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