2019 Presentation Summaries

CAPTURING VALUE FROM ADVANCED ANALYTICS
Umar Bagus, Ra’ees Mahmood

Presentation

October 23, 2019, 12:15 PM – 1:15 PM

Relevant practice area(s): Data Analytics

Suggested audience knowledge level: Foundational and Intermediate

The advance-of-analytics in insurance: An implementation focus

The use of data and advanced analytics is revolutionising the insurance industry, boosting productivity, reducing costs, streamlining processes and improving customer experience. The convergence of several technology trends is behind this revolution – the availability of mammoth amounts of data, efficient storage of data and unprecedented computing power.

Yet data and technology alone do not deliver value, as too many companies have discovered. While some are seeing good results, others admit they have seen little effect to date from their investments in analytics. This is often because the old way of working still prevails: that is, build a model (often based on unclear assumptions) and roll it out, regardless of whether people in the frontline understand precisely how to apply it. Not surprisingly, efforts at adoption can meet resistance.

We will discuss the required building blocks for a successful advanced analytics transformation, including the role actuaries can play. We will also dive into the E2E execution of analytics use cases in insurance, including:

  • Customer retention: using analytics to identify at-risk customers and working with agents and call-centres to proactively save them in both life and motor insurance
  • Lead generation and cross-selling: using analytics to measure customer propensity to buy with product recommendations for cross- and up-selling, and developing digital tools with agents to manage their portfolio of leads
  • Underwriting & Pricing: using internal and external data to speed up the underwriting experience for customers, delivered through well-designed, end-to-end digital customer onboarding tools
  • Claims management: using analytics to better predict severe claims early in the claims cycle to enable quicker resolution, fewer file handoffs, and more accurate claims outcomes
  • Servicing: using analytics to analyse customer journeys and optimise workforce management and improve customer experience

SO DIABETES IS REVERSIBLE. WHAT DOES A HIGH ROAD SCENARIO LOOK LIKE AND HOW DO WE GET THERE?
Sarah Bennett, Tim Noakes, Neville Wellington

Presentation and Audio Recording

October 23, 2019, 2:15 PM – 3:15 PM

Relevant practice area(s): Healthcare

Suggested audience knowledge level: Intermediate

Following on from the successful presentation at the IAA conference at the CTICC on 4 April 2019 on “Impact of improved lifestyle on management of chronic disease – can Type 2 Diabetes Mellitus be reversed?” we propose a follow on presentation to explore these concepts further.

A joint presentation by a health care actuary at one of South Africa’s leading managed care companies, Medscheme, and a high profile scientist, clinician, professor, sportsman and acclaimed author, Prof Tim Noakes, and a doctor specialising in diabetes and leading the way in low-carbohydrate, high-fat diet treatment of diabetes, Dr Neville Wellington.

The low-carbohydrate, high-fat diet, often referred to as the “Tim Noakes”, “Banting” or LCHF diet in South Africa, has gained considerable popularity in the country since 2010. Professor Timothy Noakes has been criticised as aggressively promoting this diet as a ‘revolution’, making outrageous unproven claims about disease prevention, and maligning the integrity and credibility of peers who criticise his diet for being evidence-deficient and not conforming to the tenets of good and responsible science.

Noakes maintains that his public message has been misrepresented, which is simply the following: “a high carbohydrate diet is detrimental to the health of persons with insulin resistance whereas carbohydrate restriction in this group can be profoundly beneficial as it can reverse obesity and in some cases Type 2 diabetes mellitus, the two conditions that will ultimately bankrupt South African medical services unless we take appropriate preventive actions.”

Medscheme’s Active Disease Management and Integrated Chronic Care Management programmes aim to improve lifestyle and management of chronic conditions. The range of services we provide gives rise to a wealth of data on chronic disease management.

In our last presentation we showed how diabetes is not very well managed in the medical scheme population. We considered the evidence for reversal of chronic diseases from an actuarial and a clinical perspective and considered the potential implications for morbidity and mortality locally and globally.

In this presentation we start from the premise that diabetes is reversible. We consider what a high road scenario looks like and how we get there considering in particular the work done by the Noakes Foundation, by Dr Neville and other practitioners and by Medscheme to change behavior.

The presentation will be of relevance to actuaries working in health care as well as life insurance and pensions.


TECHNIQUES FOR CONTROLLING MACHINE LEARNING MODEL DESIGN RISK IN THE FINANCIAL RISK MEASUREMENT DOMAIN, BASED ON RECENT TECHNOLOGICAL ADVANCES
Andre Blaauw

Presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM
October 23, 2019, 09:00 AM – 10:15 AM

Relevant practice area(s): Data Analytics

Suggested audience knowledge level: Foundational

A contributor to the slow adoption of ML/AI algorithms in the FinRisc domain has been the concern around robustness, fairness and explainability of AI model outputs. Based on recent advances, techniques and metrics available to address these concerns will be evaluated.


THE RISE OF THE CITIZEN DATA SCIENTIST – CHALLENGES AND OPPORTUNITIES
FC de Vos , Pravin Burra

Presentation and Audio Recording

October 22, 2019, 2:00 PM – 3:00 PM

Relevant practice area(s): Data Analytics

Suggested audience knowledge level: Foundational

The rise of the citizen data scientist – challenges and opportunities:

  • Demo of how easy AI has become
  • The steps you need to take to become AI driven
  • Scaling the AI-driven enterprise
  • Common AI team roles
  • Key capabilities for citizen data scientists
  • Guardrails and common mistakes

Practically, we will show that significant portions of a data scientist’s toolbox are being democratised and how easy AI adoption has become.

You will walk away from the session understanding how to embed AI into your organisation and that this can be done more easily than ever before.

In your AI-driven enterprise, you will need to put in place guardrails for adopting AI and our talk will give you an overview of what these governance requirements could be.


FIXING THE SOUTH AFRICAN BASIC EDUCATION CRISES: THE INCREDIBLE STORY OF A RURAL COMMUNITY BUILDING A SCHOOL AND CREATING A BLUEPRINT FOR OUR COUNTRY IN THE PROCESS

Wilhelm de Wet

Presentation and Audio Recording

October 23, 2019, 12:15 PM – 1:15 PM

Relevant practice area(s): Wider Fields

Suggested audience knowledge level: Intermediate

LET’S BUILD A SCHOOL!
The Jakes Gerwel Technical School in Bonnievale is nothing short of a miracle. The school is the answer to a crisis that exists throughout South Africa. A chronic shortage of high schools and a limited curriculum offering spells a bleak future for thousands of disadvantaged kids in rural areas.

The people of Bonnievale tackled the crisis head-on, joining hands across racial and socio-economic divides and setting out to raise R65 million to build their own school. Chairing the JGE Funding Trust is an actuary, Wilhelm de Wet. In the process, they created a partnership with the provincial Department of Education and offers a curriculum that is hailed as ‘the answer for South Africa’.

A vision was dropped in the hearts of the people from Bonnievale who formed a team to pursue the vision to heal a total community by creating the Jakes Gerwel Technical School, a modern three-stream technical school with cutting edge facilities and workshops with a master plan for 1200 learners.

“Most learners from Bonnievale come from under-resourced backgrounds, fatherless homes and broken family structures. Secure character is what made Prof Jakes Gerwel a world changer behind the scenes and apt role model. In this school our first priority is to invest in the character of the learners. We do not only want to broaden their vision. We want to broaden their shoulders too.”

The team was convinced that this vision was not only to accommodate the numbers of the poor, but for it to be for a high school of excellence in a 12-hectare spacious campus-like atmosphere, with top facilities and inspirational leadership, to heal a total community from a legacy and lifestyle of brokenness and lacking self-worth.

The JGE Funding Trust was tasked to not only raise the R65m, but also to manage the building project and to commit to help govern the school in the long run. Added to a long list of practically impossibilities, was the fact that there was a timeline set of less than two years before the school had to be operational. In faith the team took up the challenge.

Vision sparks hope. Positivity is infectious. Sacrifice is inspirational. When we lead with a can-do attitude and show our commitment by personal sacrifice others will follow.

Actuaries have a role to play in the wider community. Hopefully the story can inspire others.


 

“INCLUSION!” – THE NEW CURRENCY TO WIN THE WAR ON TALENT!

Dominic Gaobepe, Roy Gluckman

Presentation

October 22, 2019, 10:15 AM – 11:30 AM, 12:30 PM – 1:30 PM, 2:00 PM – 3:00 PM
October 23, 2019, 9:00 AM – 10:15 PM, 12:15 PM – 1:15 PM, 2:15 PM – 3:15 PM

Relevant practice area(s): Wider Fields

Suggested audience knowledge level: Intermediate

Progressive thinking around the role of organisations within today’s society calls for a much softer, more engaged corporation. The evolution in corporate governance regulations (King IV report) calls for organisations to practice good corporate citizenry: a movement away from the sole mandate of profit and shareholder primacy toward an inclusive and sustainable growth model. The Millennial Movement too has challenged leadership within corporates to develop their purpose statements; asking firms to reinvent their “why”. Further, the changing workforce (talent) now see an inclusive working environment as a necessity before committing their time and energy, thus challenging the way corporates do business.

This change toward an inclusive working environment is not just a “nice-to-have”, nor a legislative imperative alone, but a fundamental social and business imperative required for the growth and sustainability of corporates within South Africa. With a changing talent demographic, organisations that choose not to transform, or have slow rates of change, are failing to attract future talent and haemorrhaging current talent. Further, a changing client demographic is seeing professional service organisations being penalised by clients and government for the slow rate of change.
Cohesion Collective works exclusively within the Equality, Diversity and Inclusion (“EDI”) space. Our work with organisations on Talent, Leadership and Culture have crystallised our understanding of EDI into a working model that will enable your organisation to acquire the new currency to win the war on talent!


COULD CYBER RISK BE THE NEXT “BIG SHORT”?
Chris Harner, Lisa Swaine, Ryan van der Coolwijk

Presentation and Audio Recording

October 22, 2019, 12:30 PM – 1:30 PM

Relevant practice area(s): Enterprise and Financial Risk Management (ERM)

Suggested audience knowledge level: Foundational 

Traditional approaches to managing and underwriting of cyber risk point to vulnerabilities for insurers and the world economy. These vulnerabilities call for a new risk management paradigm.

Milliman will facilitate a panel to discuss market trends and observations in cyber risk

Practical outcomes:

  • How to think about cyber risk and the difference between assessment and quantification.
  • Discuss potential approaches for quantifying cyber risk.
  • Challenges in quantification including capture non-affirmative risk for insurers.
  • Discuss what kind of data can be leveraged for modeling.
  • Highlight key legal issues that may impact claims given the role of state actors in cyber breaches.

THE IMPACT OF ECONOMIC INDICATORS ON LAPSE EXPERIENCE
David Hatherell

Presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Intermediate

The impact of economic indicators on lapse experience.

In this presentation we will discuss the lapse experience in relation to key economic indicators. We will focus on a general overview of lapse experience. Additionally we will assess the impact of the following kinds of indicators:

  • Economic performance such as inflation
  • Employment statistics
  • Confidence
  • The level of indebtedness in the country

Key outcomes:

  • Obtaining insights into how lapse experience may develop over different economic cycles.
  • Gaining an understanding of how lapse experience could be reviewed and monitored.
  • Developing an understanding of what economic drivers influence lapse rates.
  • Gaining insights into consumer behaviour.

LIQUIDITY MANAGEMENT FOR INSURERS – RISK AND OPPORTUNITY
Herman Kalmer

Presentation and Audio Recording

October 23, 2019, 12:15 PM – 01:15 PM

Relevant practice area(s): Enterprise and Financial Risk Management (ERM)

Suggested audience knowledge level: Intermediate

“Too little liquidity kills you quickly, too much liquidity kills you slowly” is a commonly accepted principle within the banking industry. The presentation will consider the extent to which this principle applies to the insurance industry, and why it is necessary to manage liquidity from both a risk and opportunity perspective.

Historically, prudential legislation focussed on the solvency of financial institutions, often at the cost of ensuring an adequate focus on liquidity issues. The 2008 Global Financial Crisis revealed that liquidity risk is material within the financial industry, as localised liquidity crises quickly spread to other institutions and eventually threatening the financial system as a whole.

Companies understanding their liquidity risk profile does not only ensure that the risk is adequately managed, but also supports the exploitation of the risk as part of the value creation process. Through understanding internal liquidity requirements companies can minimise their dormant liquidity levels and utilise any excess liquidity to pursue higher yielding investment strategies, while remaining true to their appetite for liquidity risk – stated and inherent.

As part of the presentation the following main components will be considered:

  1. What Liquidity Risk is: How it is defined, decomposed between internal and external risks, and the principles that govern it.
  2. Whether it really matters: The liquidity risk profiles of banks, life insurers and non-life insurers will be compared, and it will be considered how recent changes to traditional insurance business models have also served to increase liquidity risk. We will also look at how institutions’ external environments further expose them to liquidity risk.
  3. How Liquidity Risk is managed: The main risk management processes used to manage liquidity risk will be considered. This includes the Risk and Control Self-Assessment process (with its focus on operational sources of liquidity risk) and Cash Flow Analysis used to manage liquidity impacts on an enterprise-wide level. Concepts like liquidity pooling and the cash flow matrix will be introduced and the role of stress testing in Liquidity Risk Management considered.
  4. Benefits of Liquidity Tiering: Though a new concept, similar to the tiering of capital, the tiering of liquidity resources provides various benefits to financial institutions. This includes the ability to inform a more scientific approach to deriving a liquidity risk appetite statement, determining the target liquidity level, informing the ideal asset allocation of the liquidity buffer and quantifying the real and opportunity costs of having too much liquidity (i.e. “dormant liquidity”).

When assessing the real and opportunity costs of dormant liquidity, a real-world example will be considered in order to illustrate how shareholder value is destroyed when dormant liquidity within organisations is too high. It will also be considered how cash is only an adequate store of value in a deflationary environment.


ENHANCING THE PROBABILITY OF DELIVERING ALPHA
Bhekinkosi Khuzwayo, Teboho Tsotetsi

Paper with presentation and Audio Recording

October 23, 2019, 2:15 PM – 3:15 PM

Relevant practice area(s): Investments

Suggested audience knowledge level: All

  • Delivering alpha in a low return, low dispersion environment has proved challenging for active managers;
  • We demonstrate how managers can enhance their probability of delivering alpha by incorporating innovative risk management techniques;
  • Perform an analysis of benchmark factor risks and concentration over time to provide a deeper understanding of the factors that drive benchmark returns;
  • Perform an analysis of stock clustering within an equity benchmark to uncover hidden relationships between stocks.

Practical outcomes:

  • This will not only provide an active manager with a deeper understanding of the factors that drive a benchmark’s returns, but it also opens up the possibility of blending multiple active managers with differentiated styles (within an investment portfolio), to enhance performance.
  • An understanding of a benchmark in this manner gives the active manager the ability to apply his skills to those areas of the benchmark where skill has been proven to deliver value, hereby enhancing performance.
  • An active manager with a good historical track record might find it more challenging to repeat the performance if the risk structure of the market changes in such a manner that his forecast skill becomes less applicable. It is, therefore, crucial to monitor the changes in the risk structure of the market and to continuously reposition the portfolio to safeguard the alpha-generating potential of the investment process.
  • We think that active managers who predominantly depend on their stock-picking skills to deliver alpha will continue to find the market conditions non-conducive for their performance. The risk management techniques that we aim to demonstrate should enhance the probability that an active manager will generate alpha.

CQS – PRACTICAL GUIDE
Zanté Kilian

Presentation

October 22, 2019, 12:30 PM – 1:30 PM

Relevant practice area(s): Enterprise and Financial Risk Management (ERM)

Suggested audience knowledge level: Intermediate

  • What guidance do the Prudential Standards give on credit quality steps
  • Judgement areas
  • Practical approach and guidance for areas of judgement
  • Examples and effect on SCR

Outcomes:

  • Guide insurers and reinsurers to a better understanding of a practical approach to CQS

HYPER SELECTION: CAN WE? SHOULD WE?
David Kirk

Presentation and Audio Recording

October 22, 2019, 2:00 PM – 3:00 PM

Relevant practice area(s): Professional Matters

Suggested audience knowledge level: Foundational 

I define hyper selection as the use of new technologies, data and testing to select and rate individuals in ever-smaller risk groups.

Can we hyper select?

  • This includes use of social media profiles, internet behaviour, location data, wearables and activity data, banking transactional data, genetic testing, messaging meta data and all of these and others combined using machine learning
  • The presentation will explore current developments and near-future expectations, from an international and local perspective
  • Technical limitations and challenges will also be discussed

Should we hyper select?

  • This will consider the fairness of discriminating at such a detailed level. Examples covered will include the removal of gender factors for pricing in Europe, restrictions on use of credit scores for insurance pricing in many markets, and the danger of reinforcing existing disadvantages on specific groups.
  • Whether it is necessary to demonstrate “actuarial justification” for differences in premiums based on the underlying risk, whether the ratings need to be explainable or just statistically significant
  • Discuss ownership of data and who might be excluded or risk-rated because they don’t, for example, have a social media presence
  • Discuss the coordination problem of some players hyper selecting and some not, impact of costs and competition
  • Discuss Guy Thomas’s hypothesis that some adverse selection is a good thing for society
  • Discuss whether insurers vs insurtech startups vs large tech players (GAFA / FAANG etc.) will “own” the insurance landscape in a future with hyper selection

The audience will:

  1. Be introduced to some of the new possibilities for selecting and rating risks.
  2. Evaluate their organisation’s capabilities in light of these trends.
  3. Think about the professional implications for actuaries using these tools, approving and pricing these products.
  4. Serve as a reminder of the increased focus on market conduct and PPR and the coming COFI bill.
  5. Consider the ethical boundaries on what we as a profession and as citizens believe is fair and what is not fair.
  6. Prompt some longer term thinking in this space, rather than just what is the immediate opportunity.

ULIMI, BOTS AND BUYING BEHAVIOUR: CAN MULTI-LINGUAL CHATBOTS IMPROVE PRODUCT ACCESS AND UNDERSTANDING IN THE SOUTH AFRICAN MARKET?
Matthew Kloos, Jonathan Elcock, Luba Dube

Presentation and Audio Recording

October 23, 2019, 09:00 AM – 10:15 AM

Relevant practice area(s): Wider Fields

Suggested audience knowledge level: Foundational

In the context of the rise of the “automated insurance agent” and against the backdrop of a culturally diverse South Africa, this presentation will take an in depth look at how chatbots can be used as an effective channel for engaging with customers and making sales. Going a level deeper, the impact of chatbot language on customer behaviour will also be assessed.

Insights gathered from millions of conversation points with 50,000+ actual chatbot users will be shared.
Prepare yourself – many of these conversations will surprise you!


JOURNEY TO BECOMING A MICRO INSURER: A CASE STUDY ON THE MICROINSURANCE LICENSE APPLICATION PROCESS
Nabeelah Kolia

Presentation and Audio Recording

October 23, 2019, 09:00 AM – 10:15 AM

Relevant practice area(s): Microinsurance

Suggested audience knowledge level: Foundational

2018 was an exciting year for Microinsurance in South Africa as it marked the introduction of Microinsurance licences.

With the changes to a number of pieces of regulation laying the foundation for the establishment of Microinsurance comes a number of questions for insurers:

  • Should I convert my current licence to a Microinsurance licence?
  • Or should I get a Microinsurance licence in addition to my current licence?
  • How do I go about getting a Microinsurance licence?
  • What are the benefits of obtaining a Microinsurance licence?

In my presentation I focus on a case study of a traditional insurer who has assessed the feasibility of converting their current licence to a Microinsurance licence. I will highlight the challenges faced during this process and possible ways of overcoming these challenges.


ALM STRATEGY: TAKING INVESTMENT RISK FOR SHAREHOLDER VALUE
Michael Lapere

Presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Intermediate

Outcomes

  1. Theme: Strategic use of ALM (Asset Liability Management) to take views that deliver shareholder value (with examples)
  2. Balancing real-world vs risk-neutral views to generate value
  3. Shareholders views of value – earnings, capital considerations and taking risks – how it ties to strategic ALM
  4. Using ALM, hedging & actuarial techniques as a tool to act on our views (with examples)
  5. Challenges and tradeoffs in practice
  6. Example application under IFRS17

A STOCHASTIC INVESTMENT MODEL FOR SOUTH AFRICAN USE
Shaun Levitan

Paper with presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Investments

Suggested audience knowledge level: Intermediate

The need for stochastic modelling is on the rise globally in the pension, life insurance and investment
industries due to both an increase in regulation and a natural requirement for stochastic analysis in
modelling exercises. Research in the area of stochastic models for actuarial use in South Africa has
largely been limited. The seminal paper in this regard is Thomsons (1996) proposed model which has a
number of practical limitations.

In this paper, we propose a stochastic investment model for South Africa by modelling price inflation
rates, long term and short-term interest rates, index-linked bonds and equity returns for the period 1960-
2018. Possible by-directional relations between the economic series have been considered and the model
is designed to provide long-term forecasts.


ARE INDUSTRY CLAIMS PRACTICES IN THE UNDERWRITTEN LIFE INDUSTRY JUST, ETHICAL AND FAIR?
Paul Lewis, Johann Le Roux

Paper with presentation and Audio Recording

October 23, 2019, 9:00 AM – 10:15 AM

Relevant practice area(s): Professional Matters

Suggested audience knowledge level: Foundational

Using the framework of controversial life claims, that was declined and then paid after a social media and public outcry, the paper looks at the current claims management process and interrogates whether this is still just, ethical and fair. In particular, we try to establish whether the process ties in with an actuary’s professional promise. The paper may make suggestions about how practice could be changed, or may provide a springboard for further discussions.


A SURVEY OF ISSUES IN CONSUMER CREDIT MODELLING: FROM REGULATORY CAPITAL TO ECONOMIC VALUE
Musa Malwandla, Mercy Marimo, Thabiso Twala

Presentation and Audio Recording

October 22, 2019 2:00 PM – 3:00 PM

Relevant practice area(s): Banking

Suggested audience knowledge level: Foundational

Description:

  • The presentation will discuss the Basel regimes as they pertain to consumer credit risk.
  • The presentation will highlight the main pitfalls in the Basel regimes.
  • The presentation will discuss potential solutions and areas of further research.
  • The presentation will introduce the concept of embedded value (or economic value) for banks.

Outcomes:

  • An understanding of the Basel regimes.
  • An understanding of the short-comings of the current capital regimes, and what consequences these might have on a loan portfolio.
  • Insights into ways of resolving the potential short-comings, through improved models for economic capital.
  • Areas of further research within the field of consumer credit risk.
  • An understanding of how to think about the economic (embedded) value of a loan portfolio.

CAN THE DISCRIMINATION IN RISK UNDERWRITING IN THE LIFE INSURANCE INDUSTRY BE ETHICALLY JUSTIFIED?
Francois Marais

Paper with presentation and Audio Recording

October 22, 2019, 12:30 PM – 1:30 PM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational

DESCRIPTION

  • Discrimination based on age, sex, smoking status and socio-economic class is widely used in life insurance underwriting.
  • The normal justification provided is actuarial equity and economic necessity. The paper considers the ethical justification.
  • Scanlon’s moral contractualism is used as normative ethics theory.
  • The paper concludes that the principle of discrimination, and the underwriting criteria of age, sex and smoking, can be ethically justified, but not socio-economic discrimination.
  • No change in underwriting practice can be expected without legislative pressure.

PRACTICAL OUTCOMES

  • Insight into the history and nature of the discrimination in life insurance underwriting is South Africa.
  • Introduction to the theory of moral contractualism.
  • Exposure to a practical example of applies business ethics (a specific normative ethics theory being applied to a pertinent life insurance issue).
  • Consideration of the possible reputation risk for the actuarial profession in this matter.
  • A call to consider an industry response in case of a possible challenge of current practice.

PAYING TO RETIRE – WHAT DOES IT COST (AND WHAT ARE YOU PAYING FOR)?
Warren Matthysen

Presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Retirement Matters

Suggested audience knowledge level: Intermediate

There has been research focused on the cost of saving for retirement benefits and the impact of those costs on the ultimate benefit value. The 2004 paper from Rob Rusconi, “The Cost of Saving for Retirement”, considered the impact of costs in the pre-retirement phase of benefit accumulation.

The purpose of this presentation is to extend the discussion to consider the impact of costs in the post-retirement, benefit payment (or decumulation phase).

The majority of flows at retirement are into living annuity products. This presentation considers the cost structure of living annuity products and the potential impact on benefits.

It also briefly builds on the work of my previous paper, “What do you want? Managing risks for better outcomes when you retire”, to further explore whether retirees understand the benefits they are paying for in retirement.


SUSTAINING THE LIFE INSURANCE INDUSTRY IN THE FOURTH INDUSTRIAL REVOLUTION: IDENTIFYING THE BELIEFS AND CAPABILITIES THAT ENABLE AND INHIBIT
Lynne Molloy

Paper with presentation and Audio Recording

October 23, 2019, 2:15 PM – 3:15 PM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: All

The Fourth Industrial Revolution is upon us and leadership teams the world over are grappling with means to respond to the unprecedented impacts that are beginning to emerge. The strategies that have offered success in the past are no longer effective, and yet an inevitable wave of creative destruction and the increasing speed of change do not allow the luxury to ‘wait and see’. With little adaption, the South African life insurance industry has remained remarkably resilient. However, the industry protection mechanisms that have supported a false sense of security are beginning to weaken. Change is imminent and adaption is vital to sustaining relevance in the future. Strategy and innovation literature tend to focus on large-scale transformational strategies, but before these can be executed, and particularly in the context of the humanistic Fourth Industrial Revolution, the foundational human element must be fortified. This research aimed to examine those embedded beliefs and capabilities that underlie business activities so as to identify those that both encourage and undermine adaption. Data was collected using a qualitative approach through semi-structured interviews with executives and senior leaders spanning across the industry, and synthesised using an inductive process. The results reveal that a pervasive belief in the importance of people as distinct from technology, an unwavering belief in the power and influence of leadership and a widespread desire to engage with partners are apparent across the industry and should be levered to grease the wheel of change. Conversely, an equally apparent lingering lack of urgency, a deep desire for agility but a widespread inability to enact it and distrusting and protectionist attitude should be proactively ring fenced and eradicated.


CONVERSATIONS WITH ACTUARIES: OUR UNIQUE JOURNEYS TO BECOME FELLOWS
Vivek Moodley, Jasmin van Schalkwyk, Rowan Burger, Sphe Msane

Presentation

October 23, 2019, 9:00 AM – 10:15 AM

Relevant practice area(s): Transformation

Suggested audience knowledge level: Foundational

The “presentation” or talk for the profession to better understand and appreciate the various diverse backgrounds that Fellows have come from.

We have many unique stories to tell and they help us understand each other a lot better which all help contribute to the colourful and vibrant South African fabric.

The aim is to get 3-4 speakers from very diverse backgrounds to share their unique journeys and challenges and to also debunk the myths and assumptions we have about peoples’ journeys to qualification.

Intended Outcomes:

  • Understanding each other
  • Appreciation of diversity
  • Benefits of diversity

SOCIAL AND STRUCTURAL CONDITIONS DRIVING NCDS
Yageshree Moodley, Beth Vale

Presentation and Audio Recording

October 23, 2019, 12:15 PM – 1:15 PM

Relevant practice area(s): Healthcare

Suggested audience knowledge level: Foundational

The increase in non-communicable diseases (NCDs) demands a revolution in healthcare. This epidemiological shift is fuelled by social and structural conditions such as food systems, habitats and social engagement practices. In this session, we use both qualitative and quantitative analysis to understand NCDs in the context of socio-economic systems and discuss possible interventions.

Outcomes

  1. Understanding social and structural drivers of health and illness, specifically NCDs in South Africa
  2. Considering the professional (actuarial) and personal implications of this shifting burden of disease
  3. Inviting innovative interventions that respect the systemic construct of NCDs
  4. Appreciating qualitative research and the synergy with quantitative analysis

Further description
Today, most people die of long-term, non-infectious illness rather than contagious epidemics, violence or famine. Non-communicable diseases (NCDs), including cancers, diabetes, cardiovascular and respiratory illnesses, account for 70% of premature deaths worldwide. This is attached to a number of relatively new socio-historical phenomena, in which most people live in cities, buy their food in supermarkets, and expect to live longer lives.

Beth’s research demonstrates that these are not just ‘urban’ problems; poor food systems, pollution and sedentary living extends deeply into rural South Africa as well. Furthermore, it is rare for a person to only have one chronic condition and also rare for there to be only one chronic patient in a home. This puts immense stress on households, financial and otherwise, which compound illness.

Let’s probe this epidemiological shift from both a quantitative and qualitative angle. We offer the perspective of the medical anthropologist, considering qualitative research methods to understand people’s experience of NCDs. We then take the perspective of an actuary, considering the cost and risk of the changing disease burden and how these present in both the public and private healthcare sector. Participants will engage with the content through self-reflection and discussions in small groups.

The content will respect the holistic nature of health and illness, including:

  • how scale, subsidies, land ownership and factory-farming create economic incentives to eat food linked to NCDs
  • how social engagement, from birthday cakes to loneliness, affects our neurology and physiology aggravating NCDs
  • how we eat, move, work and play in both rural and urban South Africa creates a social history that is encoding in our bodies

The session will end with discussion around possible interventions, focusing on those within participants’ circle of influence in healthcare supply and funding.


WHERE’S THE BLACK BOX? A TERMINATION STUDY TO UNCOVER GROUP DISABILITY TRENDS
Neil Parkin, Anja Kuys

Presentation and Audio Recording

October 22, 2019, 2:00 PM – 3:00 PM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational and Intermediate

The group disability market has experienced significant losses and challenges over the last few years. To help understand the drivers of this, we performed an industry study of termination trends in the market. By covering the entire period of deteriorating financial results, we aim to share key shifts in the experience and implications of these changes for the future.

The audience can expect:

  • A deeper understanding of group disability income, including the key drivers of experience
  • Key trends over the last 10 years (e.g. cause of disability, termination results)
  • A holistic view of the challenges experienced, and analysis around various theories of the cause (e.g. economy, tax changes)
  • An international perspective
  • Expectations for the future and implications for pricing and reserving bases

VIABILITY OF PANDEMIC CATASTROPHE BONDS IN SOUTH AFRICA
Marissa Pieterse, David Kirk

Presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational and Intermediate

Insurance Linked Securities (ILS) represent a multi-billion dollar market globally. Examples include non-life catastrophe bonds, life insurance VIF securitisations and longevity swaps. Recent interest has extended to cover for cyber risk.

While South Africa is relatively protected from many catastrophes, specific risks contribute significantly to capital requirements where traditional reinsurance solutions may not always provide a cost effective solution. A particular example is pandemic risk, for which there is extremely little appetite in the conventional reinsurance market.

ILS can offer pricing stability over a 3 to 5 year term, diversification of sources of capital and some protection from the reinsurance cycle.

Investors benefit from an asset class with low correlation with financial markets and can boost risk-adjusted performance of portfolios.

However, the ILS market in South Africa is basically non-existent. Valid concerns include regulatory complexity, unfamiliarity, sovereign risk, minimum viable size, and a soft reinsurance market. Given the new capital requirements faced by insurers, it may be time to consider whether ILS has a place for individual South African insurers, or whether a single non-indemnity instrument may provide capital- and cost-efficient risk transfer for several insurers together.

The presentation will explore the steps, stakeholders and approvals required to create an ILS in South Africa, establishing under which circumstances it might be viable and whether this might benefit from pooling of risks between insurers.

The audience will:

  1. Gain a basic understanding of the risk transfer and funding mechanisms of ILS
  2. Understand the investment appeal
  3. Learn about some examples of recent deals around the world and why they were implemented
  4. Understand the cash flows, regulatory, accounting, compliance, risk and actuarial requirements and the stakeholders involved
  5. Explore a case study of an ILS including the basic pricing parameters
  6. Explore the cost and benefits against the alternatives and when it would be viable

GENERATION WHY?
Previn Pillay

Presentation and Audio Recording

October 23, 2019, 2:15 PM – 3:15 PM

Relevant practice area(s): Professional Matters

Suggested audience knowledge level: Foundational

Millennials are known for certain characteristics that have been developed growing up with advancing technology. These characteristics can be seen to be helpful to the profession, and mostly are. But millennials have a number of traits that could prove detrimental to organisations in the future, if not nurtured and lead well. Millennials are now well-integrated in the workplace and even manage other millennials. How do we create a society or an organisation geared towards getting the best out of the unique skillset that these millennials possess, while keeping them motivated, engaged and present? How do we tailor performance appraisals and career growth to cater to differing needs and priorities?

Outcomes:

  • Showcase outcomes of the global millennial survey performed by Deloitte.
  • Discuss key observations on trends in the workplace.
  • Discuss challenges of building an organisation that will be dominated by millennials in the future.
  • Discuss management tools and talent strategies.

CLAIM VOLATILITY, ACCIDENTAL RISK & OCCUPATION EFFECT IN THE LIFE INSURANCE SPACE
Michael Prodehl, Zandile Gobe

Presentation

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational

We will look at the following in the presentation:
The experience emerging over the past few years, with this being based on the the experience that we see as a reinsurer:

  • Claims volatility (including by claim amount).
  • Impact of accidental risk (along with other accidental factors).
  • Impact of occupation.

Practical outcome:

  • The audience will be left with a good view of how claims volatility changed over the past few years.
  • They should have a better understanding of some of the drivers of accidental risk.
  • We will also consider the effect of occupation on mortality experience.

WHEN GOOD WORK FAILS: WHY PROVIDER PROFILING IN SOUTH AFRICA DOESN’T EFFECT CHANGE
Shivani Ranchod, Njabulo Dube

Paper with presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Healthcare

Suggested audience knowledge level: Foundational

Multiple entities in SA run “provider profiling” systems on behalf of healthcare funders – reporting to doctors how their cost and quality of care stacks up. We consider how doctors experience these reports.

Outcomes:

  • Understanding of provider profiling: who does it, why do they do, how do they do it
  • Comparison of statistical methods used
  • Behavioural perspective on report impact
  • Overview of competitive and commercial dynamics
  • Practical solutions to improve impact

BELIEVING THE BOT: MODEL RISK IN THE ERA OF DEEP LEARNING
Ronald Richman, Nicolai von Rummell

Paper with presentation and Audio Recording

October 23, 2019, 9:00 AM – 10:15 AM

Relevant practice area(s): Short-term Insurance

Suggested audience knowledge level: Foundational

Deep Learning models are introduced into business processes to support decision making in insurance companies. At the same time model risk is recognized as an increasingly relevant field within the management of operational risk that tries to mitigate the risk of poor business decisions because of flawed models or inappropriate model use. In this paper we try to determine how Deep Learning models are different from established actuarial models currently in use in insurance companies and how these differences necessitate changes in the model risk management framework. We analyse specific operational risk in the development and implementation of Deep Learning models using examples from pricing and mortality forecasting to illustrate specific model risks and controls to mitigate those risks. We discuss the change in model governance and the role of the actuarial function could play in providing assurance to the board on the appropriate use of Deep Learning models.


MORTALITY TRENDS: DECLINING LIFE EXPECTANCY IN DEVELOPED COUNTRIES
Bruce Robertson, Lize-Mari Wiggill

Presentation and Audio Recording

October 23, 2019, 9:00 AM – 10:15 AM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational

Recent analysis of Human Mortality Database data has shown surprising decreases in life expectancy in several developed countries. We examine the reasons for this, with specific reference to the differing drivers of the trends observed in various countries. We then look at the impact of socio-economic factors on mortality changes over time and discuss the potential implications for South Africa.


AN APPROACH TO USE MACHINE LEARNING TECHNIQUES TO MODEL CLAIMS EXPERIENCE AND CLAIM REPORTING DELAYS FOR THE PURPOSE OF PRICING AND RESERVING
Louis Rossouw, Ronald Richman

Paper with presentation and Audio Recording

October 23, 2019, 2:15 PM – 3:15 PM

Relevant practice area(s): Data Analytics

Suggested audience knowledge level: Foundational

This presentation will focus on the following:

  • Brief overview of IBNR methodologies.
  • Existing applications of ML to calculate run-off triangles and IBNRs.
  • Brief overview of adjusting exposure for reporting delays in experience analyses.
  • Model specification for experience studies as well as allowing for claim run-off.
  • Application of the method to pricing.
  • Application of the method to reserving.
  • Measuring the accuracy of the proposed methodology compared to existing approaches.
  • Practical example.

Practical outcomes include:

  • Understanding how allowance for claim reporting delays can be included in ML modelling.
  • Illustration how to apply ML techniques in mortality experience while allowing for claim reporting delays.
  • Examples of using the above for IBNR reserves.

HOW MUCH WOOD WOULD A WOODCHUCK CHUCK IF A WOODCHUCK COULD BE REASONABLY EXPECTED TO CHUCK WOOD, GIVEN HIS EDUCATION, TRAINING AND EXPERIENCE?
Brice Salence, Pedrie le Roux

Presentation and Audio Recording

October 22, 2019, 12:30 PM – 1:30 PM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational

  • Topic aims to review the current PHI product, especially the definition of disability in initial and extended period.
  • We will present on termination experience in the SA market, highlighting the effect of the change in definition.
  • Some case studies will be assessed, particularly from the Ombudsman, to provide various views.
  • Views from claims assessors and other insurance stakeholders will be shared.
  • Possible alternatives and solutions will be explored.

The audience can expect the following outcomes:

  • Deeper understanding of the current problem existing in the South African Group Income protection market.
  • Updated information on the termination experience in the SA market for this product.
  • Exposure to wider viewpoints, as opposed to purely actuarial pricing views.
  • Practical considerations when analysing PHI products.
  • Exploration of possible solutions and alternatives.

REAL APPLICATION OF FACTOR INVESTING IN SOUTH AFRICA
Ann Sebastian

Presentation and Audio Recording

October 22, 2019, 10:15 AM – 11:30 AM

Relevant practice area(s): Investments

Suggested audience knowledge level: Intermediate

  • The last two decades have seen the rise of index tracking investment products as well as factor based investment strategies such as smart beta portfolios.
  • The transparency and cost benefits promised by these products has seen them gain significant market share throughout the developed world.
  • South Africa has not seen the same take-up however.
  • Amongst the reasons provided for this lack of take-up is the concentration and liquidity characteristics of the South African market.
  • Our market supposedly lacks both the breadth and liquidity which has allowed passive and particularly factor strategies to flourish in the developed markets.
  • Our study considers whether the breadth and liquidity of the South African equity market render passive and factor strategies unviable.

Some outcomes of our study:

  • Concentrated equity index benchmarks are the norm throughout the world, even in developed markets where passive and factor strategies have had significant uptakes.
  • The concentrated nature of the South African market is a constraint for both factor and active investment managers.
  • South African equity active investment managers are mostly index cognizant as a result of the concentration constraint.
  • Active, passive and factor funds in SA are index cognizant in order to take advantage of the liquidity screening provided by the indices.
  • Active, passive and factor funds face similar liquidity and concentration considerations meaning that no one fund type is at a disadvantage.
  • We find that liquidity and concentration characteristics are not an impediment to the viability of passive and factor strategies in South Africa.

APPLICATION OF ACTUARIAL TECHNIQUES IN BANKING
Michael Tichareva

Presentation

October 22, 2019, 12:30 PM – 1:30 PM

Relevant practice area(s): Banking

Suggested audience knowledge level: Foundational

The presentation will cover at a high level some of the techniques being applied or that can be applied by actuaries in the following areas of work in banking:

  • Actuaries performing IFRS 9 and other credit risk modelling work such as modelling of Probability of Default, Loss Given Default and Exposure at Default
  • Data Analytics in many areas of banking work
  • Balance Sheet and Capital Management
  • Liquidity and Funding Risk Management
  • Interest Rate Risk Management in the banking book
  • Operational Risk Management such as fraud analytics

The audience can expect the following practical outcomes:

  • Understanding of some of the areas of work of actuaries in banking
  • Understanding of some of the techniques being used by actuaries in banking assignments
  • Appreciation of how actuarial techniques may be applied in many different field such as banking
  • The opportunities that exist for actuaries to innovate and solve practical problems in banking

USING NEW TECHNOLOGY TO SOLVE TRADITIONAL ACTUARIAL PROBLEMS
Beena Vallabh, Sean Arthur

Presentation and Audio Recording

October 23, 2019, 9:00 AM – 10:15 AM

Relevant practice area(s): Life Insurance

Suggested audience knowledge level: Foundational

  • One of the key decisions that we had to make for the IFRS17 implementation was the tool that we will use to build the Contractual Service Margin and Risk Adjustment.
  • A number of off the shelf solutions as well a big data solutions were considered. The presentation will discuss the pros and cons of each solution and why we decided to use an open source big data solution.

Outcomes

  • Traditionally big data is thought of for analytics however it can also be used to make valuations easier and more efficient.
  • Pros and cons of using an unstructured database.
  • The more actuaries that start working on open source solutions the more viable it becomes.
  • As a community we need to keep up to date with technology in order to stay relevant and continue looking at how technology can be used to revolutionise processes to allow for more time on analytics.