You are currently working for VerySafe Insurance Berhad as an actuary. The current outbreak of COVIC-19 has caused uncertainty of future performance for the insurance industry, as the loss claim predicted is going to increase due to high premature death caused by the virus. The insurance company needs to relook into its current policy premium in ensuring the company will be able to pay any loss claims by using the premium collected.

The news released by the Life Insurance Association of Malaysia (LIAM) has captured your attention. It is reported that Malaysia has recorded more than 20,000 people being infected by the virus yesterday in which is the highest number since March 2020. The total amount of life insurance claims up to date is reaching RM9.45billion.

Your superior is concerned about the increase of insurance claims on VerySafe Insurance Berhad’s financial performance.

Based on the financial statement for VerySafe Insurance Berhad, you are required to:

1. Determine the pure premium needed to pay loss expenses that occurred for the total number of 1,300,000 policyholders. Elaborate on the answer generated.

Based on the answer generated in (a), identify the gross rate for VerySafe Insurance Berhad if the expenses ratio is 35 percent. Elaborate on your answer.

3. The current uncertainty on the financial market had caused the expected loss ratio of pre-determined of 75 percent increase to 95 percent. You need to investigate this impact on the gross rate changes for VerySafe Insurance Berhad.

Estimate the total amount of gross premium received from the total expose units in (a) by referring to the new gross rate obtained in (c). Explain your finding. (3 marks)

5. Discuss THREE (3) important reasons to ensure the solvency of an insurance company to the general public.
    

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VerySafe Insurance Berhad Balance Sheet as at 30 June 2021 (million) 20 Loss Reserve Cash Certificate of Deposit Marketable Securities Comon Stock Bond Property Premium Receivable Others Assets 30 Unearned Premium 100 Loss adjustment Exp 150 Commision Payable 200 100 Stock Holder's Equity Retained earnings 300 200 1100 306 200 14 180 250 150 1100 VerySafe Insurance Berhad Profit & Loss Statement As at 30 June 2021 (Million) Premium Written Premium Earned Interest Income Dividends Rental Income Profit from investment Loss incurred Loss adjustment expenses Commission Premium taxes Administrative exp Gross profit Corporate tax Net profit 14 2.4 0.6 1 -133.6 -14 -18 -5.05 -41.59 206 205 18 -212.24 10.76 -3.26 7.5 VerySafe Insurance Berhad Balance Sheet as at 30 June 2021 (million) 20 Loss Reserve Cash Certificate of Deposit Marketable Securities Comon Stock Bond Property Premium Receivable Others Assets 30 Unearned Premium 100 Loss adjustment Exp 150 Commision Payable 200 100 Stock Holder's Equity Retained earnings 300 200 1100 306 200 14 180 250 150 1100 VerySafe Insurance Berhad Profit & Loss Statement As at 30 June 2021 (Million) Premium Written Premium Earned Interest Income Dividends Rental Income Profit from investment Loss incurred Loss adjustment expenses Commission Premium taxes Administrative exp Gross profit Corporate tax Net profit 14 2.4 0.6 1 -133.6 -14 -18 -5.05 -41.59 206 205 18 -212.24 10.76 -3.26 7.5

Answer rating: 100% (QA)

a To determine the pure premium needed to pay loss expenses that occurred for the total number of 13... View the full answer