Estimating Outstanding Claim Liabilities: The Role of Unobserved Risk Factors

Spierdijk, Laura; Koning, Ruud H.

doi:10.1111/j.1539-6975.2013.01518.x

Cited by 4 publications

(7 citation statements)

References 28 publications

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“…The results of these studies show that firm size, ownership structure, mode of business and human capital are important factors affecting firm performance. Cummins and Weiss (1993) mentioned that claim settlement practices can cause inefficiency; later, Spierdijk and Koning (2014) suggested that insurers should respond to outstanding claims by setting aside this provision. This allows us to identify a gap in the literature and provides us with an opportunity to explore the impact of provision for outstanding claims on the efficiency of Takaful insurance.…”

Section: Efficiencymentioning

confidence: 99%

“…Although many papers (Cummins et al, 2017;Biener, Eling, & Jia, 2017) have investigated size as a possible common factor that influences the efficiency of insurers, our study provides accurate insight by looking at the effect of provision for outstanding claims on the efficiency and competitiveness of Takaful insurance. Spierdijk and Koning (2014) suggest that insurers should respond to outstanding claims by setting aside this provision has become a central subject in modern actuarial science. More interestingly, this paper examines the impact of efficiency on the competitiveness of Takaful insurers by attempting to provide novel research on the insurance sector.…”

Section: Introductionmentioning

confidence: 99%

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Does Efficiency Promote Competitiveness of the Insurance Industry?

Lee

Cheng

Nassir

et al. 2018

Journal of Business Economics and Management

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This paper contributes to the existing literature by examining the efficiency and competitiveness of the Takaful insurance. We employ the Data Envelopment Analysis (DEA) to compute the efficiency of Takaful operators, while Panzar-Rosse (P-R) H-statistic method is used to evaluate the degree of competition. The findings indicate that the inefficiency in Takaful’s operations is affected by the scale of operations but not by inefficiency in managerial practice. Actuaries need to pay attention to estimating provisions for outstanding claims, as this factor is negatively influencing the efficiency of Takaful insurance. Additionally, the managers are cautioned not to overspend on commissions paid to the agents because this will reduce the profit of the Takaful operators. The findings to a very large extent indicate that improvement in efficiency will increase the entry of a more viable competitor to participate in the Takaful industry. The regulators need to implement prudent monitoring of the operations of Takaful insurers because improvements in efficiency will make Takaful operators more competitive. The implications further shed light on the motivation for insurance firms to improve efficiency that enable them to charge lower price to enhance competition which may benefit both the firms and customers.

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Section: Efficiencymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does Efficiency Promote Competitiveness of the Insurance Industry?

Lee

Cheng

Nassir

et al. 2018

Journal of Business Economics and Management

View full text Add to dashboard Cite

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“…To relax this restriction, model (3) is modified by allowing the density to vary with calender month of unemployment benefit entry. This is achieved by adopting another idea from actuarial sciences (compare Spierdijk and Koning, 2014). In particular, we use claim duration density estimates that are obtained from a duration model.…”

Section: Forecast Amentioning

confidence: 99%

“…Enhanced data requirements make it more complicated to implement and run these models in real business operations as data on all variables need to be available promptly. Similar to Spierdijk and Koning (2014), another extension could be made by adopting a duration model with frailty to allow for unobserved factors in the analysis.…”

Section: Summary and Recommendationsmentioning

confidence: 99%

“…More related to the goals of this study, new research in actuarial sciences has developed forecasts for aggregate figures on the grounds of micro-data-level analysis (compare Antonio and Plat, 2014). This approach has also been shown to be useful in estimating outstanding claim liabilities in the disability insurance (Spierdijk and Koning, 2014) and forecasting mesothelioma mortality . This article adopts the idea of using individual-level data to construct forecasts for macroeconomic figures.…”

Section: Introductionmentioning

confidence: 99%

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Forecasting Macroeconomic Labour Market Flows: What Can We Learn from Micro‐level Analysis?

Wilke

2017

Oxf Bull Econ Stat

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Forecasting labour market flows is important for budgeting and decision-making in government departments and public administration. Macroeconomic forecasts are normally obtained from time series data. In this article, we follow another approach that uses individual-level statistical analysis to predict the number of exits out of unemployment insurance claims. We present a comparative study of econometric, actuarial and statistical methodologies that base on different data structures. The results with records of the German unemployment insurance suggest that prediction based on individual-level statistical duration analysis constitutes an interesting alternative to aggregate data-based forecasting. In particular, forecasts of up to six months ahead are surprisingly precise and are found to be more precise than considered time series forecasts. JEL Classification numbers: C53, C55, J60. *Thanks are due to Jens P. Nielsen, Lola Martínez, Héctor C. Villanova and Enzo Weber for helpful discussions and to the former two for making their R code for the chain ladder model (-to be released as package 'Double Chain Ladder-) available. The comments of two reviewers have been also gratefully acknowledged.

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Efficiency, firm-specific and corporate governance factors of the Takaful insurance

Lee

Cheng

Har

et al. 2019

IMEFM

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Purpose Malaysia is recognised as an emerging country with a large Muslim population, making the Malaysian Takaful industry the largest Takaful market in the Southeast Asia region and, notably, one of the fastest growing markets globally. Malaysia is also the first country globally to implement a risk-based capital framework for Takaful. Therefore, the purpose of this paper is to identify the factors that influence the efficiency level (cost efficiency and technical efficiency) of the Takaful industry and to examine the effects of Takaful insurance firms’ specific factors and corporate governance factors that influence the efficiency of Takaful insurance in Malaysia. Design/methodology/approach In this paper, the efficiency level of the Malaysian Takaful industry was examined between 2011 and 2015. The sample consisted of 11 family Takaful and 8 general Takaful operators. Two-stage Data Envelopment Analysis (DEA) was used by first, conducting non-parametric frontier data envelopment analysis to obtain a DEA score for each operator. This was followed by panel regression with the DEA scores as the dependent variable and the insurance firms’ specific factors and corporate governance factors as the independent variables. Findings The results of DEA indicate that Takaful operators in general have allocative inefficiency but family Takaful is more cost efficient than general Takaful. Results of panel data analysis reveal that corporate governance factors do influence the cost efficiency but find no evidence on the firm-specific factors towards the cost efficiency and technical efficiency on Takaful operators. Board size and the proportion of non-executive directors impose a negative and significant relationship with cost efficiency, while proportion of Muslim directors in the board is not significant. Research limitations/implications This paper focused solely on Malaysia which uses strict regulations governing the Takaful insurance market. Due diligence was also performed to minimise any limitation in the paper. It is proposed that future studies should examine this issue in greater detail by incorporating more data from other Muslim countries. Practical implications The findings of this paper have significant implications for policymakers to understand the efficiency condition in the Takaful market. Takaful operators should maintain a small board size with a higher proportion of executive directors, given they could improve the level of effective decision-making to enhance the cost efficiency. As corporate governance factors are significant, Takaful operators in Malaysia should also undertake transparent disclosure practice and reporting such as providing adequate and relevant information related to Shariah compliance and principles to provide a robust foundation as the Takaful market leader regarding Takaful regulations globally. Social implications The consumer is able to make a better decision when choosing Takaful insurance company to protect their interests. Originality/value No similar paper has been undertaken to the best of the researcher’s knowledge using similar research design and scope to investigate the efficiency of Takaful insurance as in this paper. Takaful insurance is a rapidly growing industry in Malaysia, setting a prime example to other countries globally. Malaysia was selected for this study, as it is the only nation that has implemented the most extreme regulation in the Takaful insurance market.

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Estimating Outstanding Claim Liabilities: The Role of Unobserved Risk Factors

Cited by 4 publications

References 28 publications

Does Efficiency Promote Competitiveness of the Insurance Industry?

Does Efficiency Promote Competitiveness of the Insurance Industry?

Forecasting Macroeconomic Labour Market Flows: What Can We Learn from Micro‐level Analysis?

Efficiency, firm-specific and corporate governance factors of the Takaful insurance

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