Taylor Fry

 

Actuarial

Budgeting & Monitoring

Accurate budgeting and monitoring are crucial to the effective management of insurance portfolios and accident compensation schemes.  By monitoring actual versus expected performance you can identify and address underlying issues as they arise, and protect the performance of your business.

At Taylor Fry, we guarantee ongoing, genuine insight into business performance. We have a wealth of experience designing innovative and effective budgeting and monitoring frameworks that tell our clients exactly what’s happening. You can see when things are running smoothly or when you need to take corrective action, such as adjusting pricing, underwriting or capital management. By keeping you one step ahead, our monitoring tools enable optimum business performance.

Cutting-edge business tools

Our innovative, effective approach to budgeting and monitoring has been hard won over many years’ collective experience. Traditional budgeting and monitoring tools concentrate on overall statistics, such as the number of claims or amounts paid.  Although useful in certain circumstances, these statistics provide only limited insight into the underlying performance of the business, failing to identify exactly which processes are underperforming.  Additionally, traditional tools do not differentiate between ‘noise’ and ‘signal’: that is, when discrepancies between actual and expected scheme experience reflect random fluctuations, and when they indicate a need for intervention.

Our budget and monitoring tools are different because they:

  • Identify the key processes driving the financial performance of the business, and model each constituent element separately, so that you know exactly which part of the process needs to be fixed.
  • Provide a range of values for each part of the claims cost, instead of a providing a single predicted value, so that you can discern what is random fluctuation and what is a significant variation.

When applied across all components of the claims cost, our analyses give our clients a clear indication of:

  • exactly which part of the claims process (and not just the statistics) differed from what was expected
  • whether or not those differences are significant and require action
  • the effect of significant changes on payments and liabilities.

Case study: annuity-type benefits

We recently developed a monitoring tool for a scheme with significant annuity-type benefits. Our client was concerned about the differences between actual and expected payments of this type, and was unsure if substantial additional expensive investigations were required.

We developed a budgeting and monitoring tool for the scheme that demonstrated that no additional investigations were necessary at present.

As the above graph illustrates, our tool showed that recent actual payments per active claim were close to the predicted values, and that the variations between actual and expected payments could be safely attributed to random variation. (In the graph, Predicted Payments Per Active Claim are in blue;  the lower and upper bounds for this value are in green; and the actual value is in red.)

The ongoing use of this tool will allow our client to identify when such an investigation is required, ensuring that they only invest in costly investigative action when it is genuinely needed.

CONTACT US TODAY

Richard Brookes

Richard.Brookes@taylorfry.com.au

(02) 9249 2911