How can actuaries help the Government understand and solve society’s biggest problems?Felix TangKPMG

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

What I’ll talk about

• General Insurance fundamentals

• Case studies of “parallel worlds”

• Joining the dots

General Insurance fundamentals

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Concepts we almost take for granted…• Exposure x frequency x severity x timing

• “Data triangles” – cohort vs development

• “IBNR”!

• Current vs “ultimate”

• Not all models work in all situations – fit for purpose

• Imperfect data

• Commercial judgement

Case studies of “parallel worlds”

CaseStudy1

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 1 – Child protection• Child protection and out of home care services

• Provided by government and non-government organisations

• Recent growth in CYPs in the OOHC system

• Strain on system, and disproportionate increase in costs

• What’s driving the growth?

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 1 – Child protectionGraphs shown during presentation:

• Number of CYP in OOHC by placement provider

• Average length of OOHC episodes by date of entry

• Average length of OOHC episodes by date of exit

• Average length of OOHC placements by date of exit

• Running average length of NGO placements by exit cohorts

• Count of new versus re-placements of OOHC

• Example of other exploratory analyses – report reasons

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 1 – findings• CYPs staying in the system longer – both Govt & NGO

• Past increase in placement churn for Govt – correcting

• Recent increase in placement churn for NGO

• Evidence of placements getting shorter – stability of care?

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 1 – key take-outs• Concept of “ultimate” duration

• Data triangle – entry cohort by exit delay

• Concept of stock (in system) vs flow (entry/re-entry/exit)

CaseStudy2

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 2 – Family violence• Government wants major reforms to tackle FV

• Past data on demand and costs for FV related services

• Project future demand and costs as “baseline”

• How should we model it?

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 2 – Family violenceGraphs shown during presentation:

• “Predictive” model – ARIMA time series

• “Inference” model – drivers of entry, referrals, transitions

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 2 – key take outs• Prediction vs inference models – fit for purpose

• IBNR!

• Exposure x frequency x severity x timing

CaseStudy3

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 3 – Social investment• Investment vehicle with dividend linked to social outcomes

• To provide funding for an intense intervention programme

• Tiered dividends based on grading of success rates

• How can we determine the success rate bands?

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 3 – technical perspective• Determine the “baseline” level for the outcome measures

• Examine past level of volatility in the outcome measures

• Determine the detection threshold of a “significant” shift

• “Wider” band earlier? – less certain of “true” success

• Back-end loaded dividend

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 3 – commercial perspective• Wouldn’t delayed dividend discourage investors?

• Is there a risk of adverse selection to the programme?

• What happens if the “baseline” changes in the future?

• Moral hazards in the outcome measure? (timing difference)

• Is there a way to mitigate all these?

• Balance of commercial judgement

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Case study 3 – key take outs• Imperfect data

• Commercial judgement

Joining the dots

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Every data point is a story

Source: KPMG

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Document Classification: KPMG Public

© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.

Value we bring as actuaries

Accustomed to modelling uncertain future

outcomes, often with imperfect data

We see both the trees and the forest

Delivering relevant and actionable insights

Conveying complex ideas to non-technical audiences

Document Classification: KPMG Public

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© 2017 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

Liability limited by a scheme approved under Professional Standards Legislation.

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