• Pricing
• Accounting Systems
• Embedded Value
• Capital Management
• Team Building

Issue
Most insurance products are long-term in nature with substantial first year expenses and capital investment. Companies offer the policyholder long-term guarantees while embedding a number of options in the contract that the policyholder can choose to exercise to their benefit and the company's detriment. This means that the determination of the correct price to charge the policyholder, either in terms of premiums or expense loads is very dependent on long-term assumptions about policyholder actions and overall business and economic experience.

Learning Objective
The simulation is intended to let the participants experience the uncertainty of product pricing in a sales driven competitive environment. They will learn to understand the varying impacts that premium level, commissions and expenses can have on the profitability of an individual product and how they also drive its marketplace competitiveness, often in the opposite direction.

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Accounting Systems

Issue
Insurance companies today are burdened with the need to report their results using multiple accounting systems. This is true even if they operate in only one territory. Often times, because these accounting systems are designed for use by very different audiences, they can produce very different results with respect to a company's performance. In certain situations, this may limit management's ability to implement strategies. Moreover, at its extreme, may cause an apparently healthy company, as measured on one accounting basis, to cease doing business.

Learning Objective
Using the various annual reports generated by the simulation, participants will learn the differences in the major account systems. And just like real life, the simulation has rules based on each of the systems used that at times can limit the range of business opportunities.

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Embedded Value

Issue
Embedded Value or Economic Value is not unique to insurance company performance management but the long-term nature of insurance products has created unique implementation issues. Despite these concerns and because of the various shortcomings of other insurance accounting systems it currently is being considered by many insurance companies as an alternative to those systems for management performance measurement. One of its strongest attractions is the direct linkage between pricing and aggregate operational measurement.

Learning Objective
In the reports provided after each round, this linkage will be demonstrated to the participants. Through the various rounds of the simulation, they will learn how to use that linkage to build value in a company.

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Capital Management

Issue
In most cases, the insurance business is a capital-intensive one. Capital is needed to not only implement a business strategy but also every time a product is sold more needs to be invested. This investment may be in the form of acquisition expenses that cannot be funded with first year premium or it is the allocation free surplus to risk based capital (RBC) or solvency margins driven by the risks, both insurance and asset, the company has taken on.

Learning Objective
In the simulation, capital is sometimes a scarce resource for a participant's company, not unlike real life. Participants will learn to anticipate capital problems and learn what can be done to solve them before it is too late.

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Team Building

Issue
Completely separate from the insurance related knowledge and experience presented through the simulation is the team building opportunity offered as a result of the way the simulation is implemented. Participants must solve business problems where in most cases they have only just learned through the lectures and discussions what are the important issues and considerations. The time pressures are such that unless everyone participates, and the competitive nature of the simulations tends to motive participation, the teams will not have enough time to test and implement their strategies.

Learning Objective
Participants will learn how to work with others in an environment where no one person has superior knowledge.