LIFE INSURANCE

APPLICATIONS
SUBJECT SYLLABUS
 Life Insurance Applications
Subject Syllabus – December 2019

1. Overview and aim

The Life Insurance Applications subject applies the principles taught in the Life Insurance
and Retirement Valuations and Product Development courses to an Australian context.

The aim of this subject is to provide students with an understanding of how a life insurance
company operates in Australia and the legal, regulatory and professional framework that
governs the industry.

There are four cycles where actuaries have a core function when advising the business:
product management; valuations; risk management; and business planning. In each cycle
the actuary is required to understand the problem, develop a solution and monitor
outcomes. This course aims to equip students with the tools to perform these functions for
an Australian life insurance company.

2. Student outcomes
After successful completion of this subject, students will be able to:

• describe the commercial, legislative, regulatory and professional environments that

apply to Australian life insurers;
• describe and apply the actuarial control cycle to product management, valuations,
risk management and business planning for business sold by life insurers operating in
Australia;
• prepare components of key inputs used in, or outputs produced, as part of product
management, valuations, risk management or business planning for life insurers working
in Australia;
• evaluate components of key outcomes from product management, valuations, risk
management or business planning processes for life insurers operating in Australia;
• understand how product management, valuations, risk management and business
planning processes interact; and
• describe and apply the prudential requirements of actuarial advice within a life insurer
operating in Australia.

© 2020 The Institute of Actuaries of Australia

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 Life Insurance Applications
Subject Syllabus – December 2019

3. Prerequisites
Students will have studied (but not necessarily passed) Life Insurance and Retirement
Valuation and Life Insurance and Retirement Product Development courses. It is assumed
students have studied (but not necessarily passed) the Foundation and Actuary program
subjects or their equivalents.

4. Assessment skill level

Assessment of this subject will test the following skill levels in the proportions shown in the
brackets:

• Knowledge (20%): Demonstration of a detailed knowledge and understanding of the

topic.
• Application (50%): Demonstration of an ability to apply the principles underlying the
topic within a given context.
• Higher Order (30%): Demonstration of an ability to perform deeper analysis and
assessment of situations, including forming judgements, considering different points of
view, comparing and contrasting situations, suggesting possible solutions and actions,
and making recommendations.

5. Assessment method
The subject is assessed via a three-hour (plus 15-minute reading time) open-book
examination worth 80% and an assignment worth 20%.

6. Learning objectives
The following is a list of the learning objectives for this subject:

1. Describe the significant components and trends within the Australian life
insurance market.

1.1 Significant trends and recent issues in the Australian life insurance market.

1.2 The life insurance market in Australia and major players.

1.3 The range of organisational structures associated with Australian life insurers.

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 Life Insurance Applications
Subject Syllabus – December 2019

1.4 Types of life insurance products sold in Australia and their features, including
profitability.

1.5 How products are sold in Australia.

1.6 Consumers of Australian life insurance products, including their needs and best
interests.

1.7 Industry data available for Australian life insurers.

2. Describe the legislative environment for life insurance in Australia and how this
relates to the issues an actuary is expected to address.

2.1 The key requirements of the relevant legislation and their application to
actuarial practice in life insurance.

3. Examine the principles of taxation in Australia as they apply to life insurance.

3.1 Effect of taxation on product design, pricing, valuations, capital and profit
reporting for life insurance products.

4. Describe the role of the regulators supervising life insurers and how their
operations affect actuarial practice.

4.1 APRA’s standards and guidance for life insurers.

4.2 ASIC’s regulatory guides that are relevant to actuarial practice within a life
insurance company.

5. Describe the various roles and responsibilities of the actuary within a life
insurance company.

5.1 Role, requirements, and legal and professional responsibilities of the Appointed
Actuary.

5.2 Actuaries Institute’s professional standards and guidance.

5.3 Role of the Auditor and/or Actuarial Auditor.

6. Describe and apply the actuarial control cycle to product management for a
life insurance company operating in Australia in order to prepare components
of key inputs and outputs and to evaluate the outcomes from this process.

6.1 Objective of the product management cycle and key inputs and outputs.

6.2 Key stakeholders involved in the product management cycle and their role.

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 Life Insurance Applications
Subject Syllabus – December 2019

6.3 Risks and benefits associated with life insurance products from the perspective
of different stakeholders.

6.4 Assumptions for pricing life insurance products.

6.5 Methodologies for pricing life insurance products.

6.6 Actuarial Advice Framework in accordance with prudential and professional

requirements.

6.7 Sensitivity testing and/or scenario analysis in practice.

6.8 Underwriting and claims management in practice.

6.9 Retail lump sum insurance in practice.

6.10 Retail disability income insurance in practice.

6.11 Direct insurance in practice.

6.12 Group insurance in practice.

6.13 Reinsurance in practice.

6.14 Unit pricing in practice.

6.14.1 Actuarial review of the means by which unit values are determined.

6.14.2 Actuarial review of remediation resulting from unit pricing errors.

6.15 Participating business in practice.

6.15.1 Distributing profits to participating policy owners in practice.

6.16 Surrender values in practice.

6.17 Ongoing monitoring and management of products in practice.

6.18 Role of the product management cycle in valuations, risk management and
business planning.

7. Describe and apply the actuarial control cycle to valuation for a life insurance
company operating in Australia in order to prepare components of key inputs
and outputs and to evaluate the outcomes from this process.

7.1 Objectives of the valuation cycle and key inputs and outputs.

7.2 Key stakeholders involved in the valuation cycle and their role.

7.3 Experience analysis and assumption setting for the valuation of policy liabilities.

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 Life Insurance Applications
Subject Syllabus – December 2019

7.4 Valuation of policy liabilities in accordance with prudential and professional

requirements.

7.5 Regulatory capital, including the capital base and prescribed capital amount,
in accordance with prudential and professional requirements.

7.6 Reinsurance in practice.

7.7 Embedded and appraisal values and analysis of movement in practice.

7.8 Financial statements in practice.

7.9 APRA Life Reporting Forms in practice.

7.10 Analysis of profit in practice.

7.11 Actuarial Valuation Report in accordance with prudential and professional

requirements.

7.12 Role of the valuations cycle in product management, risk management and
business planning.

8. Describe and apply the actuarial control cycle to risk management for a life
insurance company operating in Australia in order to prepare components of
key inputs and outputs and to evaluate the outcomes from this process.

8.1 Objectives of the risk management cycle and key inputs and outputs.

8.2 Key stakeholders involved in risk management and their role.

8.3 The risk management framework in practice.

8.4 Allocation of capital in practice.

8.5 Internal Capital Adequacy Assessment Process in accordance with prudential

and professional requirements.

8.6 Financial Condition Report in accordance with prudential and professional

requirements.

8.7 Explain the role of the risk management cycle in product management,
valuations and business planning.

9. Describe and apply the actuarial control cycle to business planning for a life
insurance company operating in Australia in order to prepare components of
key inputs and outputs and to evaluate the outcomes from this process.

9.1 Objectives of business planning and key inputs and outputs.

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 Life Insurance Applications
Subject Syllabus – December 2019

9.2 Key stakeholders involved in business planning and their role.

9.3 Business planning process in practice.

9.4 Role of the business planning cycle in product management, valuations and
risk management.

© 2020 The Institute of Actuaries of Australia

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About the Actuaries Institute
The Actuaries Institute is the sole professional body for actuaries in
Australia. The Institute provides expert comment on public policy issues
where there is uncertainty of future financial outcomes. Actuaries have
a reputation for a high level of technical financial skills and integrity.
They apply their risk management expertise to allocate capital
efficiently, identify and mitigate emerging risks and to help maintain
system integrity across multiple segments of the financial and other
sectors. This expertise enables the profession to comment on a wide
range of issues including life insurance, health insurance, general
insurance, climate change, retirement income policy, enterprise risk and
prudential regulation, finance and investment and health financing.

Published June 2020

© Institute of Actuaries of Australia 2020
All rights reserved

Institute of Actuaries of Australia

ABN 69 000 423 656
Level 2, 50 Carrington Street,
Sydney NSW 2000, Australia
t +61 (0) 2 9239 6100
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actuaries@actuaries.asn.au
www.actuaries.asn.au