Nov-19

A technical person needs to make judgments about the relevance of information in

communicating with a non-technical person. Comment about any such judgments that you
exercised. In addition highlight any jargon that you avoided using in your reply

The way annuity pricing is done and the reasons for the repricing are not relevant from the customer
point of view except to the extent that the customer is interested in movement of annuity prices. I
did not explain what was the trigger for repricing annuity. While I or the company might have a view
on the way interest rates and equity markets might move I realize that as a Company we cannot
convey such views In demonstrating the fund growth there is an implicit assumption that the equity
returns are correlated with debt returns and there is an equity risk premium of 2%. This is a practical
way to set assumptions of returns without too much of subjectivity. I avoided jargon or explained
words and phrases like “annuitant mortality”, “fund earning rates”, “experience of annuitant
mortality”, “volatility”, “uncertainty of returns” and “projecting fund values”.

Comment about how you highlighted to the customer the uncertainties involved and the
implications of any decisions that would be taken by the customer.

The product is a unit linked product and the investment risk is completely borne by the customer. In
addition a product like annuity is very sensitive to interest rates. At times of market volatility it may
be advisable to switch out of equity. But returns could also be very high which could mean that the
annuity available for life could be higher. These risks were highlighted. Similarly uncertainty around
interest rates is an important factor which was also highlighted.

Nov 20

The email is to the head of HR. How did you ensure that the tone of the email is appropriate for a
senior colleague?

Any point relevant what the candidate describes as being appropriate.

One possible answer I ensured that the tone of the email was appropriate by considering that she
would have sufficient knowledge of pension schemes and of stock markets and indices. I did not
explain these terms and have used these terms without putting in explanations and ensured that the
mail appeared not to “talk down”. At the same time, I did not think there was a need to explain the
calculations as her focus would be in understanding that the framework is relevant rather than the
actual calculations and the associated complications of the calculations.

Explain how you summarized some of the numerical data to provide the required clarity without
cluttering the email.

Anything relevant which the candidate summarises to facilitate better understanding of the
framework and recommendations

One possible answer The paper produced by the investment team had a lot of data which had been
used to arrive at the key results. The data which was required to actually perform the calculations
did not have to be provided here again. I just ensured a summary was provided of the two measures
so that it was clear that the returns could vary based on the measure adopted. The summarising of
the data also highlighted the issues that were involved in deciding relative performance of
investment managers

Give two examples of jargon that you avoided or included but with appropriate explanations

Any of the terms which the candidate explains

One possible answer I explained the concept of TWRR and MWRR. While I named the Sharpe ratio I
did not do into any further explanations as I did not think the Head of HR would be interested in the
actual calculation.

March 21

Q. 2) How did you ensure your writing was appropriate for the lay public? What did you think
were important factors which retiring individuals should be considering when making a decision of
this nature and how did you bring out these aspects

I ensured that I kept the newsletter in a conversational style which would make it easy for people to
read. I did not use any jargon and tried to explain the options available in as simple terms as
possible. I tried to address important factors for someone at that stage of life. The most important
factor for a person retiring is that their savings last for the rest of their lives. Due to the current low
interest rate situation it may be tempting for retirees to opt for the income drawdown option. I also
highlighted that commutation was also an active choice. I highlighted the advantages and
disadvantages of choosing this option. Factors that need to be considered are the variability of funds
and the possibility of savings being exhausted. The summary which shows that the fund returns can
vary and the possibility of the fund lasting different tenures brings out these aspects.

Q. 3) Give examples of jargon that you avoided but used with explanations.

This newsletter is to the general public where awareness levels may vary significantly. Any of the
following terms may not be clear to the public

Pension corpus

Commutation

Expected mortality

Longevity risk

Annuity

Income drawdown

Q. 4) How did you effectively present the results of the analysis carried out by your team?

I brought out the variability in the annuity that would be available in case commutation option is
chosen. I also summarized the results of the variability of returns and the number of years the funds
would last.

September 21
Q. 2) What were some of the terms which you considered as jargon and left out of your reply or
explained so that a lay person can understand them?

Any of the terms as identified by the candidate with suitable explanations. Some of the terms

may not be exactly jargon however, in the context of finalizing the reinsurance program may need

detailed explanations.

e.g.

Risk appetite as defined in the context of the example given here

Credible experience

Parameter risk

Volatility

Stress scenarios

Deterministic approach

Retention levels,

Types of reinsurance arrangements

1 in 10 scenario

Q. 3) One of the ways that communication with non-technical audience can be made effective is
by leaving out information which may not be relevant for the audience. Explain what information
you considered as irrelevant and left out of your reply.

Examples with explanation of any information that the candidate considered irrelevant It was really
not necessary for the Director to understand how the levels had been determined. The Director’s
concerns was that reinsurance would result in reduced profits. Explaining that this is one of the
factors considered and summarizing the results of the sensitivity analysis is sufficient to address the
Director’s question

Dec 22

List the jargons that you have explained and which you have skipped?

Jargons explained:

 UPR

 Excess of Loss

 Solvency

Jargons not explained:

 IBNR

 Investment income

 Formula of Solvency
Q. 3) Explain what is Loss Ratio?

Loss ratio is the proportion of premium that is used to pay claims (and not towards expenses). It
helps track the profitability of business being booked.

July 2022

Q. 2) State with reasons, four terms which you considered as jargon and left out of your reply or
explained so that the Director can understand them?

Solution 2:

Any technical term the candidate considers as jargon with an explanation of why they considered it
as jargon. There are a number of such jargons mentioned in the supporting material which someone

from non general insurance background may find difficult to apprehend.

Q. 3) One of the ways that communication with non-technical audience can be made effective is
by leaving out information which may not be relevant for the audience. Explain what information
you considered as irrelevant and left out of your reply.

Solution 3:

Any information that the candidate filtered. There are a lot of technical details of how reserving is

carried out, utilisation of reserve, different methods with specific results, frequency, severity etc.

Candidates should be able to demonstrate that they filtered this information while framing the

response.

March 2022

Q. 2) Give two examples of jargon which you left out of your reply explaining why you considered
them as jargon.

Solution 2:

Any technical term the candidate considers as jargon with an explanation of why they considered it
as jargon.

Q. 3) One of the requirements for effective communication is filtering information. Give examples
of any such filtering you have done in your response to the email.

Solution 3:

Any information that the candidate filtered. There are a lot of technical details of how pricing is done
and how VNB is calculated. The candidate should be able to demonstrate that they filtered this
information while framing the response.

Q. 4) Explain how you structured the information in your email so that the distribution head can
follow your explanation.
Solution 4:

Structuring can be done by giving specific headings or sign posting in the reply. This is an email reply
and therefore structuring using headings maybe difficult. The candidate should be able to explain
how they have done structuring in their reply.

May 2023

Explain how you decided on

i) Structure of your response (3)

ii) The depth of your explanation (5)

iii) Filtering information

Any answer which logically lays out the thought which has gone into drafting of the response

covering the three key points.

E.g

I thought as head of sales the question that would be on top of his mind is whether there would

be a change of business plan. Considering that there is a strategy meeting which is coming up

where the current economic environment and response of the Company will be discussed he

would want to be prepared to understand the risk management framework of the Company.

He has also read various articles of banks going out of business and would want to understand

whether the situation would be similar for an insurance Company. I took my cue from his email

and structured the answer in such a way that his key questions are addressed.

On depth of the answer, I gave him information which he has specifically requested. While he is

part of the management and would be involved in decision making, it is not necessary for him

to know the specifics of matters. In making its recommendation, the risk management

Committee would have recourse to the policy which has already been drawn up and would be

assessing particularly any risk which is arising from the current situation which the current

framework may not address sufficiently. Considering that a strategy meeting is planned, the

sales director should have enough knowledge on the framework to participate in any

discussions. He is also asked specific questions after reading about the situation in other

countries.

I thought it is best to explain how the risk management framework works, what is the level of

stress that the Company can handle given its business plans. I thought it is important he

understands what are the key risks faced by the Company and therefore explained it in as

simple a language as possible. I also explained that liquidity risk is something that the Company
keeps monitoring that the current framework allows for extreme situations. I did not think it

was really necessary that he knows the precise results as they would not have really increased

his understanding of the situation. I did emphasise on the conclusions. I also pointed out that

while risk management has factored in stresses, considering the current situation, stresses have

been performed on top of the current stressed situation. Tactical measures have been put in

place to handle the situation, but the Company is capitalised to handle these situations.

I didn’t think there was a need to point how pricing was being done, or the kind of asset

strategy which was being followed and definitions and ratios of liquidity coverage ratio.

November 2023

Q. 2) While drafting your response above what are some of the terms which you considered as

jargon and left out of your reply or explained in detail/ simpler language so that a nonactuarial/
non-technical person can understand them?

Following are the jargons which are excluded out of the note in part 1:

1. Liability for remaining coverage - LFRC, instead unearned liability has been used which relates

to the existing framework.

2. Liability for incurred claims - LIC, instead earned liability has been used which relates to the

existing framework.

3. Onerous contracts - for the purpose of the note loss making contracts has been used as a

replacement.

4. UAT, user acceptance testing - this has not been used as it is because not everyone would

relate to its usability with respect to setting up of models.

5. SIT, system integration testing - same reason as point 4.

Q. 3) Given that the CEO has asked you to prepare a crisp note, one way to make your

communication effective is by leaving out some information which may not be relevant for

the purpose of discussion. Explain what information you considered as irrelevant and did

not use it in the note.

1. Details of how the cash flows will be calculated and then adjusted for time value of money is

considered too granular for the purpose of the note.

2. Top down and bottoms up approach - since the idea was to explain the impact of discounting,

how the discount rates are derived was not relevant.

3. Company needs to allow explicitly for the risk adjustment factor, but details of its calculation

are not relevant to the note i.e., based on statistical techniques.

4. Sharing excess details on what will be done as a part of financial and operational impact

assessment.

5. Discuss details about company’s current performance such as current business growth,

profitability numbers for 2023 are not relevant for the note.