Management Tools within the MedNet concept Wolfgang Hölzle, Munich Re IAAHS Colloquium, 27-29 April 2004 Münchener Rück Munich Re Group
Management Tools within the MedNet concept Munich Re Content Health insurance value chain 3 Risks of insurance 6 MedNet concept 10 Management Tools 20 Examples 45 2
Health insurance value chain…
Management Tools within the MedNet concept Munich Re Health insurance value chain Product Market- Risk Quality Prepa- Risk Risk- develop- ing control- assur- ration selection carrying ment & Sales ling ance Primary Insurer Reinsurer 4
Management Tools within the MedNet concept Munich Re Reinsurer‘s cosmos Reinsurer Insurer Insurer Insured Provider Insured Provider Member Member Insurer Insured Provider Member 5
Risks of insurance
Management Tools within the MedNet concept Munich Re Generic risks of insurance Risk of error • Inappropriate products for market environment • Wrong assumptions in calculation (insufficient premium level) Risk of change • Change of medical trend • Significant change in portfolio composition • Change in behaviour patterns of the insured population Risk of fluctuation • Catastrophic claims • Cumulative claims 7
Management Tools within the MedNet concept Munich Re Additional risks of insurance Risk of business management • Inadequate operational set up and processes • Inadequate IT-infrastructure • Inappropriate underwriting, hence adverse selection • Supplier induced demand Risk of distance (especially for the reinsurer) • Lack and lag of information • Lack of transparency of performance • Limited potential to control and influence business management 8
Management Tools within the MedNet concept Munich Re Risks of insurance Generic risks cannot be Generic risks eliminated, but every risk • Error carrier should aim to minimize • Change them. • Fluctuation Within the MedNet concept, Additional risks Munich Re strives for the • Business reduction of the additional risks management and thereby also minimizes the • Distance generic risks. 9
MedNet concept
Management Tools within the MedNet concept Munich Re Business models of Munich Re Munich Re participates in health insurance risks under the condition of full transparency • In saturated markets by offering traditional and non-traditional reinsurance products • In emerging markets by offering turn-key solutions for - business management - risk carrying 11
Management Tools within the MedNet concept Munich Re What is MedNet? A reinsurance business model working with specialised service organisations (MedNet) providing the primary insurer a full range of services to manage their health insurance risks 12
Management Tools within the MedNet concept Munich Re MedNet’s core functions (1) Product development • Execution of market/competition analysis • Packaging of benefits specifically for the market Underwriting • System supported risk assessment and selection for individuals (Normrisk) • Experience-based group renewal Production • Issuing of policies for individual and group business • Management of additions and deletions 13
Management Tools within the MedNet concept Munich Re MedNet’s core functions (2) Network management • Set-up and maintenance of a provider network Medical management • Pre-approvals • Medical guidelines Data management • Information technology • Reporting & statistics 14
Management Tools within the MedNet concept Munich Re MedNet‘s position Insurer Münchener Rück Munich Re Group effe ctive Business Management Insured Provider Member 15
Management Tools within the MedNet concept Munich Re Contractual relationships Insurer Münchener Rück Munich Re Group Service Reinsurance agreement contract Insurance policy Insured Provider Service Member agreement 16
Management Tools within the MedNet concept Munich Re Existing MedNet markets Münchener Rück Munich Re Group Saudi Unit. Arab Jordan India Turkey Greece Cyprus Italy Arabia Emirates 17
Management Tools within the MedNet concept Munich Re Interactive co-operation in value chain Munich Re through MedNet Product Market- Risk Quality Prepa- Risk Risk- develop- ing control- assur- ration selection carrying ment & Sales ling ance Munich Re participates in various areas of the value chain within the MedNet business model and hence adds value to the risk carriers 18
Management Tools within the MedNet concept Munich Re Management by data Data management Product Market- Risk Quality Prepa- Risk Risk- develop- ing control- assur- ration selection carrying ment & Sales ling ance based on proper IT-infrastrucure The integration of professional data management together with tailor-made management tools are preconditions for the overall success 19
Management Tools
Management Tools within the MedNet concept Munich Re Management objectives Key objectives of management: Planning • Monitoring • Controlling • “Know where you are today to ensure correct planning for tomorrow and success in the long run” 21
Management Tools within the MedNet concept Munich Re Data flow Operational Data Management system warehouse Tools Internet Internet Oracle database MedNeXt Powerplay Excel tools 22
Management Tools within the MedNet concept Munich Re Management Tools - overview Monitoring Management Group Information Tool System (MIS) Group Forecasting Renewal Tool Tool Product Tool Planning Controlling 23
Management Tools within the MedNet concept Munich Re Management Tools – main objectives (1) IBNR algorithm Proper estimation of completion factors (is equally applied for all Management Tools) MIS Tool Monitoring of key performance indicators for the technical-, operational- and combined account on a market level Group Tool Monitoring of key performance measures on a group level 24
Management Tools within the MedNet concept Munich Re Management Tools – main objectives (2) Group Renewal Tool Controlling and steering of renewal group portfolio Product Tool Controlling of key performance indicators on a product level and option for automated premium adjustment Forecasting Tool Planning and controlling of business on a insurance company level based on key assumptions (membership, average premium, target LR) 25
Management Tools within the MedNet concept Munich Re IBNR algorithm Purpose: Determination of IBNR’s Main features of the algorithm: • Calculation of completion factors supported by several variants of Chain Ladder based on loss triangles • Bernhuetter-Ferguson for smaller completion factors 26
Management Tools within the MedNet concept Munich Re MIS Tool (1) Purpose: Management information system on a market level providing 1. Combined account Sum of operational and technical performance Operational result + Technical result Combined account 2. Operational performance - Revenues for MSO services - Expenses for business management 27
Management Tools within the MedNet concept Munich Re MIS Tool (2) Purpose: Management information system on a market level providing 3. Technical performance • Production - Premium written - Enrolled members - Average premium • Key performance measures per underwriting - and calendar year - Exposed at risk population - Premium earned, claims incurred - Utilization, average cost - Burning cost and loss ratio 28
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