Abstract
Managing for Solvency and Profitability in Life and Health Insurance Companies by Susan Conant, Nicholas L. Desoutter, Dani L. Long and Robert MacGrogan (Life Office Management Association, 1996) Reviewer: James G. Bohn, Board of Governors of the Federal Reserve System This book presents a practical guide to the management of the modern life insurance company. Although the authors intended this text to prepare students for the LOMA FLMI Course 371 examination, this volume could also be used as the main text for an undergraduate course in.life insurance company management. This text is also rich in industry-level institutional and regulatory detail and would be a valuable tool for those interested in gaining an understanding of the major operational and regulatory issues facing life insurance companies. The text's twenty chapters present a complete and concise guide to insurance company management. The first two chapters are introductory. The remainder of the book could be divided into two sections. The first, which includes chapters 3 to 9, discusses methods for pricing insurance contracts and determining the adequate level of policy reserves. The second section, chapters 10 through 20, addresses company operations and financial management. Since the book is intended to be a guide to insurance company management, there is relatively little discussion of specific provisions of insurance contracts or the selection of risks. Unlike the typical undergraduate life insurance text, this book does not include chapters on the history or the social significance of the insurance industry. Each chapter begins with a brief outline of the concepts to be covered and the major learning objectives for the reader. The authors make liberal use of tables and figures to assist the reader in organizing the information presented in the text. One of the outstanding features of this book is the collection of brief Insight sections in each chapter. The Insights are excerpts of articles which have appeared in insurance industry publications. There are up to five Insights per chapter. The authors have clearly taken great care to find articles that are both appropriate and timely for the Insight sections. Almost all of the excerpts are from articles that have appeared since 1993. The text takes a somewhat unique approach to insurance product pricing in the first section of the book. The authors first discuss the determination of the value of the different cash inflows and outflows from insurance contracts -- investment returns, benefit payments and company operating expenses. Then, unlike most other texts, the authors discuss the factors that affect the company's margin on each of the three components of the contract instead of a single margin for the entire contract. This approach allows the authors to more closely connect the pricing decision with the contract's riskiness and major provisions as well as the firm's competitive environment. Given the degree of heterogeneity between insurance contracts and insurance markets, the authors' disaggregated approach to pricing is intuitively appealing. …
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