Assignment 2 Scenario – Insurance First Australia Insurance First Australia (IFA) is an insurance company specialising in the sale, management and underwriting of insurance products in Australia. Currently, IFA is offering five types of insurance to Australian households car, home,

Assignment 2 Scenario – Insurance First Australia
Insurance First Australia (IFA) is an insurance company specialising in the sale, management and
underwriting of insurance products in Australia. Currently, IFA is offering five types of insurance to
Australian households: car, home, landlords, pet, and life insurance. According to an IBISWorld’s report on
Australia market research, the number of Australians travelling overseas has grown strongly over the past
five years; the growth in the number of senior citizen travellers is particularly notable. The IFA senior
executive team saw this as a good business opportunity to enter the travel insurance market.
You have been employed as a DSS analyst by the IFA CEO to help him plan the establishment of the new
insurance product. While the IFA executives have made what they think are sound judgments of the various
factors surrounding the new travel insurance, they want a DSS that will allow them to easily vary these
estimates in order to see the impact of different assumptions on the insurance’s operation. A meeting has
been held with the executives of the IFA Strategy Committee where they outlined the nature of the
insurance’s operation to you. The area that the committee wants help with is forecasting the travel
insurance claims and profit scenario for the first 5 years.
To simplify the scenario, the committee is planning at a quarterly level, rather than monthly or weekly.
Given the nature of travel insurance and the claim process designed by IFA, there are five types of claims
that are of interest to IFA:
? Initialised claim – the travel insurance policy holder has encountered incident(s) during travel, and
is thinking of making a claim;
? Prepared claim – the travel insurance policy holder who has started filling the travel insurance
claim form and collecting supporting evidence;
? Lodged claim – the travel insurance claim that has been lodged to IFA for assessment;
? Approved claim – the travel insurance claim that has been approved by IFA;
? Settled claim – the approved travel insurance claim that has been settled (i.e. payments have been
made in most cases).
To set up the new line of insurance product, the IFA Strategy Committee is planning to spend 260,000 AUD
from the corporate budget as a one-off set-up fee (including marketing) in the first quarter of the first year.
Based on market research from similar businesses, it is estimated that the initial marketing expenses will
result in 3,000 travel insurance policies for IFA in the first quarter. However, the number of insurance
policies per quarter is also subject to a seasonal factor. This means that the initial number of insurance
policies multiplied by the seasonal factor estimates the number of actual insurance policies per quarter.
Table 1 below shows the seasonal effect on the number of insurance policies.

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