1 - Market Factors and Trends Flashcards
Frequency/Impact
Protection policies are designed to deal with events that are:
- High or low frequency?
- High or low impact?
Protection policies are for high impact, low frequency events.
Demand
4 factors driving demand for life protection
Impact of age on demand for insurance
- Affordability
- Movements in the housing market
- Economic issues (level of income, GDP etc)
- Whether they have dependants
People generally want more protection as they get older (as they become more risk averse and worried about death/illness)
What is the protection gap?
This is the difference between the amount of resources (i.e. income) you need and the amount of cover you have (including state benefits).
Effectively it’s how much you’ll be short by if you lose your job and need to survive on insurance payouts and state benefits.
Difference between mortality and morbidity
Mortality is about the rate of death
Morbidity is about the occurance of illness
Impact of male/female on insurance policies/cost
New laws from EU mean insurers can’t discriminate on price between men and women, despite the fact that women live longer
Preferred life policies
What are they?
Things like vitality health insurance.
Screen customers based on specific profiles (such as lifestyle, health, exercise) and encourage them to behave in a more health way.
Can offer lower premiums and reduce risk because their customers are in a select group and less likely to claim.
Value of advice in assurance products
Although there is more availability to buy direct than there used to be (online sales vs door to door sales in the old days), customers are more likely to commit to buying protection if sold to face-to-face.
Also if dealing with things themselves they are likely to make mistakes in the type of cover they get.
Inheritance tax and insurance
How do insurance policies assist with IHT?
A life assurance policies can be used to provide for IHT bills on death.
This may prevent depedents from having to sell your assets (which might be illiquid) in order to pay the IHT bill.
You can also take out inter vivos term insurance if you make a gift (PET) to cover the IHT if you die in the next 7 years.
