1- Market Factors and Trends in Financial Protection Planning

Question 1

In what scenario is insurance most effective role to play?

E.g. Frequency and Intensity

Answer 1

Low frequency, high impact

Question 2

Life assurance - Why have they changed through the years

E.g. After WWII

Answer 2

Lifestyle changes - British Household Panel Study, Life is now less predictable.

Question 3

What is the insurance purchased by many people in 1950s?

Middle, lower middle class and working class population

Answer 3

Industrial insurance also known as home service, sales force.

Question 4

Typically how much did life assurance cover in employees earnings (1950s)

Answer 4

2-4x their earnings. Typically paid by employer

Question 5

Who were the people offering life assurances to homes in the 1950s?

How did they do this?

Answer 5

Industrial Sale force. They came to homes to collect premiums each week or month, was very effective to maintain contact with poeople from homes.

Question 6

What caused the change from the traditional insurance purchases to more like modern times?

Answer 6

Retail Distribution Review, attention to “sale” of protection.

Question 7

What is an alternative to purchasing from provider?

Answer 7

Non-advised selection of market.

Question 8

What is the simplest type of life cover

Answer 8

New level term assurance policies

Question 9

How has society changed the attitude towards insurance?

(4)

Answer 9

Welfare state - The State will look after you
Growth of Consumerism
Technological Developments - Affects delivery of insurance
Changes in attitude to risk

Question 10

What is a consistent finding that surveys found about people who are insured?

Answer 10

They overestimate the cover they have.

Question 11

What is the most common financial protection people have in the UK

Answer 11

Life Assurance

Question 12

What is a common issue that individuals have when purchasing insurance as found through ICM Research survey?

Answer 12

People do not understand different types of protection insurance

Question 13

Why might people not take any financial protection cover?

State of the Proteciton Survey - Royal London

Answer 13

• Too expensive
• Not trusting of life assurance provider to pay out on claim

Question 14

What were the reasons “Millenials” not take out financial cover?

Answer 14

Main reason - Dont need it
No Dependents
No Mortgage
Sufficient Cover from work

Least reason: Cost

Question 15

What is a barrier that financial advisors faced when issuing financial protection with regards to consumers?

Answer 15

Trust. Consumers highlighted if service offered is unbias and represented good value for commission fees.

Question 16

• What is driving the aggregate demand for life assurance policies

Answer 16

• Affordability
• Movements in housing market
• Income per head
• Dependents

Question 17

What is a key determinant in how much cover is taken?

Answer 17

Income

Question 18

What is the life assurance protection gap

Answer 18

The shortfall in the amount of cover necessary to maintain the current living standard of dependents

Question 19

Formula for Protection Gap

Answer 19

Resources needed - cover in place through individual policies and through employer-sponsored group life gap = protection gap

Question 20

What does the protection gap represent?

Answer 20

Represents the amount of life cover which should be in placed, based on national average salairies.

Question 21

The UK life protection gap is calculated to be £2.4trn. The protection gap for IP is £200bn per year. Why is this?

Answer 21

Size of gaps underlines reality of differentce in ideal measure of cover and assessment by customers. Customers do not understand and also firms.

Question 22

Why is affordability a factor to influence demand for protection

Answer 22

Guidewire - 10% would cancel health insurance in light of increased Cost of living
If costs of mortality cover falls - amount of cover purchase increase.

Question 23

Why is housing market a influence to demand for proteciton?

Answer 23

Life and critical illness package are commonly sold to protect financial commitments. More rent less packages.

Question 24

Why is Economic Factors a influence to demand for protection

Answer 24

Income is a key determinant of how much cover individuals purchase
Inflation has a negative correlation with life assurance purchases

Question 25

What are some recent changes in trends of 21st century that may increase need for life proteciton?

Answer 25

• Self-employed/changing jobs quite frequently
• People with disabilities expected to work
• Women now working

Question 26

What do insurers focus on in an individual before creating an offer?

Answer 26

Nature of someones work
Current and past health history

Question 27

What was the date where insurers stopped charging different rates to males and females?

Answer 27

21 December 2012

Question 28

What was smoker/non-smoker products in UK an example of

Answer 28

Anti-selection (Adverse information) - asymmetry.

Question 29

What is Preferred life policy

Answer 29

Followed principle of “cherry-picking risk”. Gives discount to applicants that can meet preferred lifestyle habits (as they have lower mortality risk)

Question 30

What did the British Insurance Brokers Association introduce in 2020

Answer 30

Caxton House statement - support people with disabilities and pre-existing medical conditions, covers life assurance, critical illness or income proteciton.

Question 31

What is the service that helps with Caxton House statement

Answer 31

Find Insurance they operate across personal insurance, business protection and group risk policies