9. General Business Environment

Question 1

Reasons health and care insurance products sold rather than bought

Answer 1

• public unaware of need, due to ignorance or belief an event won’t happen to them
• serious illness and incapacity may be taboo subjects
• products may be difficult to understand and thus dissuade purchase
• market place difficult (many providers, hard for consumer to decide which product best)
• cost constraints
• general need for advice before making long-term financial commitments (makes process time-consuming_

Question 2

Aim of regulation

Answer 2

• protect the policyholder, may discourage innovation and/ or restrict the benefits offered

Question 3

Government may impose controls on insurance companies

Answer 3

• restrictions on type of contracts can be offered
• restriction on premium rates or charges
• restriction on rating factors used to calculate premiums
• restrictions relating to terms and conditions
• restrictions on distribution channels that may be used
• restrictions on information given at point of sale
• restrictions on the ability to underwrite
• indirect constraint on amount of business written via a minimum reserving / SCR
• restriction on type of assets that may be invested in / used for demonstrating solvency

Question 4

Taxation regime - approaches to taxation

Answer 4

• profits-approach: tax on annual profits of the business
• investment income approach: tax on investment income/ gains less some or all operating expenses of the company

Question 5

Importance of political stability for health and care

Answer 5

• can indicate national economic wellbeing
• can mean stability of rules governing the insurance industry
• stability of future economic value of insurance policies for policyholders