CH 11 (Distribution Channels)

Question 1

Reasons for Consumers Avoiding Insurance

Answer 1

• Distant need which people aren’t as aware of
  (ignorance or
  “won’t happen to them”)
• Taboo subject
• Difficult to understand
• Difficult market place
  (many providers makes it tough to know which is best)

-Need for advice with LT financial commitments
= time-consuming

Question 2

Driving forces behind sales

Answer 2

• Genuine needs (inbound)

- Selling force (outbound)

Question 3

Types of Channels

Answer 3

- Independent intermediaries
(aka brokers/independent financial advisers)
- Tied agents
- Own sales force
- Direct marketing

Question 4

Effect of Distribution Channel

Answer 4

DUCCC
[M(ILF)W]

• Demographic profile
  > customer Mortality and Withdrawal profile
  » Financial sophistication
  » Interest/keenness in taking up product
  » Levels of income
• level of Underwriting
  (will also affect demographic profile)
• Complexity of product
• need for Competitive terms
  (amount of competition)
• Commission costs (and thus price)

Question 5

Key Insurer Risks from Mis-selling

Answer 5

• Persistency risk
• Reputational risk
• New business risk

Question 6

Forms of Direct Marketing

Answer 6

• Mailshots
• Telephone selling
• Press advertising
• Internet selling

Question 7

Aspects to Describing Sales Channel

Answer 7

WRIM

• Who initiates the sale
• Remuneration method
• Independence
• Medium