Ch 20: Product design Flashcards
1
Q
When designing or reviewing any product the following factors need to be considered (13)
A
- Meeting customer needs
- Profitability
- Marketability
- Competitiveness
- Financing requirement
- Risk characteristics
- Onerousness of any guarantees
- Sensitivity of profit
- Extent of cross-subsidies
- Administration systems
- Consistency with other products
- Meeting regulatory requirements
- Sustainability of investment options (ESG)
2
Q
When faced with a large parameter risk, the company could do:
A
- Offer the contract in unit-link and/or reviewable form to avoid long-term rate guarantee
- Reinsure a large part of the risk
- Incorporate very ample margins in the premium rates
- Offer the contract as an additional rider benefit rather than stand-alone
3
Q
Offering guarantees results in two problems:
A
- Possibly suffering a larger cost than what would have been expected without the guarantee
- Possibly having to reserve from the outset of the policy for the possibility of the guarantee biting. Increasing the capital strain of the product.
