Ch20: Product design

Question 1

Factors in product design

Answer 1

FROM CAMS PEC
1. meeting customer needs
2. profitability
3. marketability
4. competitiveness
5. financing requirement
6. risk characteristics
7. onerousness of any guarantees
8. sensitivity of profit
9. extent of cross-subsidies
10. administration systems
11. consistency with other products

Question 2

Offering guarantees results in two problems

Answer 2

• possibly having to suffer a cost you did not fully expect
• probably having to reserve for this possibility at the outset

Question 3

Why is it important to treat customers fairly?

Answer 3

• to meet what would be considered normal standards of professional ethical behaviour
• may be a regulatory requirement
• to foster good relationships and ongoing trust with policyholders, the media and the public in general, which will in the long-term help generate sales