Chapter 1-4 - Life Insurance Products

Question 1

List the stages of the product cycle: (7)

Answer 1

1. Product design
2. Pricing
3. Marketing Sales
4. Underwriting
5. Claims management
6. Experience monitoring (feeds back into pricing)
7. Valuation

Question 2

What is the sum at risk?

Answer 2

Sum assured - reserve

Question 3

Capital requirements will depend on: (5)

Answer 3

1. Design of contract
2. Frequency of payment of prm
3. Relationship between pricing and supervisory reserving bases
4. Additional solvency capital requirements
5. Level of initial expenses

Question 4

What are the advantages and disadvantages to a company if they do not explicitly charge for mortality in a unit linked contract?

Answer 4

+ greater simplicity
+ may help marketing of product
+ should also be cheaper to administer

• charges will not be sensitive to changes in sum at risk
• charges each year may not match the cost of death claims closely