Chapter 1 - Financial Protection Market Factors & Trends Flashcards

1
Q

Why consumers need Financial Protection?

A

To protect against different risks.

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2
Q

Why don’t customers take action and provide themselves with the cover they need?

A

Failing to understand:

Impact of risks.
Role of savings vs insurance.
Frequency at which risks can occur.

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3
Q

What is Industrial Insurance and what are the implications?

A

Door to door salesmen that sold insurance.

Access was easy but less choice and value for money.

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4
Q

What are the factors that have affected customer attitudes to Financial Protection:

A
  • Greater support from Government.
  • Changes in traditional family unit.
  • More scrutiny, fuelled by consumerism.
  • Huge advances in technology
  • Affordability

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5
Q

What is the formula for the Protection Gap?

A

Income/Capital Required
Minus
Existing Cover

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6
Q

Why are consumers failing to take out sufficient cover?

A
  • Cover is too expensive
  • Consumers to not trust Providers to pay out in the event of a claim

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7
Q

What are the factors that affect consumer demand for Financial Protection?

A
  • Affordability
  • The Property Market
  • The Economy (Inflation)
  • Improvements in Health
  • Ageing population

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8
Q

What are the factors that affect the sales of insurance policies?

A

Individual Factors:

  • Age
  • Health
  • Occupation
  • Stage of life journey

External Factors:

  • Housing market
  • How often one moves house
  • Economic Climate (jobs and income)

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9
Q

What is the EU Gender Directive?

A

A Directive that stopped insurers charging different premium amounts for men and women.

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10
Q

What is a Preferred-Life Policy?

A

A policy offered by an insurance company with heavily discounted premiums to individuals that can prove a high level of fitness.

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11
Q

What are Smoker and Non-Smoker products?

A

As non-smokers are proven to be healthier, a smoker product is a policy that is loaded with higher premiums and different underwriting practices to offset the higher risk of insuring a smoker.

Before these products, all the smokers ended up going to the same insurance company and were charged the same premium as non-smokers, resulting in the insurance company only attractions higher risk consumers.

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12
Q

What is Reinsurance?

A

Where an insurer shares some of the risk on a life assurance application with another company.

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13
Q

What are Super-Select and Overweight lives?

A

Super-Select Life:

Meets high criteria in terms of health and fitness and pays reduced premium rates.

Overweight Life:

Will pay higher premiums as they do not fulfil the criteria for a Super-Select Life.

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14
Q

What is Commoditisation?

A

This is where consumers see life insurance as virtually the same from every provider, and will therefore use a price comparison website to pick the cheapest policy shown on the first page of said website.

TLDR: Consumers treat the purchase of Financial Protection as a commodity.

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15
Q

What are consumers likely to find difficult as a result of not seeking advice regarding their protection needs?

A
  • Deciding which product best suits their needs.
  • Working our their required cover levels.
  • Establishing whether a trust should be used.

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16
Q

What is Price Elasticity?

A

The direct relationship between the falls in the cost of insurance and the rise in the purchase of insurance products.

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