Chapter 1 - Financial Protection Market Factors & Trends Flashcards
Why consumers need Financial Protection?
To protect against different risks.
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Why don’t customers take action and provide themselves with the cover they need?
Failing to understand:
Impact of risks.
Role of savings vs insurance.
Frequency at which risks can occur.
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What is Industrial Insurance and what are the implications?
Door to door salesmen that sold insurance.
Access was easy but less choice and value for money.
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What are the factors that have affected customer attitudes to Financial Protection:
- Greater support from Government.
- Changes in traditional family unit.
- More scrutiny, fuelled by consumerism.
- Huge advances in technology
- Affordability
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What is the formula for the Protection Gap?
Income/Capital Required
Minus
Existing Cover
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Why are consumers failing to take out sufficient cover?
- Cover is too expensive
- Consumers to not trust Providers to pay out in the event of a claim
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What are the factors that affect consumer demand for Financial Protection?
- Affordability
- The Property Market
- The Economy (Inflation)
- Improvements in Health
- Ageing population
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What are the factors that affect the sales of insurance policies?
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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What is the EU Gender Directive?
A Directive that stopped insurers charging different premium amounts for men and women.
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What is a Preferred-Life Policy?
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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What are Smoker and Non-Smoker products?
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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What is Reinsurance?
Where an insurer shares some of the risk on a life assurance application with another company.
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What are Super-Select and Overweight lives?
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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What is Commoditisation?
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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What are consumers likely to find difficult as a result of not seeking advice regarding their protection needs?
- Deciding which product best suits their needs.
- Working our their required cover levels.
- Establishing whether a trust should be used.
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