Chapter 1 - History of financial protection Flashcards
Demand for life cover is driven by?
Affordability
Movements in the housing market
Income per head
Dependants
What is the protection gap?
The shortfall in cover required to maintain the current living standard of any dependants
What is the formula for the protection gap?
Resources needed - cover already in place through individual and personal policies
When insuring against risk, it is most effective when addressing risks that are?
Low frequency but high impact
“life insurance is……..”
“sold not bought”
Life insurance is sold not bought refers to?
Life insurance being complex and easily misunderstood and should rely on a financial adviser identifying a need and selling the correct cover
What are the impacts for customers not taking financial advice on protection products?
Taking out the wrong kind of cover Taking out the wrong amount of cover Taking out cover for an insufficient term Incorrect or no use of a trust form Having cover they don't fully understand Taking out cover that is unaffordable
As people are now living longer what has the impact been on new protection policies?
Demand has fallen, people are now concerned with living too long and more focused on saving for retirement
What was significant about the 2011 EU gender directive?
Life offices must now charge unisex premiums (the same rates for men and women)
Why are non smoker protection policies cheaper?
Less risk for the insurer as statistically less chance of premature death
What is a preferred life policy?
A life policy that offers significantly reduced premiums for individuals who can evidence a healthy lifestyle
Due to increased longevity the underwriting of life insurance is becoming more aggressive. The impact of this is;
Definitions are becoming stricter, something as little as being overweight can increase your premium. More policies are being rejected outright
Commoditisation of life insurance refers to?
Increases in technology, primarily online portals diminishing the unique features of different offices.
Now viewed as a commodity where the end consumer views them all the same and will just go with the cheapest
Benefits of receiving financial advice with regard to protection.
Full fact find Comprehensive needs analysis Product recommendations tailed to individual circumstances - right product, right sum assured Expert knowledge of product types Use of trusts
What is the impact of the changes in traditional life stages on protection demand?
As there are now typically many more stages to the life cycle protection planning has become more difficult to predict when it is likely to be appropriate
