Chapter 1: Life insurance products 1

Question 1

Two types of life products

Answer 1

1. Savings products

2. Protection products

Question 2

Typical product lifecycle: (7)

Answer 2

1. Product design
2. Pricing
3. Marketing and sales
4. Underwriting
5. Claims management
6. Experience monitoring
7. Valuation

Question 3

How can group business be set up

Answer 3

• Group schemes can be set up by any affinity group
• but are most commonly set up by employers for their employees,
• in which case the employer is the policyholder even though those insured are the employees.

Question 4

Endowment assurance

Answer 4

• Contract that pays a benefit on survival to a known date.
• Death benefit may also be payable.
• Surrender value usually available

Question 5

Main risks relating to Endowment assurance contracts: (4)

Answer 5

1. investment risk
2. expenses
3. withdrawals (especially when the asset share is negative)
4. mortality (including anti-selection risk).

Question 6

Endowment assurance - capital requirements depend on: (5)

Answer 6

1. the contract design
2. premium payment frequency
3. the relationship between the pricing and supervisory reserving bases
4. the additional solvency requirements
5. the level of initial expenses

Question 7

New business strain - examples of costs associated with the contract at the start: (4)

Answer 7

1. Marketing
2. Underwriting
3. Initially setting up the policy on the system
4. Commission

Question 8

Needs (Ages 16 - 25):

Answer 8

1. Saving

2. Paying off student debt

Question 9

Situation and needs (Ages 25 - 35):

Answer 9

Situation:

• have children,
• large debts,
• moderate income,
• high expenditure,
• not much wealth.

Needs:

• repay loans,
• protection for dependents,
• saving for children,
• saving for retirement

Question 10

Situation and needs (Ages 35 - 65):

Answer 10

Situation:

• Debts reduce
• Loans are paid off
• Increased income
• periods of redundancy may occur
• disposable income

Needs:

• Saving for retirement
• Long-term care
• Transferring wealth
• What to do with disposable income.

Question 11

Situation and needs (Ages over 65):

Answer 11

Situation:

• in retirement
• few debts
• lower income
• accumulated wealth

Needs:

• protection against running out of money
• need for long-term care
• wealth transfer