Chapter 1 - Life insurance products Flashcards
What is a paid-up benefit
It is when the client stops paying premiums, but the policy continues at a reduced benefit amount
What is lapse
This is when no benefit is payable when the premiums cease before the contractual time
What is a surrender
This is when the policyholder fails to pay all of the premiums required under the contract, and receives a lump sum in compensation for the premiums paid to date
The Product cycle
Product design
Pricing
Marketing sales
Underwriting
Claims management
Experience monitoring (Which feeds back into pricing)
Valuations
Where can group products arise?
- The employer pays for the whole premium on behalf of the employees
- Where the costs are shared between the two parties
- Where the employer facilitates the payroll deduction but the employee pays all costs
- Where the group is not employment based but linked to club memberships
Term of group products
Short. Typically one or two years
How does endowment assurance meet the needs of consumers
- It pays a benefit on survival to a known date and hence operates as a savings vehicle
- It can also pay a significant benefit on the death of the life insured before that date, and hence provides protection for dependants
What causes new business strain?
- Large costs occur at the start of the policy because of items such as marketing, underwriting, setting up the policy on the computer systems
- Paying commission
- Reserves
- Solvency margins
What are the forms of with-profit policies
- Cash payments
- Sum assured enhanced by bonuses
- Reduction in future premiums
Is anti-selection risk reduced on group contracts?
Yes
What is the capital needed to write a contract depend on?
DIPS F
- DESIGN of the contract
- level of INITIAL expenses
- the relationship between PRICING and supervisory reserving requirements
- the additional SOLVENCY requirements
- the FREQUENCY of payment of the premium