Chapter 1 - Life insurance products Flashcards

1
Q

What is a paid-up benefit

A

It is when the client stops paying premiums, but the policy continues at a reduced benefit amount

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2
Q

What is lapse

A

This is when no benefit is payable when the premiums cease before the contractual time

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3
Q

What is a surrender

A

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

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4
Q

The Product cycle

A

Product design
Pricing
Marketing sales
Underwriting
Claims management
Experience monitoring (Which feeds back into pricing)
Valuations

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5
Q

Where can group products arise?

A
  • 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
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6
Q

Term of group products

A

Short. Typically one or two years

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7
Q

How does endowment assurance meet the needs of consumers

A
  • 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
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8
Q

What causes new business strain?

A
  • 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
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9
Q

What are the forms of with-profit policies

A
  • Cash payments
  • Sum assured enhanced by bonuses
  • Reduction in future premiums
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10
Q

Is anti-selection risk reduced on group contracts?

A

Yes

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11
Q

What is the capital needed to write a contract depend on?

A

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
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