Chapter 1 : Products (1)

Question 1

What are the 7 steps of the product cycle?

Answer 1

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

Question 2

What are the risk avoided and those not-avoided by having a group scheme?

Answer 2

Avoided: We avoid Anti-selection risk

Vulnerable to: Catastrophe risk because employees are concentrated in a certain area and not spread across the country

Question 3

What is an endowment

Answer 3

Endowment assurance provides a lump sum on survival to a pre-determined date or possibly on earlier death.

Can be sold to an individual or a group. Can be with-profits, without-profits or unit-linked

Question 4

What are the main risks of an endowment assurance?

Answer 4

1. Investment returns
2. Expenses
3. Withdrawals (especially with asset share is negative)
4. Mortality (including anti-selection risk)

Question 5

What are the capital requirement dependent on?

Answer 5

1. Contract design
2. Premium payment frequency (RP vs SP)
3. Relationship between the pricing and supervisory bases
4. Additional solvency capital requirements
5. Level of initial expenses