Chapter 11 - General business environment Flashcards
State 2 risks to the insurer for selling policies that do not meet the needs of a policyholder
- persistency risk - and consequent financial loss, including the possibility of compensation
- reputation risk
List 4 distribution channels used by life insurance companies
- Insurance intermediaries/independent financial advisers
- Tied agents
- Own sales force
- Direct marketing
Describe insurance intermediaries
How they work
How they are remunerated
Who initiates the sale
Salespeople act interdependently of any insurer
Searches for contract that best meets clients’ situation/needs (premium and benefits)
AKA: independent financial advisers and insurance brokers
Remunerated via
+commission payments from companies whose products they sell
+fee from clients
Sales often client-initiated, however, can also promote themselves e.g. initiating periodic reviews
Describe tied agents
How they work
How they are remunerated
Who initiates the sale
Work solely on behalf of one or several insurers i.e. offer clients only products of those companies
Where tie is to multiple companies, sometimes product ranges are mutual exclusive, but often overlap
Typically employees of bank or other similar financial institution
Remunerated via commission payments or salary plus bonuses by companies to which they’re tied
Sales often client-initiated, but tied agents may actively engage in selling.
Describe an insurer’s own sales force
How they work
How they are remunerated
Who initiates the sale
Usually employees of insurer and only sell products of that company
Remunerated by commission and salary or mixture of both
Usually the salesperson initiates the sale, making use of client lists or purchased leads (however, client my initiate any further sales)
List 4 forms of direct marketing
- Internet selling
+useful for without profits contract (simple)
+quote online
+apply online - Press advertising
+short application form
+give telephone number or address - Telephone selling
- Mailshots (promotional/advertising letters sent in batches)
State 3 features of life insurance contracts that will be affected by the distribution channel used
- Contract design
- Contract pricing
- Demographic profile
State how the choice of distribution channel can affect contract design
- Higher clients’ financial sophistication, greater possible complexity
- Products sold via direct marketing may be less complicated than products sold face to face
- Insurer using multiple distribution channels may sell different versions of same product, varying by channel
List four Items of insurance customer profile that likely to vary by distribution channel
- Financial Sophistication
- Income
- Mortality Experience
- Persistency Experience
