Chapter 11 - The General Business Environment Flashcards

1
Q

What are the various distribution channels

A
  1. Insurance intermediaries - select products for their client from all or most of those available on the market
  2. Tied agents - who offer the products of one life insurance company or a small number of life insurance companies
  3. Own sales force - usually employed by a particular company to sell its products direct to the public
  4. Direct marketing via press advertising, over the telephone, internet or mailshots
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2
Q

What are the key risks to the insurance company when a policy is sold which does not meet the needs of a policyholder

A
  1. Persistency risk and consequent financial losses
  2. Reputational risk
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3
Q

What form does direct marketing take

A
  • Mailshots
  • Telephone
  • Press advertising
  • internet selling
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4
Q

Why business from intermediaries is likely to be subject to most underwriting

A

Intermediaries are representing the interests of their clients, not a particular insurance company.

The company needs to be aware of the possibility that an intermediary might encourage anti-selection

They also are likely to have customers of high net worth, with consequent need for higher insurance cover

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5
Q

Why is having competitive rates or charges not the be-all and end-all for every product, even when selling through intermediaries

A

ICIC

  • products may be differentiated through INNOVATIVE features or attractive options
  • more complex products may be difficult to COMPARE across companies
  • some savings contracts may compete as much on past INVESTMENT performance as on premium rates or charges
  • some products may compete on the level of CUSTOMER service or admin support
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