Chapter 36 - The big picture Flashcards
1
Q
What are the main steps in product design and pricing
A
- Formulation of structure of product (with marketing)
- Decide on assumptions for expenses, interest, mortality, withdrawal
- Profit test to give premiums to meet set profitability target
- Given those premiums, sensitivity test; need to adjust premiums or structure
- Compare with competition, adjust premiums?
- Run model office with expected tranche of new business - are there any capital, tax or expense problems
2
Q
How can the risk of underestimating mortality, expenses,… be reduced
A
Offer the contract as a unit-linked contract with a variable charge