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
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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

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