Chapter 4 : Products (4)

Question 1

What are the product to the insured

Answer 1

1. Benefits ultimately paid out do no meet the need for which they were originally intended
2. Inflation can erode the real value of the monetary benefits

Question 2

What is the purpose of the products to the insurer

Answer 2

The insurer aims to sell products that will maximise its profitability for an acceptable degree of risk. Products with the greatest utility to policyholders should achieve this aim.

Question 3

What is the risk to the insurer to a product linked to an investment or economic index?

Answer 3

The main risk is that the assets held, if they are not an exact match may not move in line with the index

Question 4

How are the capital requirements for a unit linked contract?

Answer 4

The contracts can be very capital efficient, depending on the charging structure and the ability to take credit in the supervisory reserves for future initial expense charges, using actuarial funding or negative non-unit reserves. The ability to do this may be constrained by legislation