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LOMA 371- ISTAR > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What are the 5 typical steps in the product development process?

A

1) product planing
2) comprehensixe business analysis
3) technical product design
4) product introduction
5) monitoring evaluation and feedback

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2
Q

What are some opposing forces (internal or external) affecting product development?

A

rapid innovation vs limited operational and financial resources.
Market forces vs need for disciplined pricing
rapid speed to market vs regulatory compliance.

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3
Q

Define new product risk

A

refers to the risks that companies face in developing and supporting new life insurance and annuity products.

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4
Q

what are some examples of established products that are well understood and generally have lower risk?

A

1) yearly renewable term life insurance
2) multiple-year term insurance
3) Fixed whole life insurance
4) universal life insurance
5) single-premium immediate annuities

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5
Q

what are some newer, complex products and features that pose a generally greater risk?

A

variable UL life insurance with secondary guarantee riders.
variable annuities with secondary death benefit guarantee riders
variable annuities with secondary living benefit guarantee riders
indexed annuities.

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6
Q

What would be examples of combination products?

A

term life insurance with disability income insurance

annuities with long-term care insurance.

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7
Q

Define the differents between a product portfolio and product mix.

A

product portfolio: array of products a company offers
product miz: a company;s total assotment of product types in force by proportion according to a moneatary measure of buisness volume.

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8
Q

define innovation in terms of product design

A

refers to an improvement that adds value to a design or process.
can be viewed as existing in degrees, small improvements to sweeping development
- usually will refer to moderate change or breaktrhough that renders past designs and practices obsolete.

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9
Q

companies can distinguish between product development projects on the basis of their complexity as a rate of change project, product revision projects, or new product projects. Define Rate change product

A

involves changing rates for adjustable policy elements such as administrative fees and mortality and expense charges.
Requires resetting lookup tables in softwre and may requrie some limited regulatory rate filings.

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10
Q

companies can distinguish between product development projects on the basis of their complexity as a rate of change project, product revision projects, or new product projects. define prodcut revision project

A

involves broader changes than does a rate change project but fewer changes than does a new product project. This category covers the broad spectrum of projects between a rate change and new product

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11
Q

companies can distinguish between product development projects on the basis of their complexity as a rate of change project, product revision projects, or new product projects. define new product projects

A

the msot complex type of product development project requiring the company to develop new product features and requiring comprehensive regulatory filings.
REquires full-scale effort in all phases of the product development process.

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12
Q

An effective product development project has what 4 characteristics?

A

1) documented product development procedure
2) a specified developement schedule and planned launch date
3) a detailed product development budget and product sales forecasts
4) formal system for monitoring product development progress and product performance, including standard project documentation.

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13
Q

What is a cross-functional team?

A

group of representatives from different functional areas of the company, such as investments, underwriring, actuaries and IT.

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14
Q

What are the type groups that involve cross-fucntional team assignments?

A

1) Marketing committee:
2) risk committe
3) audit commitee
4) product development team

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15
Q

What is the marketing comimitee?

A

senuor mgnt group who provides overall guidance and control of the product development process.
- activites: product design/ approcing or rejecting developement of product design.

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16
Q

What is the risk commitee?

A

senior mgt group, who profivdes overal guidance and control of enterprise risk management effots.
ensures all functional unites have appropriately understood, measured, and arranged to manage al the risks associated with a new product.

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17
Q

what is an audit commitee?

A

board of directors serts the policies ofr a company’s accounting department, reviews, policies, and procedures. OVersees internal and external audits and reviews period financial statements

18
Q

What is the product development teamn?

A

group that suually performs hand-on development of a new product.

  • typically include representatives from many departments’- typically reports to the actuarial function and is responsible for
  • conducting research abour product features,
  • planning, budgetting, scheduling development
  • marking prodcut and risk mgnt recommendation
  • desigining benefits, fin structure, uw standards,
  • guiding product implementation.
19
Q

Product planning consists of what two main activities?

A

1) idea generation

2) Idea screening

20
Q

What is idea generation?

A

involves searching for new product ideas that are consistent with the company’s overall product development strategy and the needs of its target markets.

21
Q

New product ideas can come from research performed by the company’s competitive intelligence unit. What is competitive intelligence?

A

the systematic collection and analysis of publicly available information about competitors and ongoing developments in the marketing environement

22
Q

What is idea screening?

A

action, during which new product ideas are evaluated quickly and inexpensively to separate workable ideas from those that have little or no potential.

23
Q

Insurance companies use what criteria for screening new product concepts?

A
  • marketability to target markets
  • compatibility with the company’s corporate goals and strategies
  • potential profitability
  • compatibility with the company’s image
  • compatibility with the company’ current market position
  • potential for generating additional new sales and not displacing or replacing sales of existing products
  • compatibility with the company’s existing or proposed distribution channels.
  • compatibility with the company’s current actuarial, financial/investment, administrative, accounting, or other systems.
  • understandability for target customers
24
Q

After eliminating th eleast promising product ideas, a company subjects the remaining product ideas to a comprehensive business analysis. define this

A

an evaluation of all the factors that are likley to affect the design, prduction, pricing, marketing and sales potential of a new product.

25
Q

To support a commitment of company resources, decision markers would like to see documentation that desmonstrates what?

A

1) product will satisfy the risk-return equirement
2) product will have competitive features
3) independent sale producers will accept the product
4) product is a good fit with the company’s existing operations/expertise
5) product is a good fir with company’s existing product mix and marketing strategies.

26
Q

what is a market analysis

A

document that evaluated all the factors that might affect product sales.
- can be derived from information already fathered during ongoing marketing research activities for similar new product ideas.

27
Q

what are product design objectives for a life insurance or an annuity product?

A

documents the product’s basic characteristics, such as its benefits, any limits on the contract amount or the applicant’s age at issue, any special features, the commission range and any settlement options.

28
Q

What is a feasibility study?

A

study that evaluates whether the company has the capability to take a new product to market.

29
Q

How does a company evaluate a new product’s operation and technical feasibility?

A

they study weather 1) the product can be structures to be competitive and profitable 2) the insuere’s operating and distribution system can accomodate the product 3) the insurer has sufficient capacity to support the new product. 4) the new product complies witht the company’s risk tolerance, underwriting policies and reinsurance rettention limits.

30
Q

What are examples of underwriting specificcation for product design objectives?1`

A
  • non-medical limits
  • medical ?nnaire required above max initial premium amount
  • standard for any guraranteed or simplified basis.
  • any minimum and max issue age
  • any max dollar limit
  • smoker rates?
  • std/preferred/substandard
31
Q

What are some risk specifications for product design objectives?

A
  • mortality risks and longevity risks
  • financial and investment risks assumed
  • interest-rate risk
  • legal and regulatory risks
  • policyholder behavior risk.
  • reinsurance requiremetns/retention limits
32
Q

what are some marketing specifications for product design objectives?

A
  • distribution system/marketing channels
  • commission structures + bones rates
  • marketing overhead expense rate
  • promotion and advertising expense allovation
  • competitive positioning of product
  • chargeback schedules
  • field expenses
33
Q

what are some product specifications for prodcut design objectives? (life products)

A
  • death benefit/settlement options
  • renewability
  • convertibility
    -min and max face amounts
  • cash values, surrender benefits, dividend forms
  • transaction charges
  • subaccounts for varriable products
  • assumptions as to investment earnings, persistency average conteact size, and expense charges
  • range of premiums
    =levels of graded premiums
  • age bands
  • policy fees
  • volume discounts
  • expense assumptions
  • premium taxes
34
Q

what are some product specifications for prodcut design objectives? (annuities)

A
  • asset-based fees
  • transaction charges
  • interest-cerediting grequency
  • interest guarantees
  • withdrawl and surrender benefits
  • periodic paumenet
    s- death benefits
    -secondary guarantees
    -subaccounts available
35
Q

what are profit and risk specifications?

A

1) minimum required itnernal rate of return

2) fewer than X% of scernarios result in a loss

36
Q

Define a marking plan

A

its a definition of a company’s product, price, distribution and promotion strategies for reaching potential customers and meeting their needs.
- outlines the specific, action-oriened tactices the company has developed to support its marketing foals and strategies for the prosed new product.

37
Q

What is a marketing projection

A

an estimate of future sales.
a projection specifies an expected or a most likely value- rather than a best-case value or a worst-case value- for an unknown future value.

38
Q

What are sales volumes?

A

the number of unit or product sold

39
Q

what are sales revenues?

A

the total dollar volume of sales. Sales revenye is calcualted by multiplying the sales volume by the average price per unit.

40
Q

To project important sales figures, how do marketers define expenses?

A

the adminsitrative cost the company incures to support a product, plus the periodic income payments, cash surrenders, and other benefits the company will pay out.

41
Q

what is a product proposal?

A

a document used to present a product idea to an internal team that decides whether to allocate company resourecs towards deloping the product idea.

42
Q

a product proposal describes what aspects of a product?

A
  • product purpose
  • key product features
  • target market and projected sales volume
  • differentiation from other products.
  • plans for promotion, advertising, distribution and sales
  • requirments for adminsitrative resources, including technology,
  • profitability projections and capital needs
  • regulatory considerations.

LOMA 371- ISTAR (15 decks)

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