Chapter 5 - Methods of sale in South Africa

Question 1

What are the merketing channels used by life insurers (5)

Answer 1

• Brokers
• Company agents
• Direct response marketing
• Bancassurance
• Digital

Question 2

How do different distribution channels impact underwriting and pricing in insurance?

Answer 2

Different channels exhibit difference experience - creates challenges for underwriting

Question 3

Describe the three different methods of paying commission? (3)

Answer 3

• Upfront commission -
  Commission is paid in full over the first number of years of the contract, based on the full contract term
• As-and-when commission -
  Commission is a percentage of every regular (monthly) premium and is payable when the premium is received, with payments continuing throughout the full policy term
• Trail commission -
  Commission is a percentage of FUND VALUE with payments continuing throughout the full policy term
  Aggregated trail commission paid may not exceed the maximum aggregated as-and-when commission that can be paid (regulation)