Chapter 6 - Life Insurance Products Flashcards
1
Q
What are the features of Life Products?
A
- Long Term
- Typically one claim
- Claim amount may be known
- death/ill-health/savings
- Individuals or Groups
2
Q
What investment types exist with Life Products?
A
- without - profit (no discretion on benefit amount)
- with - profit (policyholder entitled to share of surplus)
- unit - linked (value depends on underlying investments)
- index- linked (benefit moves with index)
3
Q
What factors are considered in setting with-profit product bonusses?
A
- smoothing benefits year on year, keeping profit in good years to help in bad years
- policyholder expectations (based on past distribution)
- Looking at competitors
- adhering to regulatory limits
4
Q
What is underwriting?
A
- Process to decide the level of risk posed by a potential policyholder
- Riskier - higher premium, lower benefit, declined
- Medical/Lifestyle/Claims/Financial
- Helps avoid anti-selection
- Different levels of UW for different products
5
Q
What is provisioning?
A
- Money set aside to meet future liabilities
- Minimum solvency capital - provides greater security
6
Q
What is new business strain?
A
- in the first month premium doesn’t cover commission, admin, underwriting, provisions and solvency capital
- Outgo is greater than income
- difference covered by free assets
- over time loss is recouped
- release of provisions and solvency capital
7
Q
What are the key risk under Life contracts?
A
- mortality
- investment
- expenses
- early withdrawals (expenses not recovered)
- new business volumes (too low or high)
- credit risk
- operational risk
8
Q
Three Points to remember when explaining products.
A
- Definition of benefits
- Use of products to meet customer’ needs
- Whether a group version exists
