Chapter 7 - Other Stakeholder Interests

Question 1

Targets to be met by product design and pricing procedures: (8)

Answer 1

1. Customer acceptability
2. Regulator requirements
3. Needs of distributors
4. Price competitiveness
5. Adequate profitability/return on capital
6. Company culture in product style and price
7. Systems and other internal constraints
8. Underwriting methodology

Question 2

To be attractive the product must be clear about both:

Answer 2

1. Benefits provided in terms of claims triggers and cash values
2. Amounts and variability of premiums

Question 3

Key considerations on system implications when proposing a new contract: (7)

Answer 3

1. Computer systems must record all processes of insurance
2. Must provide info to enable profitability to be assessed
3. New products may require systems’ reorganisation
4. Any launch or redevelopment will require reappraisal of priorities
5. Expense relating to system changes must be included in the product costing
6. Timenmust be allowed for development and testing
7. Continuing dialogue with a key systems decision maker will be important in the process

Question 4

When capturing data, IT must perform these tasks: (6)

Answer 4

1. Capture individual policy details at inception
2. Align these to claims info
3. Combine the policy and claims data to monitor profitability
4. Group by risk characteristics
5. Be able to add external data as appropriate
6. Be able to model and project, including other apsects of company cashflow

Question 5

Guidelines to following in deciding whether to offer guarantees : (7)

Answer 5

1. Ensure there is customer need
2. Price as accurately as possible, projecting a range of potential outcomes
3. Charge the cost of capital to the product, if possible
4. Obtain sound reinsurance, building this cost into the product
5. Ensuring marketing and other policy literature is clear in its description of guarantees
6. Ensure sales process explains clearly any guarantees and their implications for premiums and benefits
7. Ensure that adequate reserves are in place when business is written

Question 6

Areas of difficulty in offering tiered CI benefits: (3)

Answer 6

1. Problems with designing the benefit levels and claim triggers at each level
2. Probelsm is pricing the benefits
3. Problems in underwriting

Question 7

Medical cost inflation may be a function of the following factors: (5)

Answer 7

1. Ageing population of PHs
2. Lack of sufficient supply of hospital beds or professional medical practitioners forcing up the prices
3. Movement to newer and more expensive treatments or drugs for certain conditions
4. Greater propensity for PHs to claim following a perceived deterioration in State-provided healthcare
5. Increases utilisation of benefits due to increasing disease burden for example epidemics
6. Benefit package provided over time may have increased and PHs might have migrated to more expensive policies

Question 8

Regulator’s 3 main priorities:

Answer 8

1. Insurers remain solvent
2. Consumers are considered in all decisions and that any disadvantage to consumers ito sales, administration and claim payment are minimised, if not totally eradicated
3. Ensure private sector interest aligned in furthering public sector’s interest

Question 9

Entering a market for the 1st time, the company can reduce the risk using the following: (4)

Answer 9

1. Offer contract with reviewable premium
2. Reinsure a large part of the risk
3. Incorporate large margins in the premium rates
4. Offer the contract as an addition (rider) on a term insurance policy so that CI claims are effectively accelerated death claims

Question 10

Extent to which the State can meet its objective will depend on: (3)

Answer 10

1. The wealth of the country
2. The priority given to the provision of HC
3. The style and culture of politics within the country