Chapter 9 - General Business Environment

Question 1

Why the State can’t continue to provide welfare benefits at the same level: (4)

Answer 1

1. Commitments to low taxation
2. Ageing population
3. Proportionately reducing taxable workforce
4. High treatment cost inflation due to medical advancements

Question 2

8 common regulatory restrictions for a IC

Answer 2

1. Restriction on types of contract IC can offer
2. Restrictions in prm rates or charges that can be used for some types of contract
3. Restrictions on rating factors that can be used to calculate prm
4. Requirements relating to the T&Cs of the contracts offered, for example with regard to how paid up policy and surrender values are to be calculated
5. Restrictions on the channels through which insurance may be sold or requirements as to the procedure to be followed or the info required to be given as part of the selling process
6. Restrictions on the ability to underwrite
7. Indirect constraint on the amount of business that may be written
8. Restrictions on the types of asset or the amount of any particular asset in which the IC may invest for the purpose of demonstrating solvency

Question 3

2 most common methods to tax IC:

Answer 3

1. Tax on the annual profits of the business
2. Tax payable on investment income/gains less some or all of the operating expense of the company

Question 4

Guidance notes will typically cover areas such as: (3)

Answer 4

1. Policy conditions
2. Adequacy of premium rates for new business
3. Value of liabilities