Contract Design Flashcards
How will a customer be influenced in what contract he wants?
Ability to pay premiums
Risks to be covered
Benefits needed for future
Risk attitude
Who will be involved in the contract design process?
Company Actuary Lawyers Accountants Administration Financial backers - shareholders
How will an actuary be involved in contract design?
Determining the pricing
Determining reserves needed
Monitoring experience and changing design
How will sales be optimised in a design of financial contract?
Appeal to wide range of customers with wide range of risk appetites
What part of the ACC is contract design?
Specify the problem
What important choices will a provider have when choosing to design a new contract?
Benefits on offer - guarantee/discretionary, lump sum/series of payments/ amount/ timing of benefits/ options/guarantees surrender value Premiums/contributions - Regular/lump sum Amount Level/index linked Guaranteed/reviewable Charges - Type of charges Charge to meet expenses or not
What objectives might a company have for their new contract?
Profitable/draw people in Competitive Meets need of current customers Meets need of potential customers Capital efficient Simple to understand Simple to administer Simple to account for Consistent with company risk appetite Consistent with consumers risk appetite Wide range of consumer risk appetites covered Consistent with other products of company or in market place
What is a company’s needs influenced by in contract design?
Chosen market
Capital available
Expertise available
Give 2 types of contract done in contract design?
Life insurance
Benefit scheme
How might the level and form of benefit of a contract be influenced?
Client’s needs
Risks covered
Client’s ability to pay
What does it mean by form of benefit?
Lump sum or regular amounts
What does it mean by level of benefit?
How much the sum assured is
