General Environment (11 – 12) Flashcards
Main distribution channels (4)
- Insurance intermediaries
- Tied agents
- Own sales force
- Direct marketing
Effects of distribution channel
Demographic profile
– income level
– financial sophistication
Contract design
– structure, etc
Contract Pricing
– demographic assumptions
– need for competitive terms
Contract pricing effects
Demographic
– anti-selection
– withdrawal rates
Competitive terms
– intermediary > tied agent > own sales force > direct marketing
also
- innovative features
- complex products
- savings products
- level of customer service
Expense types
Incurred costs:
– commission
– management
Commission
– initial
– renewal
Management cost split
– new business
– in-force business
– terminated / claims
– overheads
Economic environment
- Yields
– expected
– attractiveness of insurer - Volatility
– capital requirement
– speculative & riskier investments
Regulations
1. Goals
2. Side effects
Goals
– protect PH
– confidence
Side effect
– stifle innovation
– reduced benefits
– restrict operations
Common regulatory restrictions (8)
- contract types
- premium rates / charges
- rating factors
- distribution channels & procedures
- required T&Cs
- ability to underwrite
- indirect constraints to amount of business
- investment
Legal environment
- Economic risks
– PRE
– voiding clauses
– inconsistency between documents & representations - Impact
– new legislation
– developing legal- cultures
- interpretations
- court judgements
Professional giudance
– framework of points to consider
– keeping professional standards
– impact scope for judgement
– guidance
= confidence
= safeguides
Fiscal regime
Methods of taxation (2)
- Annual profits
- Investment income
** Premium income
Asset share depends on (4)
- Size of guarantees
- Initial expenses
- Volatility of underlying assets
- Likelihood of withdrawal
External environment elements
- Expenses + commission
- environment
2. Economic
3. Legal - regime
4. Regulatory
5. Fiscal
6 Professional guidance
