Insurance Products Flashcards
1
Q
Definition of an insurable risk
A
- -Quantifiable
- -policyholder Interest in the risk
- -claim amount Commensurate with loss
- -probability of event is Small
- -moral Hazard eliminated as much as possible
- -individual risks should be Independent
- -Large number of similar risks should be pool
- -Limit on ultimate liability
- -sufficient Information to quantify the risk
2
Q
Making a risk insurable
A
- -control Distribution channel
- -choose Form of benefit
- -restore equality of Information
- -adjust Term of cover
- -adjust Trigger
- -adjust Type of sum assured (increases/links)
- -risk Sharing
- -Specialist risk pooling
- -compulsory vs Voluntary
- -Grouping with other cover
3
Q
Process of designing and pricing an insurance product
A
- -Needs
- -Distribution channel
- -Design
- -Launch date
- -Product spec
- -Burning costs
- -Expense costs
- -Profit requirement
- -Lapse assumptions
- -Profit testing
- -Competitor comparison
- -Revise and fine tune
4
Q
Factors to consider in contract design
A
- -all Parties involved
- -Benefit
- -Financing
- -Commercial considerations
- -Costs vs expenses
- -Practical considerations
- -Risks
5
Q
Cashflows in a policy
A
--Premiums (net reinsurance premiums) --Investment income and gains --Claims (net of reinsurance recoveries) --Commission --Expenses --changes in Reserves (provisions) --Tax =Profit
6
Q
Factors to consider when comparing finance strategies
A
- -Security
- -Stability of cost
- -Realistic sense of cost
- -Opportunity cost
- -Flexibility
- -Liquidity
7
Q
Expenses over a policy’s life cycle
A
- -Overheads
- -Product development
- -policy Termination
- -policy Issue
- -Marketing
- -policy Administration (renewal)
- -claims Settlements
- -Support
(PART O **Pre-sale **At sale **Regular **Termination **Overheads )
8
Q
Everything an insurance company spends money on
A
- -Salaries
- -Property
- -One-offs
(e. g. fines) - -Computers
- -Consumables
- -Commissions
- -Investments
9
Q
Reasons for valuation of liabilities
A
--Disclosure (accounts and reports) --Acquisition --Merger --Discontinuance --Management --Compare with assets (investment strategy, excess allocation)
