Lecture 17 - Insurance and pension funds

Question 1

What are the biggest insurance companies in Canada

Answer 1

Manulife - 849b
Great-West Lifeco 701b
Desjardin - 407b

Question 2

What is pure risk in insurance service

Answer 2

It is the chance of loss

Question 3

What is objective risk in insurance services

Answer 3

Deviation of actual losses from expected loss

Question 4

How does an insuracne company reduce objective riks

Answer 4

Underwriting claims, Deductibles, Reinusrance

Question 5

What are the key considerations for insurable risks

Answer 5

-There has to be a lrge number of similar exposure risk, helps with underwriting and predictions
-Losses should be random
- THe losses occur independent of each other and not all at once like a flood
-The probability of loss should be caclculable
- The premium needs to be feasable

Question 6

What is pricing risk

Answer 6

-The goal of insurance companies is to charge a rate high enough to cover calims and expenses and still make profits
- It is a competitive indutry which forces competitive rates
-Credible data is crucial

Question 7

How do Intrest Rates effect insurance companies

Answer 7

They are susceptible to changes in rates because their investment and liabilities are long term in nature

Question 8

What is straight coverage in term life insurance

Answer 8

Coverage over a specifc period of time with premiums increasing as you age

Question 9

What is decreasing life insurance

Answer 9

Coverage decliens and you pay premium iver a period of years

Question 10

What is increasing term life insurance

Answer 10

Coverage amount growth over time and the premium also increase

Question 11

What is renewable life insurance

Answer 11

There is an option to continue after the experiation data independant of health chagnes

Question 12

What is whole life insurance

Answer 12

You pay the same premium for your entire life and the coverage amount stays the same

Question 13

What is unniversal Life insurance

Answer 13

The savings portion of the insurance grwoth with current intrest rates. Pays market rate on savings

Question 14

What is variable life insurance

Answer 14

The savings are directly invested n equities
-You pay a set amount of premiums that does not change

Question 15

What is a life annuities in the insurance indutry

Answer 15

In exchange for payments, the insurance companies pays a lifetime steady income of payments

Question 16

WHat is a superannuation

Answer 16

It is the risk of outliving yoru money during retirement

Question 17

What deos the balance sheet of life insurance look like in terms of assets. Give some examples

Answer 17

Assets are long term matching liabilities
- Corporate bonds/equities
-Morgages
-Goverment securities

Question 18

What does the liabilities side of a life insurer look like. Give some examples

Answer 18

-Life insurance reserves, funds that are owed for the life of the policy
-Pension fund reserves, Accumulated commitments

Question 19

WHat is property insrance

Answer 19

Protection from financial loss such as perils, fires, theft

Question 20

What is Casulty insurance

Answer 20

Protection against loss caused by liabiities, For instance if you are responsible for somones injury, property damage etc.

Question 21

What are some of the key differences between life policies and P/C

Answer 21

P/C are less predictable, need to be more liquid, shorter term than life insurance

Question 22

What is a insured pension fund on the private side

Answer 22

a fund managed by life insurer

Question 23

Give 2 examples of non insured pension companies

Answer 23

Trustee Managed - Usually by a bank, investment firm
-Non trustee, managmed by the employer or a labor union

Question 24

What is the meaning of fully funded in pension

Answer 24

There is enough money set aside to pay retirement income to employes and cover future obligations

Question 25

What is contributory in pension

Answer 25

Both employee and employer contribute

Question 26

What is Fully contributory in pension

Answer 26

Only the employee contributes

Question 27

What is non contributorty in pension

Answer 27

Only the employer contributes

Question 28

What is a defined beenfit

Answer 28

Benefits set bsed on years of service and average salary