Life Insurance Products Flashcards
1
Q
Product life cycle
A
- Product design
- Pricing
- Marketing + sales
- Underwriting
- Claims management
- Experience monitoring
- Valuation
2
Q
Customer needs addressed by endowment assurance
A
- Benefit on death - protection
- Benefit on survival - savings
- Wealth transfer
3
Q
Without-profits EA
A
Offers guaranteed amount of money at the end of the contract. Usually same sum assured on early death.
4
Q
With-profits EA
(participating insurance)
A
Initial sum assured expected to be enhanced by declaration of bonusses.
- Conventional with profits
- Accumulating with profits
5
Q
Unit linked EA
A
- Premiums pooled into investment funds
- Benefit depends on underlying asset and charges
6
Q
Benefits for UL EA could be:
A
- Fixed sum
- Value of units
- % of value of units
7
Q
Risks of writing EA contracts
A
8
Q
Customer needs addressed by WoL
A
- Benefit on death
- Cover funeral expense/ tax liability
- Could be efficient way to transfer wealth
9
Q
Risks of writing WoL contracts
A
- Investment and mortality depend on entry age and duration in force
- Mortality risk from selective withdrawals
- Anti-selection
- Expenses
- Withdrawal risk when asset share is negative
10
Q
Capital requirements for WoL
A
Similar to endowment assurance
11
Q
Reasons why NBS occurs
A
- Difference between day-one asset share and sum of supervisory reserves and required solvency capital is negative.
- Any such strain is made good from company’s free assets
- For reg premium contracts, asset share is negative in early years due to high initial expenses e.g. commission, marketing, underwriting etc
- Sum of reserves and solvency capital is likely to be positive since company must calculate these to give low probability of insolvency.
- L exceed A in value»_space; NBS
- Prudence implicit in solvency calc is generally greater than risk and profit margins in premium basis»_space; common to have nbs even for single premium contracts
