Product Design (20)

Question 1

Why PD (2)

Answer 1

1. aware of gap in existing product range
   • market awareness
   • new financial instrument
   • legislative/regulatory
2. inadequacy of range
   • profitability
   • ROC
   • premium basis / charging structure

Question 2

Factors to consider in PD (12)

Answer 2

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– meeting customer needs

– profitability

– marketability

– competitiveness

– financing requirement

– risk characteristics

– guarantees

– sensitivity of profits

– cross-subsidies

– consistency

– admin systems

– regulatory requirements

Question 3

Improve marketability (5)

Answer 3

– innovative features

– options & guarantees

– charging structure (unit-linked)

– premium rated

– understandability

Question 4

Unit-linked advantages

Answer 4

Few/no guarantees
– expense
– mortality
– investment return

Lower supervisory solvency margin

Question 5

Lower risk of a product (4)

Answer 5

– reinsurance

– unit-linked / reviewable

– ample margins

– rider

Question 6

Sensitivity of profitability – variables (4)

Answer 6

– Investment return

– Mortality

– Expense (incl. inflation)

– Withdrawal rate