Surplus Flashcards
1
Q
Why do an analysis of surplus/profits?
A
DIVERGENCE
2
Q
Why does surplus/profit arise?
A
CAMBODIAE
3
Q
What 12 assumptions may not be equal to experience, and are therefore sources of surplus/profits
A
Mortality Morbidity Lapses Investment income Premiums Expenses Commission Salary growth Inflation Tax New business levels Claim amounts
4
Q
What are the levers that can be used to control surplus/profits/losses?
A
Control expenses Reduce lapses Underwriting to reduce claims Reinsurance to limit volatility and large claims Investment policy is good Increase # renewals Tax management policy
5
Q
How would you manage the cost of expenses or payments?
A
Require ongoing proof of illness
No guarantees, only discretionary benefits
No claims discounts
Policy Excess
Increase cost of premiums
Government could increase retirement age
Claims control cost being consistent with cost of getting it wrong
6
Q
What are the issues that effect how surplus/profits are distributed?
A
Type of company T's and C's Legislation Regulation Tax Maximum proportion to shareholders Retain for working capital use Capital requirements Margins for adverse experience Objectives Expectations of policyholders Expectations of shareholders Smoothing profits Growth of business Investment freedom Self restrictions Source of the surplus Trade unions
