The General Business Environment Flashcards
List the most common distribution channels
1) Independent intermediaries
2) Tied agents
3) Own sales force
4) Direct marketing
Independent intermediaries
A.K.A. Broker or IFA
Salespeople who act independently of any one insurer and select products for their clients from all or most of those available in the market.
They legally act for their client and aim to find the most suitable premium and benefit for their client’s needs.
They may be remunerated via commission payments from insurers for via a fee from their clients.
Tied agents
Salespeople tied to one or a few life companies and sell only the products of those companies e.g. Employees of a bank.
They act legally for the insurer.
They are usually rewarded by commission.
Own sales force
Usually employed by a particular company to sell its products to the public.
They act for their employer, the insurer. Salesperson might initiate sales until they have established a rapport with customer, then customer may initiate.
They may be remunerated by commission, salary or a mixture of both.
Direct marketing
Via press advertising, over the telephone, internet or mail shots
Warm client
One with whom an insurer or salesperson already has an established relationship
Distribution channel
The routes and methods through which life insurers sell their products
Class selection
Refers to the fact that people can be usefully classified by certain attributes that affect their mortality/morbidity. In this case, the attribute considered is the distribution channel by which the business has been acquired
Differences in target markets reached by different distribution channels
1) Demographic differences
2) Level of financial sophistication
3) Level of income
4) Keenness to purchase a contract
Differences by distribution channel
1) Target market reached
2) Type of business sold
3) Level of underwriting conducted
4) The need for competitive terms
5) Cost
6) Demographic experience
7) Aggressiveness of approach to sales
8) Extent of customer consideration
Insurers compete on…
1) Price
2) Features and options in products
3) Investment performance
4) Customer satisfaction
List the items to consider under the general business environment
1) The propensity of consumers to purchase products
2) Distribution channels
3) Expenses and Commissions
4) Inflation
5) Economic environment
6) Legal environment
7) Regulatory regime
8) Fiscal regime
9) Professional guidance
Areas impacted by a regulatory regime
1) Types of contract that can be sold
2) Premium rates and charges
3) Terms and conditions of contracts sold
4) Distribution channels (including sales procedures and info given at point of sale)
5) Ability to underwrite
6) Minimum reserve levels and SCR (indirectly limits sales volume)
7) Types of asset or amount of any particular asset permitted for demonstration of solvency
In comparing the tax advantages of different products one must consider….
1) The tax treatment of premiums paid (tax deductible for individual?)
2) Tax of the life insurer’s funds during the life of the contract
3) Tax treatment of the eventual policy benefits
