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F102 Life > Life Assurance Products (1 – 3) > Flashcards

Life Assurance Products (1 – 3) Flashcards

1
Q

Customer Needs

A
  1. Savings
  2. Protection
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2
Q

Capital Strain Formula

A

C = V + E – P

C: Capital strain
V: Supervisory reserves & min solvency margin
E: Expenses & commission
P: Premium paid
At T0+: immediately after policy inception

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3
Q

Asset Share Formula

A

A0+ = P0+ – E0+

E: Expenses & commission
P: Premium paid

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4
Q

Product Lifecycle (7)

A
  1. Product design
  2. Pricing
  3. Marketing and sales
  4. Underwriting
  5. Claims management
  6. Experience monitoring
  7. Valuation
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5
Q

Group Business

A

Collection of individuals make single proposal of uniform cover

  1. Affinity Group
    – union
    – credit card
  2. Employees of Company
    – contributory
    – sponsored
    – facilitator
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6
Q

Major Life Products

A

Death Oriented:
1. Assurances
2. Annuities

Health Oriented:
1. Income Protection
2. Critical Illness
3. Long Term Care Insurance

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7
Q

Endowment Assurance

A

Benefit on survival at known date
– Savings vehicle

Usually surrender value

May provide death benefit
– protection & savings

Group
– Employer

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8
Q

Endowment Assurance Forms

A

Without-profits
With-profits
Unit-linked

Without
– guaranteed sum

With
– risk to PH
– enhanced by bonus declarations
> increase sum
> cash
> lower future premiums

Unit
– pooled investment fund

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9
Q

Endowment Assurance Risks

A

– Investment
– Mortality
– Expense
– Withdrawal
– Concentration

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10
Q

Endowment Assurance Capital Requirement (5)

A

– contract design

– frequency of payments

– pricing & supervisory reserving basis relationship

– additional solvency capital requirements

– initial expense levels

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11
Q

Whole Life Assurance

A

Death benefit whenever

Uncommon surrender benefit

No group

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12
Q

Whole Life Assurance Needs

A

Providing for
– funeral expenses
– inheritance tax / death duties
– LT protection dependants
– wealth transfer

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13
Q

Whole Life Forms

A

– without-profits
– with-profits

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14
Q

Whole Life Risks

A

Investment & mortality depend on
– entry age
– duration in force

– selective withdrawals
– inflation

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15
Q

Whole Life Capital Requirements

A

Similar to endowment

– design
– frequency of payments
– pricing & supervisory reserving basis relationship
– additional solvency capital requirements
– initial expense

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16
Q

Term Assurance

A

Death within the term

Surrender: NO

Group: yes

Forms:
– Without
> with
> unit
> index

17
Q

Term Assurance Needs

A

– protection for dependants (at lower cost)

– Debt repayment (decreasing assurance)

– Fin. loss key person

18
Q

Term Assurance Risks

A

Main
- mortality
- anti-selection

Also
- expense
- withdrawal (anti-selection)

Little/none
- investment

19
Q

Term Assurance Capital Requirements

A

– Little intrinsic

– Depending on regulatory regime

– Initial costs:
> underwriting
> commission

20
Q

Convertible / Renewable

A

Allows change / extend cover

Without further medical u/w

Surrender: NO (term)

Group: (NO) Only continuation option

21
Q

Convertible / Renewable Risks

A

Significant additional risk of anti-selection (at exercise date)

Renew > risk than convertible

22
Q

Convertible / Renewable Capital Requirement

A

Higher than basic term

Depending on additional reserves required

23
Q

Immediate Annuity

A

Regular benefit payments

Surrender: NO

Group: Yes (pension)

24
Q

Immediate Annuity Needs

A

– Income protection
– Compulsion (pension)

25
Q

Immediate Annuity Forms & Types

A

Mostly
- Without
- Index

Also
- With-profit
- Unitised

Types
– impaired life
– widow/orphan
– single life
– survivor

26
Q

Immediate Annuity Risks

A

Mostly
- longevity
- anti-selection
- Investment
- expense

27
Q

Immediate Annuity Capital Requirements

A

Significant

Depending on pricing vs reserving bases

28
Q

Deferred Annuity

A

Income protection with more flexibility (pre-vesting date)

Surrender: Only pre-vesting

Group: Yes

29
Q

Deferred Annuity Forms

A

Without-profit

With-profit

30
Q

Deferred Annuity Risks

A

Mostly
- withdrawals
- anti-selection
- Investment
- expense

31
Q

Deferred Annuity Capital Requirements

A

As endowment and annuity

Add. capital for guarantee to convert lump –> annuity

32
Q

T-ROADS

A

Term / Timing

Rating & Premiums

Options & Guarantees

Amount of benefit

Definitions of claim event

Structural basis (forms)

33
Q

Why no surrender benefit for term assumance

A
  1. Loss recouping
  2. Selective withdrawals
  3. Not very large (less admin)
  4. Asset share is volatile
  5. Not always positive
34
Q

Failure to meet needs

A
  1. Inflation
  2. Insolvency
  3. Needs changed
  4. Mis-selling / misunderstood
  5. Unaffordability

F102 Life (17 decks)

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