Financial Products And Customer Needs Flashcards
What to consider when outlining cash flows for assurances
Premiums: regular series or single? indexed or not?
Outgo: One lump sum or multiple claims? Indexed or not?
Expenses outgo for selling policy and regular maintenance, plus claim expenses
Considerations of choosing annuities for retirement
Relates to longevity/investment risk and relative cost of products for the individual
Time for which the individual will need an income after retirement
Increase in cost of living
Current annuity rates of different products
Annual management fees
State of health at retirement
Flexibility, choice and control
Need for individual: requirement amount of income, need for cash, dependent’s income after death, other sources of income, wanting to leave an inheritance, risk appetite of individual
Relative tax treatment
Why take lump sum rather than investing for retirement fund?
May have debts to repay
Make large once-off expenditures
Taxation of lump sum are more attractive relative to taxation of annuities
Associated cost may be high
May be better diversified in investment portfolio
May be in poor health and wish to spend proceeds soone
Factors for comparison if different insurance
Term and renewable
Reported and settled
Multiple or single claim
Claims amounts certain
Methods for determining level of provisions
Investment strategies
Number of perils to give rise to claims
Regulations
Levels of anti-selection
Define the four types of needs and exapmles for each
Logical need - needs that are established by systematic and logical approach - life insurance for breadwinner
emotonal need - needs that are established by what member feels is needed - life insurance providing generous benefits
current need - need that has an immediate effect on a member’s circumstances - disability cover for employed
future need - a need relating to member’s future aspirations - retirement annuiity policy
provide a general framework for analysis of needs
Identify the stakeholders –
list of distinct stakeholder groups
consider the group of each group and identify their
particular needs
Classify the need –
Differentiate between logical needs approach and
emotional approach
logical - analysis and prioritisation
- in terms of maintaining current lifestyle,protection, accumulation for a known/unkown purpose
emotional - irrational but important to consider
Distinguish between current and future needs
Prioritize the needs using hierarchy of logical needs
What items should be disclosed to the members of a pension fund
Benefit entitlements
Contribution obligations
Expense charges
Investment strategy
Investment returns
Risks involved
What happens in event of insolvency
At which point should closure of information be required
On entry
At regular intervals
Once a payment commences
On request by a member
Why might demand for a particular asset might suddenly increase
Change in liabilities
Change in regulatory regime to enforce
incentivizing tax regime
political uncertainty
sentiment altering the demand
marketing of providers
investor education
changes in relative attractiveness of assets
