Ch 25: Nature of risks (2)

Question 1

Competition may lead to management making decisions that leads to an increased risk profile beyond which can be supported by available resources

Answer 1

• Reduce premium rates or charges under new business contracts
• Offer additional guarantees and options
• Increasde ocverage under existing contracts
• Increase salaries or commissions
• Constrain future growth of charges

Question 2

Risks relating to distribution

Answer 2

• Distributor may knowingly or otherwise commit the insurer to conditions that were not the original purpose of the contract
• A distributor may default, in circumstances were policyholder money transactions are conveyed through the distributor (may be late or become bankrupt)
• A distributor may, in dealing with clients bon behalf of the insurer, bring the insurer into disrepute