Ch 6: Customer interests

Question 1

Five main factors relating to product design that may affect the level of customer attraction

Answer 1

• Meeting specific needs
• Providing cash
• Providing peace of mind
• Simplicity and clarity
• Guaranteed vs reviewable premiums and benefits

Question 2

Four specific needs met by health and care insurance

Answer 2

• Finance medical bills
• Provide funds to finance costs of lifestyle adjustments following critical illness.
• Finance cost of care in old age
• Provide lump sum benefit to repay loans (protection against inability to meet major financial outgoings)

Question 3

How asymmetry of information in healthcare between consumers and providers can be dealt with by regulators, managed care organisations, insurers…

Answer 3

• Setting treatment standards that will ensure a minimum level of of quality of treatment
• Establishing treatment protocols where specific treatment is defined for a particular diagnosis.
• Establishing fee schedules for particular treatments. Insurers may be able to negotiate discounted fees in return for increased sales volumes.

Question 4

Managed care organisations are the link between who?

Answer 4

• Link between party that pays for healthcare services and the healthcare provider.
• They also implement schemes where quality of service and managing costs are encouraged.

Question 5

Needs met by critical illness policy

Answer 5

• Income can be provided from the lump sum via an annuity when the individual cannot work as a result of the illness.
• The benefit can be designed to repay a mortgage or other loan when the policyholder is diagnosed with a critical illness
• Medical costs can be funded when the illness requires surgery or other expensive treatment
• Business partners can purchase CI policies on the lives of each other such that the benefits will fund the buyout of the stake in partnership when CI arises.
• Change in lifestyle can be funded when necessary to improve claimant’s health (e.g. moving to a less stressful lower paying job following a heart attack.
• Other needs include recuperation or rehab treatment after illness
• Tax planning
• Medical aids

Question 6

Needs met by LTCI (3)

Answer 6

• Provision of some financial protection against the costs of care and assistance when a person becomes unable to look after themselves
• Provides comfort that there is an independent source of cash (state’s role may be uncertain)
• Some might be worried about reduction in informal care provided by friends and family