Ch11: General business environment (1)

Question 1

Why is insurance sold and not bought?

Answer 1

• people unaware of the need, either through ignorance or don’t think it will happen to them
• death may be a taboo subject
• products are difficult to understand
• difficult marketplace
• general need for advice before making long-term financial commitments

Question 2

If product is sold that does not meet needs, insurer faces the following risks:

Answer 2

• persistency risk
• reputational risk

Question 3

Forms of direct marketing

Answer 3

• mailshots
• telephone selling
• press advertising
• internet selling

Question 4

Order of competitiveness of premium rates (most to least):

Answer 4

• independent intermediaries
• tied agents
• own sales force
• direct marketing (although not always)