Chapter 6 and 7 - Products Flashcards
(16 cards)
What are the advantages and disadvantages of group products for an insurer?
Advantages:
* Lower admin
* Collects one prem
* Lower chance of prem default
* Spend less money on credit control, risk management around cash collection
* One policy give you cover on multiple llives
* Lower marketing costs
* Membership tends to be compulsory reduces anti-selection risk
* no underwriting costs
Disadvantages:
* If employees aren’t independent, there is concentration risk exposed to same risk regularly and catastrophe risk
* Theres a lot of competition for group life prems and therefore a lot of pressure on prems
* The employer has a lot of buying power *
Limited to no underwriting
What are the disadvantages of group insurance for an individual?
- Cover is not specific for individual
- Expensive to change providers
- Over-insured if you already had cover
- Uninsurable if there’s no continuation option
What are the advantages of group insurance for employers?
- Easy admin
- Remains competitive
- Premium could be tax deductible
- Cheap and easy to move providers
Trigger of a critical illness product
- First diagnosis of listed Ci (heart attack, stroke or cancer)
- Could include a survival period if it’s a stand-alone benefit
- Could include severity levels and allow for multiple CI diagnoses
Needs met by CI product
- Extra costs (medical treatment, private nursing, childcare, home adaptation)
- Bc life expectancy reduced, early retirement
- Impact on income because you can’t work as hard to develop your career
- Changes to lifestyle due to contracting and surviving CI
Form and structure of CI benefit
Form:
* Lump sum or regular annuity payments
* Can be fixed or escalating - unit-linked, wit-profits or index-linked
Structure of benefit:
* Stand-alone benefit ( more expensive but flexible and matched need. better)
* Accelerator of life SA (less life cover when you are difficult to insure) which could include a reinstatement period after which the life cover is reinstated to its original benefit
* Could also include a waiver of premium rider
Key assumptions of CI
- P(suffering listed CI) at each age and for each gender
- P(surviving the survival period)
- P(lapse)
Why is permanent disability not a listed CI?
- Claims assessing more difficult and costly
- Now there’s an extra thing to underwrite
What are the triggers for a disability income product?
- Loss of ability to work due to disability as a result of accident or illness.
- Which results to loss of income
- They could be a deferred or elimination. Before receiving the sum assured.
What are the needs met by a disability income product?
- A loss of income on either permanent or temporary disability Should one be unable to follow occupation due to accidental illness
- to replace future earnings during working life
What is the form and structure of the disability income product?
Form
* Regular annuity payment or lump sum could be fixed but likely escalating.
Structure
* Definition of disability could be any occupation, own occupation, suited occupation, only job.
* Cover or level of benefit could decrease each year
What are the key demographic assumptions for a disability income product?
- Morbidity rates, disability rates
- Mortality rates – before, after disable, mortality during deferment period
- Mortality at different ages and gender
- Incidence rates
- Rates for each occupation
- Termination rates = death or recoveries= in deferment period and after deferment period
- Age of retirement, ill health retirement
- Lapse rates
What are the needs met by a PMI product?
- Monetary compensation to cover medical costs and the trauma.
- No hospital, from a doctor of choice, attention without waiting.
What are the triggers fora long-term care product?
- Admittance to a frail care home.
- Inability to perform tasks of daily living
What needs are met by a long-term care product?
- Provides financial protection when a person becomes unable to look after themselves independently.
- Activities of daily living includes washing, dressing, feeding and toileting.
- The money is used for a caregiver, nursing home or home modifications.
What are the needs met by cash benefits?
- Inpatient costs associated with surgery and provided for balance to fund incidental and recuperation costs.
- For other expenses that arise upon hospitalisation
- Not having to pay out of pocket for expenses not covered by private medical insurance.
- Disabled or receiving treatment due to accident.
