Life Assurance Products (1 – 3) Flashcards
(34 cards)
Customer Needs
- Savings
- Protection
Capital Strain Formula
C = V + E – P
C: Capital strain
V: Supervisory reserves & min solvency margin
E: Expenses & commission
P: Premium paid
At T0+: immediately after policy inception
Asset Share Formula
A0+ = P0+ – E0+
E: Expenses & commission
P: Premium paid
Product Lifecycle (7)
- Product design
- Pricing
- Marketing and sales
- Underwriting
- Claims management
- Experience monitoring
- Valuation
Group Business
Collection of individuals make single proposal of uniform cover
- Affinity Group
– union
– credit card - Employees of Company
– contributory
– sponsored
– facilitator
Major Life Products
Death Oriented:
1. Assurances
2. Annuities
Health Oriented:
1. Income Protection
2. Critical Illness
3. Long Term Care Insurance
Endowment Assurance
Benefit on survival at known date
– Savings vehicle
Usually surrender value
May provide death benefit
– protection & savings
Group
– Employer
Endowment Assurance Forms
Without-profits
With-profits
Unit-linked
Without
– guaranteed sum
With
– risk to PH
– enhanced by bonus declarations
> increase sum
> cash
> lower future premiums
Unit
– pooled investment fund
Endowment Assurance Risks
– Investment
– Mortality
– Expense
– Withdrawal
– Concentration
Endowment Assurance Capital Requirement (5)
– contract design
– frequency of payments
– pricing & supervisory reserving basis relationship
– additional solvency capital requirements
– initial expense levels
Whole Life Assurance
Death benefit whenever
Uncommon surrender benefit
No group
Whole Life Assurance Needs
Providing for
– funeral expenses
– inheritance tax / death duties
– LT protection dependants
– wealth transfer
Whole Life Forms
– without-profits
– with-profits
Whole Life Risks
Investment & mortality depend on
– entry age
– duration in force
– selective withdrawals
– inflation
Whole Life Capital Requirements
Similar to endowment
– design
– frequency of payments
– pricing & supervisory reserving basis relationship
– additional solvency capital requirements
– initial expense
Term Assurance
Death within the term
Surrender: NO
Group: yes
Forms:
– Without
> with
> unit
> index
Term Assurance Needs
– protection for dependants (at lower cost)
– Debt repayment (decreasing assurance)
– Fin. loss key person
Term Assurance Risks
Main
- mortality
- anti-selection
Also
- expense
- withdrawal (anti-selection)
Little/none
- investment
Term Assurance Capital Requirements
– Little intrinsic
– Depending on regulatory regime
– Initial costs:
> underwriting
> commission
Convertible / Renewable
Allows change / extend cover
Without further medical u/w
Surrender: NO (term)
Group: (NO) Only continuation option
Convertible / Renewable Risks
Significant additional risk of anti-selection (at exercise date)
Renew > risk than convertible
Convertible / Renewable Capital Requirement
Higher than basic term
Depending on additional reserves required
Immediate Annuity
Regular benefit payments
Surrender: NO
Group: Yes (pension)
Immediate Annuity Needs
– Income protection
– Compulsion (pension)
