ALU 202 Exam Chapter 1 – Accurate Answers To All
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Terms in this set (45)
cost of the product is impacted by 1. The target market 2. product features 3. sales
approach 4.udw process
2 key items re stratergic directions *org needs skill set to appropriately analyze the risks
being considered
*org must be realistic about the underlying cost of
different offerings (simplified issue approach is
significantly different from that of a super-preferred
fully underwritten product offering)
assignment of surplus Another component in constructing profit
expectations
Profitability Expectation *key component for a product offering.
*a large component of expected profit margins is
pressure for a competitive price which is driven by
the generally accepted belief that LI products are
bought as a "commodity."
surplus capital that is held above & beyond the expected
needs of the product in order to ensure that all
policyholder claims will be met. (With a very high
probability)
4 types of risks to be covered by the 1. C1 - Asset Risk
assigned/allocated surplus 2. C2 - Insurance Risk
3. C3 - Interest Rate Risk
4. C4 - Business Risk
, C1 asset risk The risk that the assets supporting the product line
lose some/ all of their value.
C2 insurance risk The risk that the price for the insurance product is
inadequate. Caused by mis-estimation of expected
mortality
C3 the interest rate risk The risk that assets must be sold at a loss in order to
meet the case needs of the policyholder.
C4 business risk this is a "catch-all" category of risk management
Pricing Components Mortality Lapse rates Expense levels Interest rate
components establish by regulation (reserve basis;
non-forfeiture laws; surplus needs; *tax law)
Mortality is the single biggest cost in a LI product. Its impact
on profitability is always predictable
With more stringent udw 2 things take 1. the expected mortality decreases on the block of
place policies that qualify at this tighter level of
criteria=>lower, more competitive prices.
2.fewer people will qualify under the more stringent
udw reqts
Prospects who just miss qualifying for • They will find a co w slightly less restrictive
a company's preferred rates will likely preferred criteria & obtain a pref classification from
do one of 3 things that company.
• They will be unhappy that they did not qualify as
preferred and drop out of the buying pool
altogether.
• They will purchase the residual standard policy from
your company.
Actuaries Trained to think of the dynamics of large groups.
It is assumed that the group is comprised of relatively
homogenous risks.
Questions
Save
Terms in this set (45)
cost of the product is impacted by 1. The target market 2. product features 3. sales
approach 4.udw process
2 key items re stratergic directions *org needs skill set to appropriately analyze the risks
being considered
*org must be realistic about the underlying cost of
different offerings (simplified issue approach is
significantly different from that of a super-preferred
fully underwritten product offering)
assignment of surplus Another component in constructing profit
expectations
Profitability Expectation *key component for a product offering.
*a large component of expected profit margins is
pressure for a competitive price which is driven by
the generally accepted belief that LI products are
bought as a "commodity."
surplus capital that is held above & beyond the expected
needs of the product in order to ensure that all
policyholder claims will be met. (With a very high
probability)
4 types of risks to be covered by the 1. C1 - Asset Risk
assigned/allocated surplus 2. C2 - Insurance Risk
3. C3 - Interest Rate Risk
4. C4 - Business Risk
, C1 asset risk The risk that the assets supporting the product line
lose some/ all of their value.
C2 insurance risk The risk that the price for the insurance product is
inadequate. Caused by mis-estimation of expected
mortality
C3 the interest rate risk The risk that assets must be sold at a loss in order to
meet the case needs of the policyholder.
C4 business risk this is a "catch-all" category of risk management
Pricing Components Mortality Lapse rates Expense levels Interest rate
components establish by regulation (reserve basis;
non-forfeiture laws; surplus needs; *tax law)
Mortality is the single biggest cost in a LI product. Its impact
on profitability is always predictable
With more stringent udw 2 things take 1. the expected mortality decreases on the block of
place policies that qualify at this tighter level of
criteria=>lower, more competitive prices.
2.fewer people will qualify under the more stringent
udw reqts
Prospects who just miss qualifying for • They will find a co w slightly less restrictive
a company's preferred rates will likely preferred criteria & obtain a pref classification from
do one of 3 things that company.
• They will be unhappy that they did not qualify as
preferred and drop out of the buying pool
altogether.
• They will purchase the residual standard policy from
your company.
Actuaries Trained to think of the dynamics of large groups.
It is assumed that the group is comprised of relatively
homogenous risks.
