In chapter 21, under section 5.3 'Determining a basis for retrospective value', there is a question as below: Qus. The Core Reading suggests that smoothing investment earnings is more likely for regular premium contracts than for single premium contracts. Explain why this is the case. Solution: Policyholders are more likely to be exercising financial selection against the company when purchasing a single premium contract. It should therefore be longer before a company considers letting them benefit from investment smoothing Could anyone please explain this? What is financial selection? Any example of it? What investment earnings they are talking about?
Hi Bharti We had a similar question asked by sagar_sagar recently. Look at the thread for Chapter 21 and in particular question 7. Best wishes Mark