Hello,
While solving April 2018's question paper, I had following questions. Can someone please help?
1. Q3
i)- For negative non unit reserve, how will an exit 'reduce' asset and 'increase' liability? How is this justified considering (PV of expenses-PV of charges) for non-unit reserve calculation?
ii)- Assumptions don't appear to reflect trend in data. In particular, assumption for B doesn't appear to be prudent when looking at the most recent date.
I didn't understand these comments.
2. Q4
ii) 'Impose a maximum new business target' for managing risk from option offered by insurance company. Is this a practical solution? Do insurers ever limit the new business from a certain offering (and decline policyholders after that or remove the option's availability)
3. Q7
i) Assessing principles for setting surrender values against the approach for transfer values-
Treating surrendering and continuing policyholders equitably.
How does using best estimate assumption ensure this?
Relevant part of Core Reading below-
If these surrender value assumptions exactly represent future experience, then the total profit retained will be the same as if the contract had not been surrendered. If they are the same as the premium basis assumptions, then the company only retains the profit it has made to date.
(EAS – SV' ) + (SV' – SV'')
ii) Why will pricing model be run when we only need the assumptions from pricing model, not the output?
Why are we considering possibility of a full run of valuation model if there is an individual request? Modelling platforms always allow running a single policy in contrast with full model.
iii) Even if the record does indicate marital status, there may not be any specific details of the existing spouse held.
If we buy a joint life policy, the joint life's birthday and relationship with primary policyholder are captured. Hence, we know their age and gender. If marital status is known, wouldn't these details also be captured?
Thank you in advance!
While solving April 2018's question paper, I had following questions. Can someone please help?
1. Q3
i)- For negative non unit reserve, how will an exit 'reduce' asset and 'increase' liability? How is this justified considering (PV of expenses-PV of charges) for non-unit reserve calculation?
ii)- Assumptions don't appear to reflect trend in data. In particular, assumption for B doesn't appear to be prudent when looking at the most recent date.
I didn't understand these comments.
2. Q4
ii) 'Impose a maximum new business target' for managing risk from option offered by insurance company. Is this a practical solution? Do insurers ever limit the new business from a certain offering (and decline policyholders after that or remove the option's availability)
3. Q7
i) Assessing principles for setting surrender values against the approach for transfer values-
Treating surrendering and continuing policyholders equitably.
How does using best estimate assumption ensure this?
Relevant part of Core Reading below-
If these surrender value assumptions exactly represent future experience, then the total profit retained will be the same as if the contract had not been surrendered. If they are the same as the premium basis assumptions, then the company only retains the profit it has made to date.
(EAS – SV' ) + (SV' – SV'')
ii) Why will pricing model be run when we only need the assumptions from pricing model, not the output?
Why are we considering possibility of a full run of valuation model if there is an individual request? Modelling platforms always allow running a single policy in contrast with full model.
iii) Even if the record does indicate marital status, there may not be any specific details of the existing spouse held.
If we buy a joint life policy, the joint life's birthday and relationship with primary policyholder are captured. Hence, we know their age and gender. If marital status is known, wouldn't these details also be captured?
Thank you in advance!