Suggest atleast 10 reasons why the payout from a with profit policy might be different from the policy's asset share? I am unable to understabd all the reasons given in the ques paper solution, please provide a better solution.
Hi It might help to think of them in groups: (1) the first few points in the examiners' report are about the fact that a WP policy will pay higher of an amount based on asset share and a guaranteed amount (SA + guaranteed bonuses) at death or maturity. (2) some reasons relate to why a surrender payout may be different from the asset share, eg surrender penalty or if asset share is negative. (3) some reasons relate to why a payout may be 'based on' asset share but not exactly equal, eg smoothing, approximations in the asset share calculation, items that might be added to (eg estate) or subtracted from (eg tax) the payout separately from the asset share calculation.
