Hi, In chapter 16, section 1.5, it mentioned that if the company is faced with a large parameter risk it could offer the contract as an additional ‘rider’ benefit rather than stand-alone. Can anyone help to further explain why is it so? Thanks in advance! Best Regards, Aaron
Hi Aaron A numerical example might help. Imagine a policy with a premium of 95 for the main benefit and 5 for the rider - if the rider turns out to cost 6, then that is only 1% of the total premium. If the benefit was instead offered on a stand alone basis then the cost of 6 is 20% more than the premium of 5. Best wishes Mark
