The solution says surrender values should treat both surrendering and continuing policyholders equitably. As this is a without profits contract the terms offered to surrendering policyholders do not directly affect the continuing policyholders. Please explain these sentences. Surrender values should not be subject to significant discontinuities by duration. Please explain.
It would be unfair to pay a SV of 250 before time t and 450 after time t. Unless a cashflow such as a premium occurred at time t of course. Mark
It would be unfair if late surrenders received considerably less than those maturing shortly afterwards. Mark
