Hi I was wondering if someone knew the answers to any of the questions below: Chapter 5 Q Need can be split by current / future and logical / emotional. Do these overlap or are they separate? Is it possible you can get a logical current need? Got an example? " logical future need? Got an example? " emotional current need? Got an example? " emotional future need? Got an example? Chapter 1 Q Often the word "client" and "actuary" are mentioned. What do we mean by these terms. By the word "actuary" do we mean in the case of a life insurance office: AFH, WPA or any qualfiied actuary? If not what do we mean? By the word "client" do we mean an external contractor doing work in a life insurance office? Will there be more often than not conflicts of interests? If the external contractor "whistleblows" on the LI office will they not jeperdise any future consulting work with the firm they belong to? Chapter 10 Page 8 Q What do you mean by RIDER BENEFIT? Is it like an "optional benefit" on a product. E.g. think of it as an option when purchasing a car? Chapter 12 Page 12 Q It mentions in the notes nominal cashflows are discounted using a nominal discount rate. Do nominal cashflows include inflation? What do we mean by nominal cashflows? Do we use NPV and IRR for the initial appraisal of capital projects or ONLY when doing a DETAILED APPRAISAL?
Hi They overlap - so you can get all 4 combinations (ie logical/future, logical/current, emotional/future, emotional/current) An example of a logical future need would be to provide income in retirement to maintain a certain standard of living. An example of an emotional current need would be to go on a spending spree at lunchtime because you've had a tough morning at work Over-providing protection for dependants, eg in the event of future death, would be an example of an emotional, future need I think. A certain level of protection would be logical, but "too much" would be emotional... "Actuary" is any actuary - doesn't have to be a specified role-holder like AFH, WPA. "Client" is "person/organisation for whom an actuary is doing a piece of work/providing advice". Yes Yes, nominal cashflows include inflation (so, for example, you might expect projected nominal expense cashflows in most circumstance to increase over time). Nominal cashflows are discounted using nominal discount rates (ie rates that include inflation). Real cashflows don't include the impact of inflation (so, for example, real expenses might be assumed to stay level over time). We discount these cashflows using real discount rates. A short answer to the initial/detailed appraisal is "only during the detailed appraisal". A slightly longer and better answer (I think) is that appraisal is an interative process, so we might include a pretty rough calculation initially and then refine it in subsequent iterations. Hope the studying is going well Lynn
I remember receiving an email a few years' ago from the writer of the section of Core Reading on logical / emotional needs. The distinction involved the approach to identifying needs. Here's an example: The need to provide protection to dependants on death This could be a logical need, ie one identified using an analytical approach, looking at an individual's priorities, asking them questions about the level of savings and protection they already have. Or it could be an emotional need, ie one identified by playing on what a customer thinks they need. Eg the customer may want to avoid the feeling of guilt of not providing for dependents on death. So, what I take from this is that a given need could be described either as logical or emotional, depending on how it was identified. Anna
