Chapter 9 (page 10)

[eevee]

Hi everyone,

The following extract is from Page 10 in chapter 9 of the textbook:

"Other institutions will usually be subject to different regulatory controls from insurance companies, which can lead to a non-level playing field with regard to the terms on which such contracts can be offered. However, this is less of an issue for health and care insurance than for life insurance.

Because most health & care policies are protection policies and policy reserves at all durations are usually small compared to sums at risk."

What are the “different regulatory controls” the text is referring to? And what "non-level playing field" is text implying?

Thanks

 

[Charlie]

So the notes talk about "access packages" that are offered by hospitals / clinics, which are not insurance companies, although they offer things that are similar to PMI.

If they're not insurance companies, they won't be subject to the same regulation - for example, the same capital requirements. So insurance companies are required to hold a certain level of capital to back its business, which ties up its capital and ultimately is likely to reduce its profits. If the hospitals / clinics aren't subject to the same capital requirements, then they might be able to offer cheaper products - hence the non-level playing field.

 

[eevee]

Thank you, Charlie. Thank makes a lot of sense now!