Hi everyone and ActEd tutors,
Please can you answer these questions as I'm unsure on them.
Q1) What's the difference between a product's "Premium Assumptions" and "Premium Rate"?
Is the premium rate the amount charged to a customer for a product (e.g. dependant on their age/gender/health) which has been priced using a set of pricing assumptions.
Q2) Is "Market Consistent or Market Value" assumption one where the investment return and discount rate is the "Risk Free Rate + Risk Margin", where the risk margin could be the credit spread?
Is "Risk Neutral" assumption one where the investment return and discount rate is the "Risk Free Rate" Only?
For a Market Consistent Valuation, assets are taken to have investment return as "Risk Free Rate" regardless of asset mix. Why is this?
Q3) For a With Profits Policy, is it correct to think of the policy's asset share are being kept in the company's reserves (this is the policy's total SA, which is basic SA + declared bonuses) and the company's free assets (this is the policy's asset share in the estate)?
Q4) Please can you clarify what a "Policyholder's Expectations" (PRE) are and how they are found?
And is the below true?
E.g. A Surrender Value Method is going to change soon. As long as its communicated well before the change, are the PRE met?
E.g. If a Surrender Value Method is very low, say 10% of asset share, and is explained clearly to a customer at point of sale. Are PRE met as they expect this to be the surrender value or is it not met as it doesn't comply with the industry or competition's surrender value for the same product?
Big Thank You!!
Please can you answer these questions as I'm unsure on them.
Q1) What's the difference between a product's "Premium Assumptions" and "Premium Rate"?
Is the premium rate the amount charged to a customer for a product (e.g. dependant on their age/gender/health) which has been priced using a set of pricing assumptions.
Q2) Is "Market Consistent or Market Value" assumption one where the investment return and discount rate is the "Risk Free Rate + Risk Margin", where the risk margin could be the credit spread?
Is "Risk Neutral" assumption one where the investment return and discount rate is the "Risk Free Rate" Only?
For a Market Consistent Valuation, assets are taken to have investment return as "Risk Free Rate" regardless of asset mix. Why is this?
Q3) For a With Profits Policy, is it correct to think of the policy's asset share are being kept in the company's reserves (this is the policy's total SA, which is basic SA + declared bonuses) and the company's free assets (this is the policy's asset share in the estate)?
Q4) Please can you clarify what a "Policyholder's Expectations" (PRE) are and how they are found?
And is the below true?
E.g. A Surrender Value Method is going to change soon. As long as its communicated well before the change, are the PRE met?
E.g. If a Surrender Value Method is very low, say 10% of asset share, and is explained clearly to a customer at point of sale. Are PRE met as they expect this to be the surrender value or is it not met as it doesn't comply with the industry or competition's surrender value for the same product?
Big Thank You!!