In the example on page 17, it states that in a unit linked capital efficient market, a design is to have 0 or low premiums initially allocated to the unit funds and therefor most of the premiums can be used to recoup the insurance companies initial expenses. Then Q1.13 goes One advantage of a unit linked contract over a non linked contract is said to be better value for the money to the POLICYHOLDER. Solution says a product that is very capital efficient will not need to generate as much profit to service the capital. So it should be cheaper for the PHolder and therefor the more capital efficient the better. I get that somewhat but the conclusion I drew was, it would be disadvantageous for a policyholder because all of his premiums are being used towards the expenses of the insurance company while none of the premium is being allocated to the unit fund to allocate over time. And therefor it would be a worst case scenerio for a policyholder. Any ideas?
Ignore If anybody is confused the example following the question in the notes answers my question above. Pg 18
