Q2 (i), Sep. 2020

[Smith]

The question paper clearly direct that "Explain how you used the structure of your paper to construct your argument from a starting point that would be familiar to the members of the marketing committee and take account of how they are remunerated."

But either the example solution or the mark scheme advised that set out the difference between insurance business and traditional business upfront, which obviously is the point the audience not familiar with. Does that seem contradict with the implication from the question paper?

In my opinion, the paper is supposed to be written in the way that,
- starting from stabilising the revenue which is the key consideration the audience would want by launching this new product so they would be quite familiar with, and then inferring to ensure more customers to pay their premiums continually in order to achieve more revenue and stabilise revenue got from the policies,
- start from improve claim expenses which would be familiar with by the audience, and then inferring to control claim validation processes in order to achieve it
Does follow this approach to answer the Q2(i) make more sense?

 

[Lindsay Smitherman]

Hi - it might be better to continue the bold underlining in that first sentence to include also: ... and take account of how they are remunerated as these parts should probably be considered together.

It is always important to step back and think about the overarching objective of our communication. Here, this is fundamentally to get the marketing committee (who we know are primarily focussed on sales) to agree to the proposed changes, even though these are likely to reduce sales volumes (at least in the short term).

In order to get the committee to agree to the changes, our 'argument' is going to have to focus on the other area that we are told they are interested in: profit, which the advance scenario material tells us their remuneration is linked to. The key focus of our communication should be making clear that the changes will result in higher profits, despite potentially lower sales volumes - with the supporting explanation being that this arises because the beneficial persistency and claims impacts are greater. In other words, we need to get them to shift their focus from purely thinking about sales volumes to thinking about profit more widely.

So what the reflective question here is getting at is making sure that the structure chosen does achieve that reinforcement of thinking more widely about 'profit', and understanding that it comes from more than just sales volumes. We could achieve this by having an executive summary that makes this clear at the start of the communication, for example.

In order for them to be able to understand why the changes proposed will have a beneficial impact on profit (ie how they lead to better persistency and lower claims, and how that then improves profitability), there needs to be an element of explanation of unfamiliar concepts. It is normally preferable to include such explanation early in the communication, as the concepts need to be understood before the next steps of the argument will make sense. The reflective question isn't saying that we shouldn't do this (we should!), it just indicates that the argument and explanation should be driven from the profit angle, rather than from the sales volumes angle.

Hope that makes a bit more sense.

[BTW you refer above to 'claims expenses' - the key beneficial impact on profit here is not expense savings, but the lower expected claims experience through tightening up the underwriting by asking about pre-existing conditions.]