N
niluki
Member
Hi, I have a couple of questions on parts 1 and 2 of the notes. Any help would be much appreciated. Thanks.
Chapter 1
Page 13 3rd paragraph: The core reading states that the extent of the risk of anti-selection depends on the extent of the actual or perceived choice the policyholder had in effecting the contract. Why does it depend on the perceived choice?
Page 28 solution 1.12 end: It states that [claim cost] – [asset share] ignores the cost of capital. How can this be when the asset share normally includes the cost of capital (see Chapter 5 page 5)
Chapter 3
Page 3 second paragraph: The core reading states that immediate annuities can be bought on single, joint life first death or last survivor bases. Does joint life first death mean that payment will cease on the first death? Also the core reading states that immediate annuities are payable for temporary periods only. Does payment then occur for the specified duration regardless of whether the life assured is alive or not?
Page 4 first paragraph: An explanation is given of unit linked annuities and how a certain number of units is paid per month at the then prevailing unit price. What happens if the unit fund runs out before the life assured dies? Will payments cease? Who bears the risk of fund implosion in this case?
Chapter 4
Page 18 fourth paragraph: The core reading states that unit-linked contracts often allow premiums to be missed for ad-hoc periods of time. How is this practical if there is a death benefit offered? If the policy holder knows he will die soon he can just stop paying the premiums and receive the death benefit. Also how are regular charges deducted from premiums? Won’t there be a risk of a negative unit fund developing if charges are deducted but no premiums come in?
Page 20: With index-linked contracts is there a danger of selective withdrawals when the index performs poorly relative to other available investments?
Chapter 5
Page 6 last paragraph: What does “reserves for profits allocated to the policy” mean?
Page 11 first sentence: Shouldn’t the asset share represent the upper limit on a policy at any given time rather than “over a period of time”?
Chapter 6
Does the distribution of profits to policyholders e.g. using a large terminal bonus also defer distribution of profits to shareholders? How do shareholder distributions compare with policyholder distributions over the policy term?
Chapter 9
Page 19: Is there a withdrawal risk as a result of tax changes? That is, if it is announced that tax on benefits will be higher would there be a motivation for an endowment policyholder to withdraw now before the tax comes into effect presuming that future tax loss greater than surrender penalty?
Chapter 1
Page 13 3rd paragraph: The core reading states that the extent of the risk of anti-selection depends on the extent of the actual or perceived choice the policyholder had in effecting the contract. Why does it depend on the perceived choice?
Page 28 solution 1.12 end: It states that [claim cost] – [asset share] ignores the cost of capital. How can this be when the asset share normally includes the cost of capital (see Chapter 5 page 5)
Chapter 3
Page 3 second paragraph: The core reading states that immediate annuities can be bought on single, joint life first death or last survivor bases. Does joint life first death mean that payment will cease on the first death? Also the core reading states that immediate annuities are payable for temporary periods only. Does payment then occur for the specified duration regardless of whether the life assured is alive or not?
Page 4 first paragraph: An explanation is given of unit linked annuities and how a certain number of units is paid per month at the then prevailing unit price. What happens if the unit fund runs out before the life assured dies? Will payments cease? Who bears the risk of fund implosion in this case?
Chapter 4
Page 18 fourth paragraph: The core reading states that unit-linked contracts often allow premiums to be missed for ad-hoc periods of time. How is this practical if there is a death benefit offered? If the policy holder knows he will die soon he can just stop paying the premiums and receive the death benefit. Also how are regular charges deducted from premiums? Won’t there be a risk of a negative unit fund developing if charges are deducted but no premiums come in?
Page 20: With index-linked contracts is there a danger of selective withdrawals when the index performs poorly relative to other available investments?
Chapter 5
Page 6 last paragraph: What does “reserves for profits allocated to the policy” mean?
Page 11 first sentence: Shouldn’t the asset share represent the upper limit on a policy at any given time rather than “over a period of time”?
Chapter 6
Does the distribution of profits to policyholders e.g. using a large terminal bonus also defer distribution of profits to shareholders? How do shareholder distributions compare with policyholder distributions over the policy term?
Chapter 9
Page 19: Is there a withdrawal risk as a result of tax changes? That is, if it is announced that tax on benefits will be higher would there be a motivation for an endowment policyholder to withdraw now before the tax comes into effect presuming that future tax loss greater than surrender penalty?