HI IT ASKS TO GIVE TWO REASONS FOR ACHIVING LOWER CAPITAL REQUIREMENTS FOR UNIT LINKED PRODUCTS. AS FOR 1ST POINT ON PAGE 51: AS IT BEEN PROPOSED BY ST1 SUBJECT, COMPANY CANNOT CHANGE ITS PRICING AND ASK FOR HIGHER PREMIUM FROM ITS POLICY HOLDERS, UNLESS IT HAS TOTAL PORTFOLIO LOSS. WHILE THE ANSWER PROPOSE POSSIBILITY OF CHARGING HIGHER EXPENSES (IF COMPANY RECALCULATING ITS EXPENSES AFTER PRODUCT BEEN LAUNCHED). DO I UNDERSTAND IT RIGHT? WHILE 2ND POINT SAYS THAT INITIAL CHARGES CAN BE CHARGED INNIATIALLY BUT NOT SPREAD TOWARD POLICY TERM. PLS GIVE ME EXAMPLES OF HEALTH PRODUCTS WHERE INSURER CHARGES IT INITIAL EXPENSES ON A FRONT END BASIS? THANKS AHEAD
Hi We aren’t asking for a higher premium from policyholders, just increasing the charges. The terms that would allow this to happen would depend on the policy T&Cs and it would be viewed at a portfolio level as you say rather than individually. In reality, even with this flexibility insurers may find it hard to implement as policyholders may not expect this to happen leading to lapses and reduced new business. Any unit linked product could have a larger initial charge and therefore require less capital to meet costs upfront. Obviously if there was a significant guarantee offered this might require a very significant capital requirement which could dwarf any benefit from the higher initial charge! Hope this helps Sarah
