1. Posts in the subject areas are now being moderated. Please do not post any details about your exam for at least 3 working days. You may not see your post appear for a day or two. See the 'Forum help' thread entitled 'Using forums during exam period' for further information. Wishing you the best of luck with your exams.
    Dismiss Notice

September 2015 Q3 (ii)

Discussion in 'SP2' started by Act, Apr 10, 2022.

  1. Act

    Act Keen member

    Hi,

    This solution says that the shortening of the surrender penalty period would improve persistency experience in the long term on existing business. Why is this the case? I would have thought that the absence of a surrender penalty would increase surrenders

    Thanks
     
    Act, Apr 10, 2022
    #1
  2. Lynn Birchall

    Lynn Birchall ActEd Tutor Staff Member

    Hi

    Good question!

    Your thought that the absence of a surrender penalty would be expected to increase surrenders is correct. Indeed the examiners report itself includes this idea : 'In particular, there may be higher surrenders in the last five years of the contract term as there is now no penalty.'

    So, the idea about the change potentially improving persistency experience in the long-term on existing business must be referring to something else. This is making a more general point that the company improving a product feature, and doing this not just for new sales but also for existing customers, may be viewed positively by customers and improve their view of the company. This may in turn improve customer loyalty / persistency.

    So we have two different effects, each working in a different direction here.

    Lynn
     
    Lynn Birchall, Apr 11, 2022
    #2
    Priyanka Malhotra likes this.

Share This Page