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SP2 - ch21 - Financial selection

Discussion in 'SP2' started by Bharti Singla, Jul 19, 2021.

  1. Bharti Singla

    Bharti Singla Senior Member

    In chapter 21, under section 5.3 'Determining a basis for retrospective value', there is a question as below:

    Qus. The Core Reading suggests that smoothing investment earnings is more likely for regular premium contracts than for single premium contracts. Explain why this is the case.
    Solution:     Policyholders are more likely to be exercising financial selection against the company when purchasing a single premium contract. It should therefore be longer before a company considers letting them benefit from investment smoothing

    Could anyone please explain this? What is financial selection? Any example of it? What investment earnings they are talking about?
     
    Bharti Singla, Jul 19, 2021
    #1
  2. Mark Willder

    Mark Willder ActEd Tutor Staff Member

    Hi Bharti

    We had a similar question asked by sagar_sagar recently. Look at the thread for Chapter 21 and in particular question 7.

    Best wishes

    Mark
     
    Mark Willder, Jul 19, 2021
    #2
    Bharti Singla likes this.

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