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Case Study (Product Descriptions) (UL (COI (Only 80% of mort. table,…
Case Study
(Product Descriptions)
Level Term
Mort. table => non-smoking; ultimate table
Great sales; competitive pricing (low premium)
Underwriting => questionaire
Considered reinsurance, but quotes make unprofitable
Face amount => too large
Mort experience poor, fired aggressive agents =>
Principal-agent risk
No cash value
Low lapse => because low premium
Postpone pricing review
VA
ROP GMDB & GMAB
8 Mutual funds
7 domestic
1 foreign
Commission low
Low sales due to competitor & low comm;
"Fast follower"
National Bank => competitor on GMAB
Proposed improvement
Add GMWB & GMIB
GMDB => add a rollup
Adding more funds options to GMAB
GMIB => fixed rate accumulation
Withdrawal basis => dollar-for-dollar basis
Aggressive time schedule
Admin system needs more programming
UL
Company has full discretion on fund investment
Pricing fund yield = 6%; too optimistic
3% guaranteed credited rate
Low sales;
Fast follower
COI
Only 80% of mort. table
adjustment needs reg. approval & only based on exp. mort.
Admin system => heavily manual
Competitors form admin service coalition
Cut mainte. charge by $30
Comm low
50% coinsurance with Conservative Re.
Cons. Re never puts capacity limits => counterparty risk
Only issued to non-smoking male aged 40-50
Low issuance/application => because
strict underwriting => low lapse & equal mort.
Large face amount
Changed invest => seeking higher return; higher volatility
Underwriting => full medical => strict
SPIA
Lower int. rate => lower inv. income from single premium => less payouts to annuitant => less attractive
Enter into higher yielding exotic investments
Real estate
Domestic PE
Emerging market common equity
Mort. as expected; but mort. improve is high (Scale X)
Slow sales, but getting better due to down int.
Mort. table with projection scale X
Comm low