Define an insurance termination
A policyholder changes their insurance to a different insurer mid-year
Define a lapse
A policyholder doesn’t pay a premium that is due
What does the term ‘broker distribution channel’ refer to in life insurance?
It refers to the intermediary role of brokers between the policyholder and the insurance company.
Why might it be necessary to use a model before implementing changes in the real world?
To investigate possible consequences and avoid risky, expensive, or slow real-world trials.
What could happen if a proposed change is tried in the real-world without a model?
Serious consequences such as economic recession, patient death, or unprofitable premium rates.
What is an input parameter in a model?
A variable that is fixed within the model but can be varied to obtain different models.
What example is given for an input parameter related to share prices?
Future interest rates, such as a fixed value of 6% per annum.
What happens when the interest rate in a model is varied?
Different models can be created to answer questions about the price of shares
Why must randomness be included in a model?
To obtain meaningful results when randomness is an essential part of the process
What information does a pension fund client require from a model?
How much to pay into the company’s pension fund next year.
What does a finance director of a general insurance company want to estimate from a model?
The end-of-year profit figures
