Chapter 23: Contract design

Question 1

Factors of contract design:

AMPLE DIRECT FACTORS

Answer 1

Administration- remain efficient, allow for changes in B’s
Marketability/ marketing cost
Profitability- profit targets / Professional and ethical considerations/ Pricing and underwriting/
Level/form of benefits
Extent of cross-subsidies

Discretionary/discontinuence
Interest/ needs of customers
Risk apetite /reinsurance
Expenses
Competition/ Comission- attractive to brokers
Ts and Cs - no loop holes in contract/ Training of staff/ exclusions, waiting periods, excess payments

Financing
Accounting implications
Consistency with other products
Timing of premiums/contributions
Options and guarantees
Regulatory and statutory requirements
Simple to understand/ Sensitivity of profit

Additional factors:
- New business

Question 2

The outcomes of TCF

(CAP CDC)

Answer 2

• Culture of trust established with clients
• Advice should be relevant and accurate
• Performance standards of products met
• Communication to be clear
• Design of products should meet relevant needs of clients
• Claims should be handled swiftly