Study Notes and Published References - Note SN 8I-100-00 - PRODUCT DEVELOPMENT TRENDS
Overview of Product Development Process
- Product Design
- prelim decisions - target mkts, perceived needs/wants of consumers, competitor peer group, perceived needs/wants of destributors
- prelim objectives set for prem rates, nonf values, divs, comm rates, u/w stds
- task force containg freps from most HO funtions, most importantly: Executive, Actuarial adn Mktg
- Actuarial - primarily repsonsible for fin soundness of product
- should have (or develop) experience assumptions
- Mktg - responsible for evaluatigin anc characterizing the mkt place
- Exec Mgmt - direction to initial conceptual decision and the design process
- Planning Process - begins w/ clear def of life co's goals adn strategies
- key part of corp strategy - mktg plan
- to select mkt, co will review
- size and character of targeted mkts
- ability of co to effectivley reach mkt
- nature of perceived copmetition in teh mkts
- dist channel that most effectivley serves mkts
- concepts futher refined after initial planning
- general benefit characteristics defined
- decisions as to premium structure
- range ultimate prem structure must fall w/in
- what funing scenarios included in profit test
- fixed or flex prems
- how to grade if not level
- "high" or "low" prems
- guar or adjustable prems
- mktg costs must be determined (comm, mktg OH, adv, etc)
- risk parameters (mort/morb, inv, legal/regulatory, fni, tax, inflation)
- clarify u/w stds
- int, persistency, and exp assumptions taht reflect product risk characteristics and target mktplace
- other reqs
- reins
- policy and app forms design
- computer and admin systems
- distributor education and training
- staffing needs (additions?)
- investment philosophy
- consumerism adn company solidity
- Product Implementation
- Princing - before pricing you need
- experience assumptions - adjustments may be necessary for target mkt/dist channel/sales scenarios/u/w changes/environ factor/expected/recent changes in environmental circumstances
- profit or surplus standards
- competitive standards
- valuation standards
- mktg costs
- FIT
- Policy Values
- must relate to mktg plan strategy
- adhere to legal requirements (SNL)
- Forms - drafted,printed & filed for approval
- Mktg support - materials developed ads/ratebooks/etc
- Systems
- Reinsurance
- Add'l Benefits
- Product Release
- Process Contraints
- Environmental Constraints
- legal
- economic
- taxation
- competition
- Organizational Constraints
- surplus
- systems
- expertise
- tradition
- Critical Product Success Factors
- competitive prices
- valuable benefits
- flexibility
- harmonious w/ co strategy
- complements other portfolio products
- satisfies teh distributor
- ability to admin and u/w (at reasonable cost)
- profitable
- equitable (classes and generations fo PO)
- managable tax status
- Important part of prod dev process - continuous re-evaluation of product and performance
- Evaluation criteria
- sales success
- actual vs expected
- dist receptiveness
- cost of dist
- admin effectiveness
- Conclusion
- Two distinct levels : Product design and product implementation
- product dev must clearly relect interests of potential consumers, POs, potential distributors, co EEs, shareholders, regulators, general public
Product Trends in the US
- Overview
- 3 components of prod dev paradigm: mkt-driven strategies/consumer-oriented/capital focused
- catalysts for development of products
- consumer needs
- shift in mkt awareness
- regulatory issues
- increased flexibility (benefits and funding)
- exonomicn and/or inv conditions
- changes in taxation
- special pricing considerations
- characteristics of newer products - degree of PO flexibility adn non-guar elements
- therefore imperative to perform profit analysis using several diff scenarios
- sensititive tesing w/r to mort/lapse/expenses/int earned/spread/prem pay pattern/etc
- most require comlicated admin systems
- admin systems may limit # bands, commission structures, # inv avail, # lives, type of joint age calc
- costs of new admin systems - developmental adn ongoing
- Indeterminite Premium Life
- Product design
- dual prem structure - guar adn curr
- guar max is stated in policy form, insured pays lower current prem
- purpose - avoid def reserves
- lower prems typically guar first few years
- Pricing Considerations
- prem structure - during guar peroid, def res may be req'd adn s/b consisdered
- low curr prem and guar period - primary features for competitiveness therefore critical assumptions
- regulatory concerns - many states have limitations on prem adj for indet prem products
- prem changes must be on a class-wide basis, justifiable in light of current and anticipated future exp adn not recover prior losses
- many states req notification adn justification prior to implementing change
- Pricing Methodology
- priced using trad techniques to current premium produces proper profit objectives
- consider
- filing req gor a prem change
- def reserves
- FIT
- add'l admin system expense
- consider guar max prem adn analyze profits under a "worst case" scenario where max prms req'd
- Multiple Life Products - Last Survivor
- Product Design
- mainly sold in estate planning mkt - some applications for business ins
- important product features
- premium flexibity - focus on DB/$
- either low AP or limited pay prems
- CV buildup not as improtant since proceeds usually to pay taxes
- automatic increase in DB - to cover inflation or increased value of estate/business
- consider increases when u/w oringal policy
- consider likelihood of anit-selection
- policy split option - some allow policy split into two parts if certain events occur
- sum of new pols = orig face
- may charge processing fee
- some cos req evidence of insurability
- other cos charge extra (like a GIO benefit) but don't require evidence
- estate preservation - additional coverage for 4 years to cover extra taxes if "gift" to trust brought back into estate
- first-to-die benefit - small benfit to pay for final expenses
- sometimes policy becomes "paid up"
- Pricing Considerations
- Product approach - 2 different comman approaches: dual or single status
- dual status - PVFB incr dramatically after first death
- admin systemn need to track sets of pol values for 3 states, x alive, y alive, both alive
- single status - "Frasierized" method
- single life decrement developed from teh joint lives
- a blend of 1 and 2 alive statuses
- Method of Calculating Multiple Life Status - 3 common methods to combine age/risk classes for pricing multiple whole life products
- admin systems may dictate method used
- exact age - everythign calced from first principles based on each life to be insured
- joint equal age - exact age calcs done, bot only at equal ages
- "equal age rules" used to calc JEA based on actual ages
- equivalent single age - rates and values equated to a single age
- admin as a single life product therefore simplest to admin
- wide fluctuation in mortality from exact age
- Mortality - assume independence of lives in formulas
- consider "lonely-heart syndrome"
- single life experience probably not appropriate for pricing a new joint product since more older individuals
- since pays on second death, if one life is "std", second life can be substd ans still get std coverage
- more u/w concessions since competitive mkt
- Persistency - much higher than for single life policies
- bought for a specific need - to pay estate taxes
- owned by trust
- Claims - be concerned w/ steep claim costs in advanced years (long dur product)
- Expenses
- since face amts usually very large, common to have u/w adn per policy overhead as an amt/policy (vs per $1m)
- u/w costs are to u/w 2 people and higher med reqs b/c of age
- maint costs higher b/c dealig w/ lawyers, acctnts, etc
- "not taken" cost higher b/c of "shopping"
- admin and illustration systems might need upgrade
- Cash Values adn Reserves
- b/c of low lapse assumptions, profit results might be counter-intuitive
- CV not the concern of the insureds. 0 CV term would be optimal plan
- Retention:
- some co's beleive higher retention is appropriate (up to 2x single life)
- argument can be made for lower retention (low prems, high face, low claim prob)
- Reinsurance:
- key to mktg sucess many co'w will have w/ last surv products
- help w/ u/w
- reinsurers have difficulty pricing @ attractive rates for ceding co
- YRT rates sometimes exceed those charged by ceding co
- Pricing Methodology
- profit tested similar to trad/UL products
- modifications
- joint age calc methodology
- inclusino of contagion mort factor
- revised to retention limit
- reins costs
- provisions for auto increase/policy split/estate preservation if applicable
- requires select mort charge structure
- each cell needs to be price separately, paying attention to slope of mort
- contagion factor can be incorp into Frasier calc of underlying last surv mort experience and provision for substd risks
- add'l sensitivity tests on varying expenses, persistency and likelihood at least one life substd
- cells w/ wide variation in age of two insureds s/b tested to ensure consistency and reasonableness of results
- Multiple Life Products - First-To-Die
- Product Design
- insures multiple lives (typically 2) and pays on first death
- primary mkts
- business mkt
- fund buy/sell agreements in event of partner death
- multiple key person needs w/ cost-efficient split dollar programs
- family ins mkt
- provide replacement income on first death in two-income family
- pay final expenses/taxes as part of family estate planning
- Important Features
- survivorship purchase option - allows continuation of coverage for suvivors w/o evidence of insurability
- potential for anti-select on surv purch option
- reduced w/ limitations on age/years option is available
- unequal DB - varying face amt on each insured
- automatic increase in DB (COLA) - may be max allowed increase
- must factor in add'l lcost and likelihood of antiselection
- addition/deletion of insureds - for business
- simultaneous death - w/o this option, no benfit payable on simultaneous death
- prob is relatively small and often provided at no extra charge
- thought enough margin in mort to accomodate this
- policy split option
- sum of new pols cannot exceed existing face
- new pols based on orig IA and u/w class
- subject to anti-selection in new pols not subject to u/w
- Pricing Considerations
- product approach - primary approach to build multiple life products is true joint life approach
- method of calculating Multiple life status - same 3 as last-to-die
- Number of lives - typically 2. 4-6 for business products but up to 10
- Mortality - assume independence
- s/b similar to other single life products
- substd rates easier on a formula-driven UL product, more complicated on fixed prem products
- Persistency - generally same as single life products associated w/ family or business mkt
- potentially lower laspse rate on pols that have prem savings vs sep pols
- Expenses
- overhead s/b same as for a single policy. This is the biggest expense
- economy - 2 lives-> 1 expense
- u/w expenses higher since need to u/w multiple lifes
- increased admin & illus styem expenses possible if not already able to handle
- CV adn Expense Allowance Limitations
- expense allowance defined as an absolute max, regardless of # lives covered
- therefore first-to-die generate higher CV that sum of single life pols
- Reinsurance
- reinsurers often add single life rates to get joint first-to-die rate
- possible product charges (add/drop/split) need to be considered by pricing actuary
- Pricing Methodology
- same techniques as trad/UL products
- Mods to input parm
- joint age calc methodology
- expense allocations
- cash value and expense allowance limitations
- rein costs
- surv purchases/auto increase/change of insured/simultaneous death/policy split benefits if applicable
- add'l sensitivity analysis - varying # lives covered w/in one policy
- Variable UL Products
- Product Design
- DB adn CV vary according to investment experience of investment accts underlying the policy
- common features
- flexible prems payable
- DB not req'd to vary w/ inv performance
- expense and mort loads deducted from acct values
- net prems invested in underlying general acct or sep accts
- mort and expense asset risk charges assessed against acct value
- also deduction for COI and admin charges
- SC (10-15 years)
- most important feature - fund approach - outside funds or own funds
- outside funds - instant fund recognition
- own funds - fund startup costs, no track record and no name recognition
- common investment options
- equity - aggressive growth, growth, small-cap, mid-cap, growth and income, blue chip
- fixed income - med term, long term, high yield, govt
- managed - asset allocation, balanced
- international
- money market
- fixed (general) account
- Pricing Considerations
- Regulatory Restrictions
- under SEC regs
- must be registered w/ SEC
- Prospectus delivered to potential investors
- selling agent must be registered to sell securities w/ SEC
- selling co must be licensed as a B/D
- sales load limits
- max sales load is limited on premiums up to SEC GAP
- max slaes load from prems in excess of SEC GAP limited
- sales load percentages cannot increase
- sales load essentially limited to a % of SEC GAP
- actual loads may exceed, but excess must be refunded if surrendered in 1st 24 mo
- admin loads, prem tax and DAC tax loads must be reasonable
- M&E (Maint and exp) risk charge must alos be reasonable
- Admin System
- usually requires sep admin systems b/c unit values need to be calced daily
- SEC reg controls require
- admin procedures consistent w/ prospectus
- annual prospectus updating and mailing to investors
- mandatory record keeping
- processing transactions @ today's price
- seven days to confirm prems and transfers
- payment of benefits w/in 7 days
- Other admin considerations
- integration w/ other systems
- telephone transfers
- atuomated voice response
- maintaining up-to-date mktg info
- trakcing distribution systems licensing
- portfolio rebalancing
- providing dollar-cost averaging capabilities
- Build vs Buy
- considerable investment of time/people/expenses assoc w/ entract to variable marketplace
- co could market other co's product in return for compensation
- "private label" another co's product
- manufacture product but outsource admin to TPA adn use outside funds
- keep all processes inside
- SEC regs make it hard to develop VUL products w/ real differentiation
- Pricing Methodology
- vastly different from trad and UL pricing
- lack of mgmt discretion in determining credited rates and margins as a source of profit
- high degree of regulation, esp in expense load area
- analyze sources of income and cash outflow
- front end premium loads
- issue and maint charges
- mort charges - can't exceed 80 CSO mort
- current COI < max for competitive reasons
- asset charges - % of avg daily net asset bal
- m&E charge compensate for mort adn expense risks and inv advisory fee
- surrender charges - generally level 1-7 grade to 0 @ 15
- transaction charges - charges assoc w/ partial surr and fund transfers
- from these sources of income, need to
- cover DB payments
- mktg dist compensation (siimilar to UL usually)
- expenses (remember extra licensing costs and maint of several funds)
- profits
- potential loss from early surrenders
- important to study profitability under several diff lapse scenarios
- lapse scenarios ~ assumed inv performance
- Market-Value Adjusted Annuity Products
- Product Design
- SPDA or FPDA w/ int and book value guaranteed @ end of specified period
- early w/d subject to MVA & SC
- for buyers, MVAs offer
- longer guar periods
- higher int guarantees
- opportunity for capital gain
- for ins cos
- lower cost of PO disintermediation since MVA protects co from mkt loss on surrender
- lower surplus strain through higher reserve valn int rates
- potential for better persistency through attracting buyers w/ more of a saver's mentality rather than investor's mentality
- Pricing Considerations
- MVA formulas - usually not applied on death/annuitizations
- formula must recognize both up and down adjustments
- may ignor minor (< 25bps) int rate changes
- degree of downward MVA permitted
- some limit adjustment to excess int only
- some restric MVA to all credited int
- some have no limit
- degree of MVA - tradeoff between int rate risk and SEC reg and distribution access
- Valuation Basis - CARVM
- MVA = type B annuity
- allows co to choose between iss year valn basis and change in fund basis
- MVAs rec more favorable valn treatment than fixed annuities b/c of MVA
- most co's choose change in fund basis b/c practically all funds usually rec'd irst year
- pricing actuary shoudl take into consideration impact of reserving methodology choice when pricing MVA product
- Number of Guar Periods
- compete against CDs and gov't issued obligations
- 2,3,4,7,10 yrs most popular
- @ end of guar period, PO can roll into new guarantee
- sometimes 30 day free w/d at end of guar
- if so, shock lapses will be quite large
- Marketing Dist Compensation
- 1st year commission and trail (either increases or total asset value)
- reduced 1st year if rolled into new guarantee
- Admin System - must handle regular SPDA plus
- multiple guarantee periods adn resseting acct val as prem
- MVA formula
- MVA limitations
- indiv products and/or group trust
- sep accts adn acct procedures
- compliance w/ SEC regs if registered
- Pricing Methodology
- profit tested like SPDA except each guar period presents unique situations for evaluation
- MVA adjustment formula determined first
- valn methodology evaluated as part of pricing process
- test various combinations
- each guar period is a subset of overall MVA rpduct
- primary annuity profit source - spread between earned and credited
- determine appropriate spread reqs for each guar period, taking into account
- SC
- "shock" lapse
- penalty free surrenders
- mktg dist compensation
- renewal resetting
- early annuitization
- intial profit tests using "static" inv environment
- then add'l scenario profit analysis
- persistency ~ credited rate
- dynamic pricing to supplement static analysis, consider
- excess lapse
- varying re-investment strategy
- renewal interest creditig strategy
- Two-Tiered Annuity Products
- Product Design
- diff accum values @ mat depending on if annuitized or surrendered
- AV - Annuitizaton value = accum gross prems @ specified credited rates
- SV - surrender value = accum(gross prems - loads)@ lower specified credited rates - SC
- both AV and SV adj for prior partial w/d/annuitizatoins
- higher AV justified b/c profitability maintained w/ lower int margins b/c annuitization rates incorporate (potentially) two profit sources - int and mortality
- payments based on guar settlement rates or current SPIA rates, whichever gives highest payment
- most co's require payout to be >= 5 years to qualify for AV
- AV usually payable on death
- Pricing Considerations
- Credited int rates
- differences between AV adn SV crediting rates is to provide equitable dist of earnings between those who annuitize and those who surrender
- spread between AV adn SV usually 100-300 bps
- some cos may guar these spreads
- Reserve Determination
- reserve calced under CARVM
- calc both AV and SV
- greater is reserve for valn
- pattern will follow value between SV adn SV-SC @ early durs and approx AV @ later durs
- Persistency
- higher than comparable single tier DA products
- biggest diff @ end of SC when normally a shock lapse
- Admin Systems
- systems need to accomodate two accum values adn dual reserve calcs
- Pricing Methodology
- similar to regular DA, esp the SV
- AV priced sep assuming higher persistency and conversion to produce payments @ annuitization
- combine the accum adn payout phase to determine overall profitablity (optional)
- perform dynamic pricing tests under various int rate scenarios
- Varaible Annuity Products - GMDB
- Product Design
- similar to VUL
- GMDB evolution
- DB = acct value (SC waived)
- DB = ROP (net of loads) - partial w/d
- DB = ratcheted or stepped-up value (resets to current AV @ certain points)
- DB = net prems paid accumulated at annual fixed rate (usually 5-7%) aka rollup
- Pricing Considerations
- formula approach
- inherent cost to provide GMDB increases as benefit become more generous
- keep limits in mid (200% or age 75)
- variable account performance
- cost of GMDB varys widely depending on performance of sep accts
- different mixes of assets will give significnatly different benefit amts
- issue age
- shoudl consider various combinations of IA and acct performance in pricing
- mortality
- projected GMDB costs ~ mort assumption
- actual mortality might deteriorate if
- GMDB provisions become critical mktg factors
- lapse anti-selection occurs
- persistency
- higher levels of persistency will result in larger aggregate amts of benfits
- reinsurance
- due to volatility and unpredictability of underlying factors, many cos cede total GMDB risk
- still need to be aware of GMDB consequencesto evaluate reins cost structure
- Pricing Methodologies
- two methods of estimated cost of GMDB provisions
- GMDB as series of put options exercisable @ death of PO
- valued using B-S option pricing formula
- effect of fund diversification s/b considered
- B-S is limited in its ability to analyze these issues
- Monte-Carlo Simulation
- more generalized approach
- project multiple future paths of returns for each of underlying funds offering a GMDB
- @ each point, (GMDB-SV)*qx, then disocunted and summed to estimate cost of GMDB
- taking diversification into account - consider correlation between inv funds
- imperative for pricing actuary to perform scenario sensitivity profit tests to gauge importance of changes in assumptions and parameters
Product Trends In Canada
- Annuities
- consumer shoing increased sophistication
- demanding more guarantees adn more control over investments - conflicting goals (potentially)
- inc co's in competition w/ banks
- even though profit/policy is shrinking, mkt is expanding
- Deferred Annuities
- series of deposits, @ ret, converted to immediate annuity or RRIF
- mostly registered funds (tax deferred)
- gov't limits amt you can contribute to RRSP
- contribution limit offset by pension adjustment
- non-registered are non-exempt
- range of inv vehicles is increasing
- Var Def Ann guaranteed to be at least 75% of prems paid (less w/d)
- 75% req'd by law
- some cos up to 100%
- advantage since other fin institutions don't have guarantee
- Immediate Annuities
- singel life, joint life, term certain along w/ various guarantees
- if term certian purchased w/ registered funds, certain can't go beyond age 90
- non-reg funds min(40yrs, AA100) for certain
- new risk exposure due to back-to-back market
- life annuity - annuity mort
- term to 100 - life mort
- life mort <> term mort
- life is u/w therefore annuity mort is taking anti-selection risk
- RRIF (reg ret income fund)
- allows more flexibility w/ payout pattern than w/ annuity
- can only be purchased w/ funds from RRSP
- invested in segregated fund or guar fund
- w/d chosen by PO, subject to legislated mins
- no max w/d amt
- payment pattern can be modified annually
- LIF (Life Income Fund)
- allo more flexibilty in payout of locked-in pension funds
- goal - extend RRIF options to locked-in pension funds
- prior - could only receive funds when converted to annuity
- increase flexibility by allowing deferral of annuity purchase to age 80
- prior to annuitization, w/d subject to same mins as RRIF
- RRIF and LIF allowed PO to reduce exposure to int rates
- Interest Senstitive Products
- 1st generation - 5 yr adj products
- db/prem/scv guar 5 years
- redetermination every 5th year
- PO could increase prem if DB decreases
- eventually guarantees introduced as to maximums for mort and expensed, int rates linked to external index
- 2nd generation - removed guar csv adn substituted ETI/RPU amts
- guaranteed for each 5 yr period
- generally lower premiums than 1st gen products
- competition led to aggressive int rate projections and poor (none) disclosures
- led to significant prem increases at redetermination time
- 3rd generation - 5 yr adj face, prems and non-guar CV
- new money int rates used for setting prems/face amts
- @ redetermination, prems recalced based on new money rate and accum cv
- very similar to UL except prems fixed
- 4th generation - UL w/ very explicit charges - true unbundled ins products
- 2nd generation UL - dropped explicit expense charges
- hidden in higher COI charges
- increase SC (amt and/or dur)
- SC based on target prem
- inv options varied (true new money inv accounts), but no equity options or VUL due to tax reasons
- current genration UL - decreased unbundling
- COI from YRT to level to age 100
- substantially lapse supported
- subject ot same risks as Term-to-100
- single inv accts linked to moving avg of some outside index
- rise in popularity of equity or segmented fund inv options
- int earnings subject to annual taxation
- still popular despite adverse tax treatment
- Lapse Supported Products (Term-to-100 aka T-100)
- T-100 - NP WL w/ little to no CV
- provides pure death protection @ affordable cost since no need to fund CV
- prems often guaranteed
- popular in capital gains situations
- used to fund tax liab on inherited property
- used w/ immed annuity for back-ot-backs
- since guar, price is critical
- no adjustment mech to reflect actual exp
- 3 assumptions of chief concern (in increasing order of sensitivity)
- mortality - quite popular at ages 60+
- inv rates - represents very long implicit int rate guarantee
- use of asset strategies will have direct effect on rate used in pricing
- lapses - most critical pricing assumption
- nonf benefits < natural reserve, therefore excessive lapses inprove profitability
- higher assumed lapse rate would result in lower premium
- first valn tech paper suggested rarely appropriate for rate > 3%
- considerations
- mkt sophistication - if PO knows that value enhanced by keeping in force, they will tend to not lapse
- if insurer works in sophisticated mkt, expect better persistency on avg
- absence of CV s/b strong disincentive to lapse
- issue ages and lifestyles
- lapse rates should vary by age due to dinstince differences in lifestyle
- insured annuities (back-to-backs)
- T-100 prems funded by immediate annuity
- persistency is better on quality sales
- levelized commissions
- stronger incentive for agent to maintain coverage
- presence of viatical cos willing to buy policies for cash
- Miscellaneous
- Cross-Selling (back-to-backs)
- may provide some tax relief
- under a prescribed annuity, taxable int income spread evenly over life of annuity
- used w/ estate planning to preserve capital
- Segregated Funds
- don't get favorable tax treatment, but increasingly popular w/ consumers
- Compensation
- more consumer-oriented marketplace
- trend towards more levelized compensation
- pros and cons to levelized comm
- + PO receives better and longer service from agent
- + long term relationshiop -> additional sales as needs mature
- + increased persistency of inforce block
- + less 1st yr surplus strain
- + better persistency leads to smaller unit costs
- - insufficient income for new agents
- - less incentive for an agent w/ big block to pursue NB
Product Trends In Other Countries
- Europe
- was either largely deregulated or highly regulated tariff markets
- EU caused most to move to deregulated system
- UK
- traditionally endowment policies
- popular unti mid 80s
- featured
- smooth investment return to PO
- guar DB
- terminal bonuses payable upon death or maturity
- guar endowment benefit
- annual bonuses dependent on co results
- Unit-linked w/ further guarantees in early 90s
- tied to index fund w/ guarantee that a certain min benfit paid if index isn't to a certain amount over guar period (5 yrs)
- derivatives to provide maturity guarantee
- Dread disease products in 80s - lump sum upon diagnosis of speficied disease
- Latin America
- changes effect teh ability of ins cos to do business
- democratization is taking hold
- market based capitalism on the rise
- state industries are being privatized
- inflation is down and becoming more stable
- Argentina - pirvatizatoin of SS system
- ER & EE contribute a percentage of salary to either state or private pension fund manager (AFJP)
- if in AFJP, contributions accumulate in indiv pension accts
- AFJP - sole objective - manage funds
- contributors free to choose fund managers and can change 2x/year
- funds segregated and strict restrictions and limits to what fund manager can invest in
- At retirement, a monthly benfit from state
- if funds to state, then add'l benefit = % 10yr avg salary
- if funds to AFJP, annuity based on fund balance
- Death/Dis benefits also provided
- outsourced as group ins through public bidding
- Ins Co opportunities
- pension fund manager by participating in AFJP
- opportunity to provide death/dis group ins
- opportunity to provide retirement annuities to those who contribute to AFJP
- Asia
- mkts in different states of maturity
- mature adn competitive mkts - substantial % of population insured
- Hong Kong/Singapore/Japan/Korea
- strong growth mkts - very strong growth last 10-15 years
- rapidly emerging markets - recent new entrants or country changed regulatory environment such that there will be many new entrants
- Philippines/Indonesia/Thailand
- immature mkts - mkt exists, but small % of populatoin insured and few products exist
- mkts to emerge - concept of insurance doesn't exist
- basic product development considerations for co's looking to enter these mkts
- regulation
- waht is regulatory environ an din what direction is it heading
- often not a level playing field w/ discrimination againt foreign companies
- distribution
- agency distribution is waning (used to dominate)
- direct mktg, bank dist, and EE dist products gaining attention
- Admin capabilities
- policy sized may be small, but volume may be huge
- Cultural Environ
- must balance co's internal culture w/ culture of country
- products offered should not challenge basic beliefs of target audience
- products should fit customers values and needs
- mkt research - don't just expect to sell what works elsewhere
-
Copyright © 2004 Steve Welander.
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