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Flashcards in Chapter 1 - History of financial protection Deck (17)
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Demand for life cover is driven by?

Movements in the housing market
Income per head


What is the protection gap?

The shortfall in cover required to maintain the current living standard of any dependants


What is the formula for the protection gap?

Resources needed - cover already in place through individual and personal policies


When insuring against risk, it is most effective when addressing risks that are?

Low frequency but high impact


"life insurance is........"

"sold not bought"


Life insurance is sold not bought refers to?

Life insurance being complex and easily misunderstood and should rely on a financial adviser identifying a need and selling the correct cover


What are the impacts for customers not taking financial advice on protection products?

Taking out the wrong kind of cover
Taking out the wrong amount of cover
Taking out cover for an insufficient term
Incorrect or no use of a trust form
Having cover they don't fully understand
Taking out cover that is unaffordable


As people are now living longer what has the impact been on new protection policies?

Demand has fallen, people are now concerned with living too long and more focused on saving for retirement


What was significant about the 2011 EU gender directive?

Life offices must now charge unisex premiums (the same rates for men and women)


Why are non smoker protection policies cheaper?

Less risk for the insurer as statistically less chance of premature death


What is a preferred life policy?

A life policy that offers significantly reduced premiums for individuals who can evidence a healthy lifestyle


Due to increased longevity the underwriting of life insurance is becoming more aggressive. The impact of this is;

Definitions are becoming stricter, something as little as being overweight can increase your premium. More policies are being rejected outright


Commoditisation of life insurance refers to?

Increases in technology, primarily online portals diminishing the unique features of different offices.
Now viewed as a commodity where the end consumer views them all the same and will just go with the cheapest


Benefits of receiving financial advice with regard to protection.

Full fact find
Comprehensive needs analysis
Product recommendations tailed to individual circumstances - right product, right sum assured
Expert knowledge of product types
Use of trusts


What is the impact of the changes in traditional life stages on protection demand?

As there are now typically many more stages to the life cycle protection planning has become more difficult to predict when it is likely to be appropriate


Give an example of a low frequency/high impact risk event

Premature death

Serious illness


Give 3 examples of why attitude to protection have changed

The state will provide

Changes in family units

Technological advances

Growth of consumerism

Changes to attitudes in risk