Life assurance

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Dr John Pollock

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Mar 28, 2014, 9:05:04 AM3/28/14
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Does anyone have any references I could look at which might shed light on what proportion of a 10 or 20 year level term assurance premium might be for expenses and profit i.e. how much more do purchasers pay relative to the mortality cost. Say a typical £100,000 policy for someone in their 40s or 50’s. All input, or even guesses welcome, John

 

 

Dr John Pollock BSc PhD FFA

Pollock & Galbraith

Consulting Actuaries

Stirling Business Centre

Wellgreen Place

STIRLING FK8 2DZ

 

Tel :  01786 473591

Fax : 01786 448983

Email : jo...@pollock-galbraith.co.uk

Web : www.pollock-galbraith.co.uk

 

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Patrick Kelliher

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Mar 28, 2014, 1:37:21 PM3/28/14
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I think it will be quite significant.

The old MCA had term assurance commission equivalent to 25% of premium for an initial period of up to 4 years (which was typically discounted and paid as lump sum indemnity commission), and then 2.5% renewal thereafter. When this was abolished the initial commission increased with uplifts to the MCA. I found the attached on L&G's commission terms which may give a more up-to-date picture of commission:


Maintenance expenses can be inferred from prudent allowances in FSA returns - see for example p193 of:


...while these may look modest, bear in mind the premiums will be modest as well so they could be a significant percentage of premiums.

Not sure about initial or claim expenses, but I think £200 might be of the right order for the former given underwriting costs, and £50-100 for the latter, perhaps more for CI and IPP. In terms of spreading these over the term of the policy, protection lapse rates can be quite high (10% p.a. plus) so the effective term can be less than half the contract term.

Profit margins - would check embedded value disclosures for margins as a %age of PVNBP for protection business.

Hope this helps.

From: Dr John Pollock <jo...@pollock-galbraith.co.uk>
To: ScotI...@googlegroups.com
Sent: Friday, 28 March 2014, 13:05
Subject: {Scottish Individual Actuaries} Life assurance
Does anyone have any references I could look at which might shed light on what proportion of a 10 or 20 year level term assurance premium might be for expenses and profit i.e. how much more do purchasers pay relative to the mortality cost. Say a typical £100,000 policy for someone in their 40s or 50’s. All input, or even guesses welcome, John
 
 
Dr John Pollock BSc PhD FFA
Pollock & Galbraith
Consulting Actuaries
Stirling Business Centre
Wellgreen Place
STIRLING FK8 2DZ
 
Tel :  01786 473591
Fax : 01786 448983
 
This email transmission is privileged, confidential and intended solely for the person or organisation to whom it is addressed. If you are not the intended recipient, you must not copy, distribute or disseminate the information, or take any action in reliance of it. If you have received this message in error please notify us immediately by email to jo...@pollock-galbraith.co.uk. We strongly recommend that you check for viruses using your own virus scanner as Pollock & Galbraith will not take responsibility for any damage caused as a result of virus infection
 
 
 
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jo...@pollock-galbraith.co.uk

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Mar 28, 2014, 1:57:05 PM3/28/14
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More than helpful as was David's private communication, thanks and enjoy your weekend, john
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From: Patrick Kelliher <patrick_o...@yahoo.co.uk>
Date: Fri, 28 Mar 2014 17:37:21 +0000 (GMT)
Subject: Re: {Scottish Individual Actuaries} Life assurance
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