Deside for a policyholder

A common question is asking you to deside for a policyholder which option to choose

You can structure your answer as macroenvironment factors and microenvironment factors.

It may be appropriate to choose a life-style investment strategy, when the value at the maturity is of interest. e.g endowment assuance, DC pension plan

The points to consider when conparing the products

  • Risk
  • Potential gain
  • Flexibility, with regard to the level of premium, the form of benefits
  • Simplicity
  • Transparency
  • Expense

    • Macroenvironment factors
    • Regulation
    • Tax regime
    • Economic outlook
    • Expectations of inflation
    Microenvironment factors
    • Personal need: existing assets, future income, liabilities
    • Alternative investment options.
    • The insurance already in place
    • Immediate need for cash
    • Health status
    • Job status (risk of unemployment)
    • Risk appetite
      • in practice, this is largely dependent on the individual’s person circumstances
      • main factors include age, wealth, marital status, children
    • Reinvestment capability
    • Flexibility with regard to personal situation changes in the future
    • Trade-off between gains and risks, expense and effort
    Constrains
    • insufficient assets for direct investment in some asset classes: particularly property … although, many individuals actually over-invest in property as an asset class by purchasing their own home
    • high expenses when investing small amounts
    • high expenses when investing small amounts
    • lack of information and/or expertise
    In practice, collective investment vehicles can help reduce the impact of such constraints.