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Role of Insurance Companies

Insurance companies have a distribution network for selling life insurance products and with a little additional input such as the training the same sales force can sell pensions quickly and adequately. Product packaging could take away the complexities of pension regulators and tax treatment by packaging in such a way that the employee only has to sign on the form at the bottom.

Pension funds require copious records and the insurance company can handle all such record keeping. Apart from simplification of product packaging, insurance companies are able to offer pension with a life insurance cover with the employee benefit needs attached so that he employer can buy from the same source. And when the person retires the employer will be able to pay the benefits and the annuities that have accrued during the persons working lifetime.

 Insurance Products

The key generic products offered by life insurance companies are as follows:

• Group Defined Benefits

• Group Money Purchase

• Individual Money Purchase


• Individual Deferred Annuity

• Annuity

• Risk Products

 Product Development

The process of developing and refining products is circular and can be summarised as follows:


• Stimulus: This can be caused by a specific event like a change in regulation or tax rules,
response to a competitor, a new market niche, a product idea and a drop in market share or
profitability.

• Mock up: The marketing area will draft a product with as much detail as requires to stimulate a
discUS$ion within the customers and agent brokers. This may have a few iterations and is followed by a
feasibility study.

• Decision: Decision whether to delay, progress or reject the idea.

• At this point a interdepartmental project team is formed and launch dates, a task list and key
accountabilities are established.


• Detailed analysis and design: This involves defining the preferred option for the product.

• Pricing will now commence and will be set at a level that satisfies as closely as possible the twin
aims of achieving a commercial return on the shareholders capital employed and a competitive positioning of the product.


• Procedures and systems work will be undertaken concurrently.

• Launch: This is accompanied by a variety of measures to stimulate the interest of the public
through presentations, road shows, press releases and interviews with senior managers, advertising.

• Monitoring: The product managers will monitor the following aspects: sales, lapse, mortality,
investment performance and expenses of selling underwriting and administration. The focus is to identify

areas where performance differs from that assumed in the pricing.

Much retirement saving is done informally by the individuals outside of formal pension plans. This is
partly due to the lack of access to pension plans which is often restricted under rules designed to
prevent abuse of tax relief. The life insurance industry is a key player in this alternative means of saving for retirement.
 
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