Participating Business and FFA Guide : B N

Transcript:Participating Business and FFA Guide : B N:
Participating Business and FFA Guide : B N Rangarajan Presented By : 1. Ankit Sethi 2. Vishal Vermani 3. Pallavi Agarwal 4. K T Jayasager 34th India Fellowship Webinar Date: 23rd January 2021 Agenda Basic concepts : Asset share and Fund for Future Appropriation (FFA) Reasons & Implication of debiting priced acquisition expenses from asset share Expenses of Management and implication of higher than allowed expenses FFA in more details : Built up and Allocation Solvency management in declining FFA www.actuariesindia.org Basic concepts : Asset share and Fund for Future Appropriation (FFA) www.actuariesindia.org Asset Share is accumulation of : www.actuariesindia.org Uses of Asset Share www.actuariesindia.org www.actuariesindia.org FFA: excess of par assets over liabilities Reasons & Implication of debiting priced acquisition expenses from asset share www.actuariesindia.org www.actuariesindia.org Guidance Note (GN)6 :Management of participating life insurance business with reference to distribution of surplus – suggests expenses being charged to the asset share should be consistent to what has been illustrated to the policyholders Expenses of Management (EOM) regulations – specifies maximum expenses that can be spent by a life insurance company in India, exemption conditions and actions for non-compliance requires insurers to have Board approved expense allocation policy. policy needs to be reviewed annually and primarily covers policy around which expenses to be allocated to various segments and basis/manner of allocation IRDAI (Non-Linked Insurance Products) Regulations 2019 – Expenses charged to asset share shall be determined by the Appointed Actuary. Expenses charged to the With Profit fund and its appropriateness shall be disclosed to the With Profit Committee Expense Related Relevant Regulations & Professional Guidance Acquisition Expenses Charged to Asset Share www.actuariesindia.org Policyholder Reasonable Expectation Level of acquisition expenses should be known with greater certainty It would be unreasonable to charge higher acquisition expenses than provided in benefit illustrations given the timing of expense is just after the sale of the policy Charging higher than expected expenses could result in bad publicity Fairness of Treatment between different generation of Policyholder As asset share of older cohort of policyholders was debited by pricing acquisition expenses hence it would be unfair to charge actual (higher) acquisition expenses from the current or new policyholders Acquisition Expenses Charged to Asset Share www.actuariesindia.org Market Practice If competitors are charging the pricing acquisition expenses from asset share then charging actual (higher) acquisition expenses from asset share may make the product unattractive to the potential customers Expense Overrun –