Download UL introduction_EN - Cathay Life Insurance

UNIVERSAL LIFE INTRODUCTION
1
CONTENT
INVESTMENT PRODUCT
UNIVERSAL LIFE PRODUCT
UL VS. TRADITIONAL PRODUCT
CATHAY UL PRODUCT
Q&A
2
INVESTMENT PRODUCT
Investment product is a combination of
Investment
product
Insurance Part: Provide insurance protection
Investment part: provide investment tool to get profit
3
INVESTMENT PRODUCT
Investment product includes:
Universal life
Unit Link
Interest is declared and
Interest is from difference
base on monthly investment
result.
on bid price and ask price
Many fund options for
Guaranteed rate
customer
Profit is safer because
UL fund invest on safe
assets
Higher profit when
customer select
higher risk funds
Investment products has same features:
Expense clear
Flexible payment
PO get investment result
4
CONTENT
INVESTMENT PRODUCT
UNIVERSAL LIFE PRODUCT
UL VS. TRADITIONAL PRODUCT
CATHAY UL PRODUCT
Q&A
5
UNIVERSAL LIFE PRODUCT
ACCOUNT VALUE
ACCOUNT
VALUE
Account value of UL product is similar to bank account:
 Store premiums (“deposits“) collected from customer.
 Earn monthly interest on allocated premium from investment result
 Pay charge/cost as requirements or withdraw (bank account could be
deducted bank fee/ withdrawn).
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UNIVERSAL LIFE PRODUCT
Premium Payment
PREMIUM PAYMENT
Basic Premium
Top Up Premium
Basic protection
Increase investment return
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UNIVERSAL LIFE PRODUCT
Initial cost & Allocated premium
Initial Cost
Initial cost is deducted from
collected premium to pay for
service expenses
Premium allocates to account value
after deducting initial cost from
collected premium
PREMIUM PAYMENT
Basic
Premium
Top up
Premium
Allocated
premium
Initial cost
Allocated premium
Initial
cost
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Allocated
Premium
UNIVERSAL LIFE PRODUCT
Increasing ACCOUNT VALUE
Allocated
premium
Bonus
Bonus
Bonus
Interest
ACCOUNT
VALUE
Bonus is due to product design
(maturity bonus, maintenance bonus…)
Interest from investment activities
of UL fund.
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Initial
Cost
Interest
UNIVERSAL LIFE PRODUCT
Decreasing ACCOUNT VALUE
FMC
COI
ACCOUNT
VALUE
Deduct from investment
rate to get declared rate
Automatically deduct
from AV monthly
PMC
Surrender charge
Deduct when customer
surrender policy
Withdrawal cost
Surrender value
Insurance benefit
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UNIVERSAL LIFE PRODUCT
Decreasing ACCOUNT VALUE
Policy management
cost (PMC)
The amount Company uses for activities
to maintain policy and provide policy
information
Premium is used to pay for
death benefit /TPD benefit
Fund management
cost (FMC)
Cost of
Insurance
(COI)
Used to pay for investment activities
expense and UL fund management expense
Used to pay for surrender policy
activities
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Surrender
charge
UNIVERSAL LIFE PRODUCT
Decreasing ACCOUNT VALUE
FMC
COI
ACCOUNT
VALUE
PMC
Surrender charge
Withdrawal cost
Surrender value
Insurance benefit
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UNIVERSAL LIFE PRODUCT
Decreasing ACCOUNT VALUE
Withdrawal
Cost
the amount that the Policy Owner must
pay when withdrawing a portion from
the Surrender Value
Surrender
value
PO could apply to get surrender value
(if any)
Insurance
benefit
Insurance benefit of UL product
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UNIVERSAL LIFE PRODUCT
Investment procedure
3
Declared rate =
investment rate – FMC
Interest
Increasing
AV
Decreasing
AV
ACCOUNT
VALUE
1
2
Procedure:
①Values Increasing AV are allocated to Account value.
②Account Value deducts cost/fee/ payment decreasing Account value
③Remaining Account value is invested and get monthly investment result:
- Monthly, Company announces declare rate as customer’s investment result.
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UNIVERSAL LIFE PRODUCT
Increasing AV
Decreasing AV
Interest
FMC
Allocated premium
Bonus
COI
ACCOUNT
VALUE
PMC
Surrender charge
Withdrawal cost
Surrender value
Death/TPD
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UNIVERSAL LIFE PRODUCT
BENEFITS OF UL PRODUCT
SA> AV
BASIC DESIGN
ADVANCE DESIGN
Max (AV, SA)
SA+ AV
100% AV
100% AV
SA<AV
INSURANCE
BENEFIT =SA
INSURANCE BENEFIT = SA+AV
SA
INSURANCE
BENEFIT =AV
Sum Assured
SA
Account Value
SUM ASSURED
Account Value
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CONTENT
INVESTMENT PRODUCT
UNIVERSAL LIFE PRODUCT
UL VS. TRADITIONAL PRODUCT
CATHAY UL PRODUCT
Q&A
17
COMPARE UL LIFE Vs. TRADITIONAL PRODUCT
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CONTENT
INVESTMENT PRODUCT
UNIVERSAL LIFE PRODUCT
UL VS. TRADITIONAL PRODUCT
CATHAY UL PRODUCT
Q&A
19
UL WHOLE LIFE I01 AND I02
I01
I02
DEATH/TPD BENEFIT
DEATH/TPD BENEFIT
Sum Assured
Account Value
Age 99
Account Value
SUM ASSURED
Age 99
Max (AV, SA)
100% AV
Death/ TPD
Long Life
SA+ AV
100% AV
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UL WHOLE LIFE I01 AND I02
FEATURE
Age at entry
I01
I02
0~60
0~50*
Policy Term
Until 99 years old
SA
100 M ► 800 M (≤age 14)
100 M ► 2.5 B (>age 14 )
Guaranteed
Interest Rate
4% /year for first 10 years and
3% /year for next years
Rider
All (except R05 and R06)
(*) premium of I02 in age 51~60 is too high, so Company doesn’t sell it
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UL WHOLE LIFE I01 AND I02
Initial cost
I01 & I02
Policy year
+
An Tâm Hưng Thịnh
2014 (Dai-ichi)
Basic
Top up
Basic
Top up
Premium (%) premium (%) premium (%) premium (%)
50
8
55
9
20
7
40
7
10
5
25
7
5
5
20
5
5
5
10
5
2.5
2.5
7~3
2
Service expenses and fix cost in 1st and 2nd year are high, so initial cost is high in
early years.
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UL WHOLE LIFE I01 AND I02
Surrender charge
Policy year
~
+
I01 & I02
An Tâm Hưng Thịnh
2014 (Dai-ichi)
First year Basic
Premium (%)
First year Basic
Premium (%)
100
80
60
40
20
0
100
80
60
40
20
0
Surrender charge only applies for basic premium when customer surrender
policy
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CATHAY TERM UL I03 AND I04
I04
I03
BONUS
BONUS
DEATH/TPD BENEFIT
DEATH/TPD BENEFIT
Sum Assured
Account Value
20 YEARS
Sum assured
Account Value
Max (AV, SA)
100% AV
Death/ TPD
15% ×Total (basic
premium- total withdraw)
Maturity
Maturity bonus
20 YEARS
SA+ AV
100% AV
15% ×Total (basic premium total withdraw)
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CATHAY TERM UL I03 AND I04
FEATURE
I03
I04
Age at entry
0~60
Policy Term
20 years
SA
100 M ► 800 M (≤age 14)
100 M ► 2.5 B (>age 14 )
Guaranteed
Interest Rate
4% /year
Rider
All (except R05 and R06 )
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CATHAY TERM UL I03 AND I04
Initial cost
I03 & I04
Policy year
+
An Khang Tai Loc
(Hanwha)
Basic
premium
Top up
premium
Basic
premium
Top up
premium
70
15
10
5
5
2.5
8
7
5
5
5
2.5
65
25
15
10
5
2.5
10.0
7.5
5.0
5.0
5.0
2.5
Service expenses in 1st and 2nd year are high, so initial cost is high in early years.
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CATHAY TERM UL I03 AND I04
Surrender charge
I03 & I04
Policy year
~
+
An Khang Tai Loc
(Hanwha)
First year Basic
Premium
First year Basic
Premium
100
80
60
40
20
0
100
80
60
40
20
0
Surrender charge only applies for basic premium when customer surrender policy
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GENERAL PRINCIPLE OF ALL CATHAY UL PRODUCT
Item
FMC
Note
2% / year
PMC
15.000 VND / month
COI
Base on risk premium
First premium: one annual basic premium must be
paid and total premium must not be less than 3M
Premium
Payment
Top up premium doesn’t exceed 5 times of FY
base premium and not over SA
Customer must pay enough basic premiums for
the first 2 policy years to avoid policy suspending.
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GENERAL PRINCIPLE OF ALL CATHAY UL PRODUCT
Item
Withdrawal
cost
SA of
I01& I03
Note
Can withdraw after 1st year.
Free for amount of 20% Surrender Value or
below for 1st withdrawal during each policy year.
Cost for excess amount of 20% Surrender Value
for 1st withdrawal: max( 2%(withdrawal -20%
SV), 100000)
Cost full amount of 2nd withdraw onward: max
(2% amount, 100,000VND).
Min withdrawal: 500,000 VND.
Max withdrawal: 85% Surrender Value
when customer withdraws money, SA could be
deducted by withdrawal to maintain Risk SA to
guarantee benefit for customer
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COMMISSION AND PFYP (%)
+
Policy year
Basic premium
Top up premium
PFYP
30.0 10.0 8.0
4.5
4.5
2
70
4.5
4.5
4.5
2
10
4.5
4.5
Example: Mr. B, 35 years old, purchased I01 with premium 10M (basic premium 6M,
top up premium 4M). Calculate FYC?
Premium
Commission
Annual basic
premium
Top up
premium
Total
6M
30%×6= 1.8
4M
4.5%×4=0.18
10 M
1.98
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CONTENT
INVESTMENT PRODUCT
UNIVERSAL LIFE PRODUCT
UL VS. TRADITIONAL PRODUCT
CATHAY UL PRODUCT
Q&A
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Q&A (BASIC INFORMATION)
Mr.Nguyen Van B, 35 years old, purchased Whole Life Universal Life with the
information as follow:
•Sum Assured: 300 millions; Assume investment rate 6.0%
•Premium Payment Period: 20 years
•Total Annual Premium: 10 M including:
Annual basic
premium
Top up
premium
Total annual
premium
Basic (I01)
6M
4M
10 M
Advanced (I02)
9M
1M
10 M
5thPolicy
year
10th Policy
year
20th Policy
year
Basic (I01)
46.4
114.6
331.6
Advanced (I02)
43.6
109.2
Account Value
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301.8
Q&A (DEATH BENEFIT)
Question 1: Assume Mr. B is death at year 20th.Questions are as
following:
a) With I01, how much is death benefit?
b) With I02, how much is death benefit?
Answer:
a) With I01, death benefit = max (AV, SA). Base on information in year 20th :
+ AV at year 20th : 331.6 M
+ SA at year 20th : 300.0 M
 Death benefit at year 20th : max(AV, SA)= 331.6M
b)With I02, death benefit = AV+SA. Base on information in year 20th:
+ AV at year 20th : 301.8M
+ SA at year 20th : 300.0 M
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 Death benefit at year 20th : SA+ AV = 601.8M
Q&A (WITHDRAWAL CHARGE)
Question 2: Mr. Nguyen Van B chose the Term Universal Life-Basic(I01),
If Mr. Nguyen Van B withdrew cash at the end of 10th Policy Year
with the amount of 10 M. How much withdrawal charge?
Answer:
+ Surrender value at year 10th : 114.6M (Surrender charge is 0)
+ 20% Surrender value: 20%× 114.6 = 22.9M
Hence, Withdrawal 10M is less than 20% Surrender value.
Withdrawal charge is Free of charge for this first withdrawal
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Q&A (WITHDRAWAL CHARGE)
Question 3: If Mr. Nguyen Van B withdrew cash at the end of 10th Policy
Year with the amount of 50 M in 1st time. How much is withdrawal
charge?
Answer:
+ Surrender value at year 10th : 114.6M (Surrender charge is 0)
+ 20% Surrender value: 20%× 114.6 = 22.9M
=> So withdrawal higher than 20% Surrender value
+ Withdrawal charge = max( 2%(withdrawal -20% SV), 100000)
= max ((50 M-22.9M) ×2%, 100,000)
= max( 542,000, 100,000) = 542,000
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Q&A (WITHDRAWAL CHARGE)
Question 4: If Mr. Nguyen Van B withdrew cash at the end of 20th Policy
Year with the amount of 30 M in 2nd time. How much is withdrawal
charge?
Answer:
The Company will charge the cost at the maximum between:
2% total amount of withdrawal: 30 M x 2% = 600,000 VND
The amount of: 100,000 VND
So the cost Mr. Nguyen Van B must pay equal to :
MAX(2% total withdrawal amount, 100,000) = 600,000 VND
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Q&A (ALLOCATE PREMIUM )
Question 5: If Mr. Nguyen Van B buy I01, how much is allocate premium
contributed to his account value in 1st policy year?
Answer:
Initial
cost (%)
Policy
year
Basic
premium
Top up
premium
1
50
8
Basic
Premium
6.00 M
Top up
premium
4.00M
Initial cost
3.00 M
(50%× 6M)
0.32 M
(8%×4M)
3.32M
Allocate
premium
3.00M
3.68M
6.68M
Premium
Total
10.00 M
 Allocate premium is 6.68M
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Q&A (SURRENDER VALUE)
Question 6: If Mr. Nguyen Van B buy I01, then he surrender
policy(Assume he haven’t withdrawn). How much surrender value does
he get at:
5th year 10th year
a) End of year 5th
Surrender charge (%)
100
0
th
b) End of year 10
Answer:
Policy
year
Account
value
FY basic
premium
5th
10th
46.4M
114.6 M
6.0M
6.0M
Surrender charge
100%× 6M= 6.0M
0%× 6M =0.0M
Surrender
value
40.4M
114.6 M
 Surrender charge only applies on first year basic premium.
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Q&A (SA AFTER WITHDRAWING)
Question 7: If Mr. Nguyen Van B made the 1st withdrawal in 10th years
with amount 50M. How much is SA after he withdraw if
a) He buys I01
Risk SA: The Amount Company
b) He buys I02
is responsible to compensate to
Answer: a) he buys I01
I01
SA
Account Value
Risk SA
Before
withdrawing
300.0M
114.6M
185.4M
death benefit to pay beneficiary
After withdrawing
250.0M
64.6M
185.4M
Both SA and AV are deducted 50M to maintain risk SA and
SA after withdrawing is 250M
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Q&A (SA AFTER WITHDRAWING)
Question 7: If Mr. Nguyen Van B made the 1st withdrawal in 10th years
with amount 50M. How much is SA after he withdraw if
a) He buys I01
b) He buys I02
Answer: b) he buys I02
I02
Before
withdrawing
After
withdrawing
SA
300.0M
300.0M
Account Value
109.2M
59.2M
Risk SA
300.0M
300.0M
The risk SA unchanged after withdrawing and
SA after withdrawing is 300M
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Q&A (PREMIUM PAYMENT)
Question 8: Could Mr. Nguyen Van B pay premium in 1st policy year with
monthly payment mode ?
Answer: No. he must pay first premium by annual payment mode and
payment must equal to basic premium.
Question 9: Mr. Nguyen Van B doesn’t pay premium in 3rd policy year,
then he pays 10M premium in 4th policy year. Is that premium put on 3rd
policy year or 4th policy year?
Answer: that premium is put to 3rd policy year to compensate cost
occurred in 3rd policy year.
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Q&A (MATURITY BONUS)
Question 10: If Mr. Nguyen Van B buy I03 and is alive till the Maturity
Date and he withdrew cash at the 10th Policy Year with the amount of
10 M. Basic premium is 6M/year. How much maturity bonus could Mr.
B get?
ANSWER:
At the Maturity Date the Company will pay 15% x total (basic premium –
withdrawal)
•Basic premium is 6M; total basic premium is 120M (Policy term 20 years)
•Total withdrawn cash: 10 M
Special Maturity Benefit: 15% x (120 M – 10 M) = 16.5 M
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Q&A (Declared interest rate)
Question 11: Assume investment rate in Dec 2016 is 9.0%, Fund
Management cost (FMC) is 2.0%. How much declared rate does
Company declare ?
ANSWER: Company get Account value to invest. Monthly, company
announce declared rate to customer. In Dec 2016:
Declared rate = investment rate – FMC
= 9.0% -2.0% = 7.0%
Question 12: what is portfolio of UL fund ?
ANSWER: portfolio of UL fund includes:
+ Government bond (High proportion in portfolio)
+ Term Deposit
+ Cash
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