Treating With Profits Policyholders Fairly

1
Treating With Profits Policyholders Fairly

• A Life Office Perspective

Colin Ledlie Head of Actuarial Function With
Profits Actuary Standard Life
2
Treating With Profits Policyholders Fairly

• The Wider Agenda
• Role of the Actuary
• PS05/01 Implementation Issues

3
TCF The Wider Agenda

• Senior Management Responsibilities
• Embedding in the Business

4
Role of the Actuary - With Profits Actuary

• Advise on key aspects of discretion and
  compliance with PPFM
• Written report to policyholders on key aspects of
  the discretion exercised
• Aspects to consider include
• Bonus rates
• Investment Policy
• Surrender Value Methodology
• Allocation of Expenses
• Investment Fees
• Changes to PPFM
• Communications to Policyholders

5
Role of the Actuary - Head of Actuarial
Function

• For business which is not with-profits must
  ensure the firms management are aware at all
  times of his or her interpretation of its
  policyholders reasonable expectations and of any
  other obligations to treat customers fairly which
  need to be taken into account.
• When a material change (in business practices or
  plans) the AFH must take all reasonable steps to
  ensure that the firm appreciates the implications
  for fairness and the reasonable expectations of
  policyholders.

6
PS05/01 Implementation Issues

• Evolution of With Profits
• Evolution of the Policy Statement
• Target Ranges
• What is an appropriate range?
• 95 to 105?
• 80 to 120?
• 70 to 143?
• Are target ranges consistent with Year on Year
  change limits?
• 90 requirement over what time period?
• Will ranges become narrower over time?
• Issues for companies currently target less than
  100 of asset share?
• Stochastic testing of the new WP practices

7
PS05/01 Implementation Issues

• Surrender Values
• Recent experience of targeting asset share more
  accurately
• Demonstrating Compliance
• Robust Processes, Board Senior Management
  Review
• New business
• New Bonus Series
• Guarantee Charges
• Business transactions
• Excess Surplus
• CFPPFM

8
Implementation Project

• Resource
• Senior Management Steering Group
• Changes to PPFM
• Evidencing compliance
• 28 tasks by 30 June
• 26 further tasks by year end
• Target Ranges Implementation
• Other Aspects of WP Practice

9
Conclusion

• PRE and the definition of TCF are not static but
  can change over time
• PS05/01 represents a very significant change to
  the business environment in which companies
  operate
• With Profits Practices will need to evolve in
  response
• Robust Processes across the business to support
  TCF and PS05/01