Product Feature for Risk Control for GMDB!

[JuniorASA]

When we are doing the pricing for GMDB, for example
the death benefit = Max(100% of Premium, Fund) (i.e. ROP feature)

Since the fund value could be down to zero when there is total loss of investment, it means that the maximum death benefit = 100% Premium.

If we would not put the cap on the total premium paid, then the death benefit is unlimited (since he could dump in the premium whatever they like).

Is there any common product feature to cap the death element expsoure in this case?

[JMO]

Originally Posted by JuniorASA

When we are doing the pricing for GMDB, for example
the death benefit = Max(100% of Premium, Fund) (i.e. ROP feature)

Since the fund value could be down to zero when there is total loss of investment, it means that the maximum death benefit = 100% Premium.

If we would not put the cap on the total premium paid, then the death benefit is unlimited (since he could dump in the premium whatever they like).

Is there any common product feature to cap the death element expsoure in this case?

The investment doesn't even have to go all the way down to zero if there are partial withdrawals.

However, most companies believe that this whole scenario is unlikely, and in particular, the experience of partial withdrawals does not indicate that buyers are exploiting this loophole.

[Double High C]

Originally Posted by JMO

The investment doesn't even have to go all the way down to zero if there are partial withdrawals.

I assume that no companies are selling this styupid dollar-for-dollar withdrawal design anymore, eh?

[campbell]

Well..... not issuing new ones, no. But some policies are still outstanding.

From my own peering at policy data in gearing up for C3 Phase II, I noticed that those with greatly in-the-money policies had no idea about the value of their guarantee. At least, they didn't behave (partially withdrawing all but the minimum required account value) anywhere near optimally. I think most of the variable annuity features are mysteries to the people buying them, in that they don't know how to maximize their value from the guarantees.