group 5 - variable universal life (final)

8/7/2019 Group 5 - Variable Universal Life (Final)

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Variable Universal Life

InsuranceGroup 5


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Lists of Members

Bi Thanh Nam

L Minh Ngn

Phm PhngNgc

inh V Cng Nguyn

NguynThu Phng

NguynTh Phng

V NhtQuang

LngTh NgcQunh

VVnSn

ng PhngTm


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Table of contents

I. Principle of Variable Universal Life

II.SWOT Analysis of Variable Univerval Life

III. Vietnamese Variable Universal Life products


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Principles of Variable

Universal Life


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1. Definition

Variable Universal Life (VUL) Insurance is a policythat combines:

- the premium and death benefit flexibility ofuniversal life

- the investment choices of variable life

protection + investment


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2. Features

Maturity: permanent life insurance

the death benefit will be paid if the insured

dies any time as long as there is sufficient cashvalue to pay the costs of insurance in the policy

Flexible premium:

- Minimum premiums that must be paid each month or period.

- Premiums can exceed these minimums. In Vietnam, the total excesspremium cannot be 10 times larger than premium at beginning of year.

-To keep the policy in force, enough cash to pay that month's cost ofinsurance no premium needs to be paid.


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2. Features (cont.)

Flexible death benefit:

The death benefit can decrease or increase periodically.

Flexible investment:

Option to invest in their preferred investment portfolio

Option to switch between the investment fund options


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2. Features (cont.)

Cash value: minimum not guaranteed, dependson investment performance

Policy loans: Allowed

Partial withdrawals: Allowed

Surrender charges: Yes


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Insurance Purposes

Someone has affordable income, ranging from 40-55 years

old, mostly living in big cities like Hanoi, HCM and long-term planning investment (10-20 years) such as long-term

retirements, childrens enrollment expenses.

Reason:

- Diversify the selections for insured by a flexible

amount of insurance coverage

- No tax for return in VN


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Investment Purposes

Investors who lack of professions of financial market, marketforecasting capacity.

Pay premiums at anytime, any amount (subject to limits) forinsurers managing the portfolio gain high rate of return.

Reason:

- No time to manage portfolio investment

- Safe investors who want to gain cash value andreturn from investment.


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SWOT Analysis of Variable

Universal Life


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3. Strengths and weaknesses

a. Strengths:

Transparency: the insurance company has todisclose the information about the performanceof portfolio.

Separate accounts protect insured in the event

of the insurers insolvency.

Withdraw cash value as policy loans without taxpenalties.


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3. Strengths and weaknesses (cont.)

b. Weaknesses:

Expensive: high premiums compare to other life insurance products

e.g: annual minimum premium of:

Prulink: 6 mil VND

Pru cash back:3 mil VND

Pru-Health assure: 2.4 mil VND

Complex: Policyholders require at least basic knowledge of securities and investing

Market risk: the policyholders take all investment risk.

Limited Investment Options: The policyholders only can choose stocks or bondswhich insurer provides


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Threats

1. Unstable stock market

- Vn stock market is too dynamic and has downward trendwhich are not be defined to be a direction stable so that links tosmall profit of insurance companies

- Especially in 2009, when Vn stock market was so gloomy,clients of insurance companies tended to join into someother insurance products that are protective and saving

2. Variable demands of customers

- Vn Insurance market is more and more competitive becauseof attending of a large number of insurance companies sothat satisfying the variable demands of customers is a mainlycompetitive advantage.


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Threats

3. Competition between financial institutions ( banks,investment companies) and insurance company toattract the surplus money of individual.

- Banks gave a lot of products which are highlycompetitive compared to insurant products, such as :period saving, step-up interest saving, permanentsaving including campaigns like : promotional gift,

lottery- In fact, this is the main reason for the sink of insurance

market in 2004-2006


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Threats

4. Adjustment in law of insurance industry has been beingbuilt but still not catching up with the development ofthis business, especially in the case Vietnam which is

entering deeply into global economy.

5. Knowledge and understanding about VUL of customersas well as governmental agencies seem not to beenough, that really creates barrier for the activities of

this kind of insurance.6. Because of variable options for customers ( 5

categories), VUL require effective management


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Opportunities

1. Population and demand of education:

- Now, VN has 85 mil people, 13th in all over the world, tendsto increase 1 mil/year.

- Population is younger: 52 mils in labor age range, 60 % intotal

- Expectation of life obviously increases( 50 years old in 1960to 72 years old in 2005 )

-> a request of education and training both in Vn and abroad

-> requirement of ability for finance


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Opportunity

2. Devolopment of Viet Nam economy:

- After doi moi, Vn ecomony had a significant development andcontinues to grow up with high speed ( projected 7% per year )

- According to World Bank, in 2010, GDP per person would reach to1000USD

- Vietnamese has saving tradition and the highest level of saving/income.

-> higher living standard

-> appearance of more and more middle- class families and a need offinancial independence of elder people.


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Opportunities

3. According to the judgement some experts, in this stage,the appearance of VUL will define the background forthe future development, when VN stock market is stable

and increase in a good direction.

- This may be the product for the near future wheninvestors are familiar with combining betweeninsurance and investing in stock market accept the risk

of investing- When financial market booms, client will convert to buy

and sell products that are investible.


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Opportunity

Development of life insurance market in VN:


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Vietnamese Variable

Universal Life Products


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Vietnamese VUL InsurersPrudential

PRUlink - Ph bogiau tManulife

MAXX Phc Lc ThnhVng

Benefits Protection for the insured and family

in case of risks occur

Other supportive Insurance Benefits

InvestmentBenefits

Withdrawal and addition investment

Fund Switching

Fund choices

Top-up

Fund Switching

Partial withdrawal

Premium holiday

Grace period

Entry Age 18-60 18-65

Age at Expiry 80 99

Premium Term 65 99

Minimum Premium 6 million VNDs/year

Minimum Insured

Amount

30 million VNDs 35 million VNDs

Premium Method Annual Annual or Monthly


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PRUlinks supportive benefits


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PRUlink Funds


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Prulinks Insurance Activities

Tng s ph bao him

np trong nam

43.042.964.516 VND

S ph bao him phnb cho ph ban u

16.639.466.781VND

Tng s ph bao him

u tu vo cc quy

27.490.413.355 VND


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MAXXs Funds


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MAXXs Insurance Activities


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Only 2Variable Universal Life Insurer?

High requirements:

- Minimum capital requirement: 200 bil. VNDs

- Adequate information technology: to monitor unit linked

funds

- Adequate ability to value assets and unit price of each unit

linked funds

- Possessing at least 2 funds


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Only 2Variable Universal Life Insurer?

Variable Universal Life Insurance: not attractive to customers

- Turbulence in Vietnamese Stock Market

- Customers aim for more protective insurance products.


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Conclusion


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Thank you for listening!!!

group 5 - variable universal life (final)

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