Insular Life Assurance Company, Ltd.

Attached are the relevant web pages of Insular Life’s insurance product, the
Money Back Plan. You are a rich 40-year old considering Plan 1000. Answer the
guide questions below.

Guide Questions:

1. After having read web pages, are you attracted to Insular Life’s offer? Why
or why not?

2. Would you pay Php1,519 monthly or Php17,200 annually? Explain. Will

the interest rate environment affect your choice and if so, how? Are there
other considerations besides the discount rate that can affect your decision?

3. What would be the future value of Insular Life’s revenues if you make no
claims and got your money back after 10 years? What is the present value
of this revenue? Assume a rate of return of 10% p. a.

4. How many rich 40-year old policyholders (all availing of Plan 1000 and
paying annually) should make no claims for Insular Life to recover a
Php1,000,000 death benefit paid out to a policyholder at the end of year 5?
Assume a rate of return of 10% p.a.

5. You could insure yourself, i.e., deposit Php17,200 annually into a bank
where you will earn an after tax interest of, say, 6% and hope not to die in
the next ten years. Is this a good idea?

6. You could remain uninsured as many do. Is this a good idea?

7. You could “insure” yourself by putting Php17,200 annually into some risky
investment like a condominium unit or a franchise. Is this a good idea?

8. Insurers claim they manage investments and risk better than most
individuals. Because of their claimed expertise, they are able to make a
profit while also providing you protection (e.g., life insurance, accident
benefits or hospitalization benefits). Do you believe this claim? If yes,
how do you think insurers “manage investments and risk better”? If no,
why not?

This case was written by Don Brodeth as a basis for class discussion. All
intellectual property rights reserved. © 2015
Exhibit 1. Product Description of the Money Back Plan (lower half of web page)
Exhibit 2. Schedule of Benefits and Premia of the Money Back Plan