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Life Insurance (prudential standard) determination No. 2 of 2023
Servicing expensesServicing expenses
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Servicing expenses
47. The stress margin for servicing expenses is a 10 per cent increase to the best estimate of future unit costs for servicing expenses.
48. The stress need not be applied to any component of the statutory fund expenses which is contractually agreed for the life of the policy, for example, renewal commission. The stress need not be applied to the fees payable by a friendly society benefit fund to its management fund.
49. Unit costs must cover the expected maintenance cost of servicing each policy in the twelve months following the reporting date.
50. If the Best Estimate Assumption depends on a service agreement or other contractual arrangement which does not adequately reflect the long term, sustainable costs of operating the business, the stress of 10 per cent must be increased to make up for the shortfall between actual and long term, sustainable costs.