Casualty Actuarial Society (CAS) Practice Exam

The characteristics of an insurer's existing book of business play a crucial role in determining the distribution system strategy of the insurer. A book of business reflects the insurer's current clientele, including aspects such as demographics, risk profiles, and loss experience. An insurer with a diverse and stable customer base may find that it can utilize a different distribution model to better serve its policyholders or enhance its market reach.

For instance, if the existing book is concentrated in certain sectors or regions, the insurer might consider adjusting its distribution strategy to tap into underserved markets or align better with customer preferences. This could involve changing from a direct sales approach to a more broker-focused model, or vice versa, based on how the current customer base engages with the product offerings.

This strategic adjustment is often driven by a desire to enhance efficiency, improve customer satisfaction, or respond to shifting market dynamics evident in the existing book. Thus, the characteristics of the insurer's portfolio are fundamental in guiding decisions to evolve the distribution systems.