Problem
You have been appointed as an advising actuary to Delta Life, a small, regional life insurance company based in Scotland.
Delta specializes in term assurance policies, which it sells through its relationships with local employers, who mostly operate call centers.
The majority of workers at these call centers buy term assurance from Delta. This includes not only the telephone operators, but also the management and senior executives.
Delta is concerned about the concentration risk inherent in its business model. It is therefore considering expanding its sales to the general public in Scotland.
1. Explain briefly why Delta may be exposed to concentration risk.
2. Discuss the factors Delta would need to consider if it were to expand its sales to the general public in Scotland.
3. Discuss the extent to which this solution would solve Delta's concentration risk.