Question

Provide an explanation of the covers and calculations to ensure the amount of covers is understood by the clients. The "best interests" duty and related obligations may not be met if an adviser cannot, or does not demonstrate to the client how the calculations are made and why they are suitable, taking into account the client’s individual circumstances and situation.

Answer 1

The calculations and covers in the context of the 'best interests' duty are related to the insurance industry. Insurance companies need to ensure that the premiums collected from policyholders are sufficient to cover the average person's claims, the costs of running the company, and leave room for profits.

Step-by-step explanation:

The calculations and covers in the context of the 'best interests' duty are related to the insurance industry. Insurance companies need to ensure that the premiums collected from policyholders are sufficient to cover the average person's claims, the costs of running the company, and leave room for profits.

For example, the premiums collected need to be able to pay for the claims made by policyholders, cover administrative costs, such as salaries and office expenses, and still generate profits for the insurance company.

In order for insurance advisers to meet their obligations and demonstrate the suitability of the calculations to clients, they need to explain how the premiums are determined based on factors like investment income, administrative costs, and different risk levels within the insurance pool.