The Holy Grail
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<!--EZCODE ITALIC START--> "I like the RIY figure because it's a standard, easy to read format for expressing charges. "<!--EZCODE ITALIC END--><!--EZCODE BOLD END--><hr></blockquote><!--EZCODE QUOTE END-->
Wouldn't it be wonderful if such a Holy Grail existed.
Thankfully, RIY hasn't really caught on here as much as on the Mainland. We all secretly acknowledge that QLD has the keenest charging structure but companies who have huge back-ended loyalty and terminal bonuses beat it hands down in the RIY stakes.
Why? Because since very few stick around to get them, these bonuses cost the company practically nuffn' yet it minimises the RIY.:rolleyes
Some RIY junkies whose heart is in the right place <!--EZCODE ITALIC START-->
(as opposed to the originators of the concept who simply wanted to duck early encashment disclosure)<!--EZCODE ITALIC END--> now recognise that one RIY at a term way out into the future is entirely misleading. These have suggested giving a Table of RIYs at each duration - not very handy for league tables.
Have I a solution? Yes - it's called <!--EZCODE BOLD START-->
LARIY<!--EZCODE BOLD END-->. Lapse Adjusted RIY takes the RIY at each duration and combines them into one <!--EZCODE BOLD START-->
LARIY<!--EZCODE BOLD END--> by using a standard lapse rate.
Thus say we chose 10% per annum as a standard lapse rate, the first year's RIY would get 100% weighting, second year 90% weighting etc. etc. with the 20 year RIY getting a 15% weighting. This would approximate to the charges that the company is actually getting from the policyholders as a Group.:hat