Reference no: EM133009210

Tlhoko Life Brokers recently entered the life industry and found that it is highly competitive. The board of Tlhoko Life Brokers raised serious concerns about issues pertaining to both the strategy and operations of the business. Management was requested to design and implement appropriate mitigation to these concerns. The Chief Risk Officer of Tlhoko Life Brokers presented the following concerns of the board to all the management of the business:

Concern 1 (3) The board is concerned that Tlhoko Life Brokers has been incurring financial losses due to large losses since its formation. This is now constraining the liquidity of the business. The situation demands that the business finds a sustainable solution, which will result to the business to operate profitable.

Concern 2 (5) There is a concern that Tlhoko Life Brokers may not be able to afford the replacement of its unique underwriting system in 10 years' time, when it has been fully depreciated, due inadequate cash flow. The current depreciation amount of the underwriting system is R120 000 annually.

Concern 3 (5) The board is concerned about the potential loss of skilled personnel. It resolved that management must design a remuneration and incentive system which will retain the competitive and highly trained underwriting and claims staff, without exposing the staff to a high tax burden.

Concern 4 (3) The board has zero tolerance to non-compliance and is concerned that due staff changes the business may find itself in the wrong side of the law. They requested management to obtain a list of compliance requirements from the industry body responsible for the supervision of market conduct in the industry.

Describe the appropriate life insurance solution to each of the concerns of the board and, where applicable, indicate the impact of taxation.