Considerations of rights and obligations of both parties
With IFRS17, the PolicyHolder has more of a say regarding the contract boundary.
The text say "For example, if the entity has the right to compel the policyholder to pay premiums, the IFRS 17 contract boundary would not end, while the IFRS 4 term of the liability would end unless extending the term would increase the
liabilities."
Is not the example contradictory? In the above, the Policy holder is obliged to pay premium and the boundary will not end. Does not this mean that the insured is obliged to renew?
Also what is the difference between contract boundary and the term of contract?
Comments
Yes, although I can't think of any examples off the top of my head and neither does the source go into any additional detail on it.
I think the difference in contract boundary and term of contract would be easier with the following example:
A 1 year auto policy for $100, where the insured is guaranteed and has the option to renew for $110 at the end of the term for another year.
The term of the contract is one year, while the contract boundary would technically be 2 years as the insurer would be unable to reprice at the end of the contract term