(10 points)CTI is a life insurance company that plans to issue a new, high volume, low sum insured term insurance policy through direct marketing.Its current business is predominantly traditionally-brokered term insurance.

CTI assumes the following for calculating premiums and reserves.

(i) For brokered policies, mortality follows the Standard Ultimate Life Table, and expenses are 8% of each premium.

(ii) For direct-marketed policies, mortality follows the Standard Ultimate Life Table with a 5-year addition to the policyholder's age.Expenses are 3% of each premium.

(iii) i = 0.05

(iv) Premiums are calculated using the equivalence principle.

(2 points)Explain why the mortality and expense assumptions are different for the direct-marketed policies compared to the brokered policies.