ALU 202 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. Underwriting criteria generally used in the pricing of
preferred policies include
Answer:
Blood pressure, cholesterol and family history
Question:
2. All of the following are pricing components of life
insurance established by regulation EXCEPT:
A. reserve basis
B. tax law
C. nonforfeiture laws
D. asset risk
Answer:
Asset risk
Question:
3. The relationship of mortality savings from a requirement
to the cost of administering the particular requirement is
Answer:
Protective value
Question:
4. All of the following statements regarding a protective
value study of underwriting requirements are correct
EXCEPT:
A. It should evaluate which requirement identified the
underlying impairment.
B. It should consider the proposed insured's behavior in
accepting or rejecting the offered policy.
C. It should measure the difference between select and
ultimate mortality.
D. It should ensure that the offered product is "at the
market".
Answer:
It should measure the difference between select and ultimate mortality.
,Question:
5. A safety net that needs to be provided beyond the level
of reserves being held in case a company's mortality
experience turns out to be much worse than expected is
referred to as
Answer:
Risk-based capital (RBC)
Question:
6. Pricing components include
Answer:
Mortality and Lapse Rates
Question:
7. The insurance industry of today is dominated by
Answer:
Term products
Question:
8. The single largest expense related to a life insurance
product is
Answer:
Mortality
Question:
9. In Canada, statutory reserve standards are established by
Answer:
Federal regulation
Question:
10. Pricing components of a life insurance product include
what?
Answer:
Mortality costs, lapse rates and interest rates.
Question:
11. Describe a protective value study
Answer:
The relationship of mortality savings from a requirements to the cost of
administering the particular requirement.
, Question:
12. One of the two distinct issues involved in the
Reasonableness of Pricing Expectations is:
A. The value of underwriting requirements
B. Policy face amount
C. Preferred risk underwriting
D. Interest Rate Risk
Answer:
The value of underwriting requirements
Question:
13. What has a significant impact on the ultimate cost of
product?
Answer:
Target market
Question:
14. What takes place with more stringent underwriting?
Answer:
Expected mortality decreases and Lower, more competitive prices
Question:
15. The average time it takes for a carrier to recover from the
expenses incurred upon issue is:
Answer:
5 Years
Question:
16. When deciding if the cost of obtaining additional
requirements can be justified from an expense
perspective, what would be considered?
Answer:
The time taken to issue a policy, the cost of the requirement and the protective
value
Question:
17. Federal taxes paid by an insurance company are income
based and include what?
Answer:
Tax reserves and deferred acquisition cost (DAC) tax
CORRECT ANSWERS
Question:
1. Underwriting criteria generally used in the pricing of
preferred policies include
Answer:
Blood pressure, cholesterol and family history
Question:
2. All of the following are pricing components of life
insurance established by regulation EXCEPT:
A. reserve basis
B. tax law
C. nonforfeiture laws
D. asset risk
Answer:
Asset risk
Question:
3. The relationship of mortality savings from a requirement
to the cost of administering the particular requirement is
Answer:
Protective value
Question:
4. All of the following statements regarding a protective
value study of underwriting requirements are correct
EXCEPT:
A. It should evaluate which requirement identified the
underlying impairment.
B. It should consider the proposed insured's behavior in
accepting or rejecting the offered policy.
C. It should measure the difference between select and
ultimate mortality.
D. It should ensure that the offered product is "at the
market".
Answer:
It should measure the difference between select and ultimate mortality.
,Question:
5. A safety net that needs to be provided beyond the level
of reserves being held in case a company's mortality
experience turns out to be much worse than expected is
referred to as
Answer:
Risk-based capital (RBC)
Question:
6. Pricing components include
Answer:
Mortality and Lapse Rates
Question:
7. The insurance industry of today is dominated by
Answer:
Term products
Question:
8. The single largest expense related to a life insurance
product is
Answer:
Mortality
Question:
9. In Canada, statutory reserve standards are established by
Answer:
Federal regulation
Question:
10. Pricing components of a life insurance product include
what?
Answer:
Mortality costs, lapse rates and interest rates.
Question:
11. Describe a protective value study
Answer:
The relationship of mortality savings from a requirements to the cost of
administering the particular requirement.
, Question:
12. One of the two distinct issues involved in the
Reasonableness of Pricing Expectations is:
A. The value of underwriting requirements
B. Policy face amount
C. Preferred risk underwriting
D. Interest Rate Risk
Answer:
The value of underwriting requirements
Question:
13. What has a significant impact on the ultimate cost of
product?
Answer:
Target market
Question:
14. What takes place with more stringent underwriting?
Answer:
Expected mortality decreases and Lower, more competitive prices
Question:
15. The average time it takes for a carrier to recover from the
expenses incurred upon issue is:
Answer:
5 Years
Question:
16. When deciding if the cost of obtaining additional
requirements can be justified from an expense
perspective, what would be considered?
Answer:
The time taken to issue a policy, the cost of the requirement and the protective
value
Question:
17. Federal taxes paid by an insurance company are income
based and include what?
Answer:
Tax reserves and deferred acquisition cost (DAC) tax
