ALU 202 EXAM 2025 LATEST UPDATED WITH COMPLETE
SOLUTIONS 100% VERIFIED SOLUTION!!
Underwriting criteria generally used in the pricing of preferred
policies include which of the following?
A. blood pressure
B. cholesterol/HDL ratios
C. family history
Answer Options:
1. B only is correct.
2. C only is correct.
3. A and B only are correct.
4. A, B, and C are correct. - ANSWER Answer 4: A, B, and C are
correct - page 3.
All the following are life insurance pricing components that are
established by regulation EXCEPT:
1. reserve basis
2. tax law
3. non-forfeiture laws
4. asset risk - ANSWER Answer 4: asset risk - pages 6-7.
The relationship of mortality savings from a requirement to the cost
of administering the requirement is:
1. surplus value
2. protective value
,3. business value
4. reserve value - ANSWER Answer 2: protective value - page 8.
What are the components considered by the actuary in the pricing of
new products? - ANSWER Refer to page 3.
Describe the types of risk that must be covered by the allocated
surplus. - ANSWER Refer to page 2.
All the following statements regarding a protective value study of
underwriting requirements are correct EXCEPT:
1. It should evaluate which requirement identified the underlying
impairment.
2. It should consider the proposed insured's behavior in accepting or
rejecting the offered policy.
3. It should measure the difference between select and ultimate
mortality.
4. It should ensure that the offered product is "at the market." -
ANSWER Answer 3: It should measure the difference between
select and ultimate mortality—pages 8-9.
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:
1. risk-based capital
2. reserve basis
3. statutory reserve
4. deferred acquisition cost - ANSWER Answer 1: risk-based
capital—page 7.
What items are included in the expense levels that are built into
product pricing? - ANSWER Refer to page 5.
,Name four factors that could affect the profitability of a product and
explain in what way profitability could be affected. - ANSWER
Refer to pages 3-6.
Describe how exceptions can affect the profitability and mortality of a
product. - ANSWER Refer to page 11.
For direct carriers, the average percent of premium assigned to
cover mortality is:
1. 30%
2. 50%
3. 75%
4. 90% - ANSWER Answer 2: 50% - page 20.
Companies will update existing cost benefit studies for which of the
following reasons?
A. changes in pricing
B. competitive landscape
C. actual experience
Answer Options:
1. A only is correct.
2. C only is correct.
3. A and B only are correct.
4. A, B, and C are correct. - ANSWER Answer 4: A, B and C are
correct - page 19.
A hit rate of 3% associated with a table 8 (200 debit) average rating
results in which of the following:
1. 6% reduction in profit margin
2. 6% increase in mortality
, 3. 3% increase in mortality
4. 6% reduction in mortality - ANSWER Answer 2: 6% increase in
mortality - pages 20-21.
What is the sentinel effect? - ANSWER Refer to page 21.
Define and describe the pricing horizon of a cost/benefit study. -
ANSWER Refer to pages 22-23.
Which of the following statements about cost/benefit studies is
correct?
A. It is based on the historical mortality found by a requirement being
studied.
B. It assumes mortality plays out according to underwriting
guidelines.
C. Interest and lapse rates are not embedded into the results.
Answer Options:
1. B only is correct.
2. A and B only are correct.
3. B and C only are correct.
4. A, B, and C are correct. - ANSWER Answer 1: B only is correct -
pages 22-23.
Actuaries will create a double decrement table that take which of the
following two factors into consideration?
1. ratings and declines
2. lapses and deaths
3. placed and non-placed cases
4. declines and non-placed cases - ANSWER Answer 2: lapses and
SOLUTIONS 100% VERIFIED SOLUTION!!
Underwriting criteria generally used in the pricing of preferred
policies include which of the following?
A. blood pressure
B. cholesterol/HDL ratios
C. family history
Answer Options:
1. B only is correct.
2. C only is correct.
3. A and B only are correct.
4. A, B, and C are correct. - ANSWER Answer 4: A, B, and C are
correct - page 3.
All the following are life insurance pricing components that are
established by regulation EXCEPT:
1. reserve basis
2. tax law
3. non-forfeiture laws
4. asset risk - ANSWER Answer 4: asset risk - pages 6-7.
The relationship of mortality savings from a requirement to the cost
of administering the requirement is:
1. surplus value
2. protective value
,3. business value
4. reserve value - ANSWER Answer 2: protective value - page 8.
What are the components considered by the actuary in the pricing of
new products? - ANSWER Refer to page 3.
Describe the types of risk that must be covered by the allocated
surplus. - ANSWER Refer to page 2.
All the following statements regarding a protective value study of
underwriting requirements are correct EXCEPT:
1. It should evaluate which requirement identified the underlying
impairment.
2. It should consider the proposed insured's behavior in accepting or
rejecting the offered policy.
3. It should measure the difference between select and ultimate
mortality.
4. It should ensure that the offered product is "at the market." -
ANSWER Answer 3: It should measure the difference between
select and ultimate mortality—pages 8-9.
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:
1. risk-based capital
2. reserve basis
3. statutory reserve
4. deferred acquisition cost - ANSWER Answer 1: risk-based
capital—page 7.
What items are included in the expense levels that are built into
product pricing? - ANSWER Refer to page 5.
,Name four factors that could affect the profitability of a product and
explain in what way profitability could be affected. - ANSWER
Refer to pages 3-6.
Describe how exceptions can affect the profitability and mortality of a
product. - ANSWER Refer to page 11.
For direct carriers, the average percent of premium assigned to
cover mortality is:
1. 30%
2. 50%
3. 75%
4. 90% - ANSWER Answer 2: 50% - page 20.
Companies will update existing cost benefit studies for which of the
following reasons?
A. changes in pricing
B. competitive landscape
C. actual experience
Answer Options:
1. A only is correct.
2. C only is correct.
3. A and B only are correct.
4. A, B, and C are correct. - ANSWER Answer 4: A, B and C are
correct - page 19.
A hit rate of 3% associated with a table 8 (200 debit) average rating
results in which of the following:
1. 6% reduction in profit margin
2. 6% increase in mortality
, 3. 3% increase in mortality
4. 6% reduction in mortality - ANSWER Answer 2: 6% increase in
mortality - pages 20-21.
What is the sentinel effect? - ANSWER Refer to page 21.
Define and describe the pricing horizon of a cost/benefit study. -
ANSWER Refer to pages 22-23.
Which of the following statements about cost/benefit studies is
correct?
A. It is based on the historical mortality found by a requirement being
studied.
B. It assumes mortality plays out according to underwriting
guidelines.
C. Interest and lapse rates are not embedded into the results.
Answer Options:
1. B only is correct.
2. A and B only are correct.
3. B and C only are correct.
4. A, B, and C are correct. - ANSWER Answer 1: B only is correct -
pages 22-23.
Actuaries will create a double decrement table that take which of the
following two factors into consideration?
1. ratings and declines
2. lapses and deaths
3. placed and non-placed cases
4. declines and non-placed cases - ANSWER Answer 2: lapses and
