ALU 202 EXAM ACTUAL QUESTIONS AND
VERIFIED DETAILED ANSWERS COMPLETE
STUDY GUIDE GRADED A+
⩥ Pricing components from actuaries.
Answer: Mortality,
Lapse Rates,
Expense level,
interest rates
⩥ pricing components established by regulations.
Answer: reserve basis (PBR), non-forfeiture laws, surplus needs, tax law
⩥ Tax law components.
Answer: corporate tax rate,
tax reserves,
deferred Acquistion cost (DAC)
⩥ Protective value.
Answer: refers to the relationship of mortality savings versus the cost of
obtaining an underwriting requirement. If the mortality cost is greater
than the cost of the requirement, the requirement should be ordered.
,⩥ Underwriting criteria generally used in pricing preferred policies..
Answer: Cardiovascular risks (bp, cholesterol, HDL ratio, famhx)
⩥ Expense levels.
Answer: agent's comp, corporate OH, agency system, advertising,
underwriting expense
⩥ Risk based capital (RBC).
Answer: A safety net that needs to be provided beyond the level of
reserves being held in a case a company's mortality is worse than
expected
⩥ 4 factors that can affect profitability.
Answer: mortality, lapse rates, requirement expenses and interest rates
⩥ Existing cost/benefit studies need updating due to:.
Answer: changes in pricing
underlying mortality tables
actual experience
competitive Lanscape
⩥ Cost/benefit break-even points- defined as:.
,Answer: what age and face amount a requirement is justified
⩥ Common question - how the mortality will change if a requirement is
NOT required.
Answer: Frequency X severity (what is the hit rate?)
⩥ Hit Rate = frequency X severity (severity = debits).
Answer: Increase in mortality = frequency X severity (debits)
⩥ For direct carriers what % of premium is assigned to cover mortality?.
Answer: 50%
⩥ Sentinel Value.
Answer: Value not accounted for in a cost/benefit analysis, value of a
requirement that a client looks to avoid
⩥ The 1% rule.
Answer: converting present value (PV) of death benefits to 1% of face
amount (FA)
⩥ PV of future benefits =.
Answer: FA X 1%
, ⩥ Protective value dollars =.
Answer: Debits % X PV
⩥ Protective value dollars =.
Answer: Debits % X (FA X 1%)
⩥ Net Single Premium.
Answer: The premium collected today that covers all future benefit
payments for a given face amount
⩥ PV = NSP.
Answer: both used to describe the mortality dollars needed on day one
that cover all future mortality dollar payouts
⩥ Pricing Horizon.
Answer: Period over which deaths are observed and counted
⩥ Decrements (reductions).
Answer: Lapses and deaths
⩥ Double decrement.
Answer: Lapses and deaths
VERIFIED DETAILED ANSWERS COMPLETE
STUDY GUIDE GRADED A+
⩥ Pricing components from actuaries.
Answer: Mortality,
Lapse Rates,
Expense level,
interest rates
⩥ pricing components established by regulations.
Answer: reserve basis (PBR), non-forfeiture laws, surplus needs, tax law
⩥ Tax law components.
Answer: corporate tax rate,
tax reserves,
deferred Acquistion cost (DAC)
⩥ Protective value.
Answer: refers to the relationship of mortality savings versus the cost of
obtaining an underwriting requirement. If the mortality cost is greater
than the cost of the requirement, the requirement should be ordered.
,⩥ Underwriting criteria generally used in pricing preferred policies..
Answer: Cardiovascular risks (bp, cholesterol, HDL ratio, famhx)
⩥ Expense levels.
Answer: agent's comp, corporate OH, agency system, advertising,
underwriting expense
⩥ Risk based capital (RBC).
Answer: A safety net that needs to be provided beyond the level of
reserves being held in a case a company's mortality is worse than
expected
⩥ 4 factors that can affect profitability.
Answer: mortality, lapse rates, requirement expenses and interest rates
⩥ Existing cost/benefit studies need updating due to:.
Answer: changes in pricing
underlying mortality tables
actual experience
competitive Lanscape
⩥ Cost/benefit break-even points- defined as:.
,Answer: what age and face amount a requirement is justified
⩥ Common question - how the mortality will change if a requirement is
NOT required.
Answer: Frequency X severity (what is the hit rate?)
⩥ Hit Rate = frequency X severity (severity = debits).
Answer: Increase in mortality = frequency X severity (debits)
⩥ For direct carriers what % of premium is assigned to cover mortality?.
Answer: 50%
⩥ Sentinel Value.
Answer: Value not accounted for in a cost/benefit analysis, value of a
requirement that a client looks to avoid
⩥ The 1% rule.
Answer: converting present value (PV) of death benefits to 1% of face
amount (FA)
⩥ PV of future benefits =.
Answer: FA X 1%
, ⩥ Protective value dollars =.
Answer: Debits % X PV
⩥ Protective value dollars =.
Answer: Debits % X (FA X 1%)
⩥ Net Single Premium.
Answer: The premium collected today that covers all future benefit
payments for a given face amount
⩥ PV = NSP.
Answer: both used to describe the mortality dollars needed on day one
that cover all future mortality dollar payouts
⩥ Pricing Horizon.
Answer: Period over which deaths are observed and counted
⩥ Decrements (reductions).
Answer: Lapses and deaths
⩥ Double decrement.
Answer: Lapses and deaths
