Question

What is the purpose of conducting profit testing in the cash flow method?

a.

To ensure the insurer incurs losses

b.

To determine the expected rate of return on policies

c.

To assess the effectiveness of investment returns

d.

To evaluate the profitability of policies under different scenarios

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (d).To evaluate the profitability of policies under different scenarios Explanation:The purpose of conducting profit testing in the cash flow method is to evaluate the profitability of policies under different scenarios.

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Q. What is the purpose of conducting profit testing in the cash flow method?
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