Premium Bases Expense Rates MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Premium Bases Expense Rates, a fundamental topic in the field of IC 92 Actuarial Aspects of Product Development. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Premium Bases Expense Rates MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Premium Bases Expense Rates mcq questions that explore various aspects of Premium Bases Expense Rates problems. Each MCQ is crafted to challenge your understanding of Premium Bases Expense Rates principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 92 Actuarial Aspects of Product Development tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Premium Bases Expense Rates MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Premium Bases Expense Rates. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Premium Bases Expense Rates knowledge to the test? Let's get started with our carefully curated MCQs!

Premium Bases Expense Rates MCQs | Page 3 of 9

Discover more Topics under IC 92 Actuarial Aspects of Product Development

Q21.
What factors are considered in choosing expense assumptions for insurance products?

a.

Volume of sales through various distribution channels only

b.

Company's recent experience and insurance legislation

c.

Nature and type of products and support from consultants

d.

Support from reinsurers and competitors rates

Discuss
Answer: (c).Nature and type of products and support from consultants Explanation:When choosing expense assumptions for insurance products, factors such as the nature and type of products, as well as support from consultants, are considered along with other factors like volumes of sales, persistency assumption, and industry practices.
Q22.
What is the primary purpose of the capital brought in by the promoters of an insurer?

a.

To cover initial expenses

b.

To ensure profitability of the insurer

c.

To create initial assets for the insurance business

d.

To provide returns to the shareholders

Discuss
Answer: (c).To create initial assets for the insurance business Explanation:The primary purpose of the capital brought in by the promoters of an insurer is to create initial assets for the insurance business, including offices, infrastructure, and human resources.
Q23.
How does the scale of operation impact the use of capital in insurance business?

a.

It has no impact on the use of capital

b.

The scale of operation determines the distribution of profits

c.

The scale of operation determines the volume of sales only

d.

The scale of operation determines the capital requirement

Discuss
Answer: (d).The scale of operation determines the capital requirement Explanation:The scale of operation in insurance business, including factors such as the number of offices, agents, employees, and products, determines the capital requirement for the business.
Q24.
What factors does the insurer typically consider when conducting a market survey?

a.

Availability of professional staff only

b.

IT infrastructure and capital markets

c.

Banking network and documentary evidence

d.

Volume of sales and persistency assumption

Discuss
Answer: (c).Banking network and documentary evidence Explanation:When conducting a market survey, an insurer typically considers factors such as the banking network for premium collection, availability of documentary evidence, and other infrastructure items.
Q25.
How does the size of the market influence the capital requirement for an insurance business?

a.

It has no influence on the capital requirement

b.

A larger market requires less capital

c.

A smaller market requires more capital

d.

A larger market requires more capital

Discuss
Answer: (d).A larger market requires more capital Explanation:The size of the market directly influences the capital requirement for an insurance business, with larger markets typically requiring more capital investment to accommodate the potential business opportunities.
Q26.
How are expense rates determined in the insurance business?

a.

By making only best estimates

b.

By making both best estimates and pessimistic estimates

c.

By making best estimates, pessimistic estimates, and optimistic estimates

d.

By making only pessimistic estimates

Discuss
Answer: (c).By making best estimates, pessimistic estimates, and optimistic estimates Explanation:Expense rates in the insurance business are determined by making best estimates, as well as considering pessimistic and optimistic estimates to choose a prudent rate.
Q27.
What types of products are considered when determining expense rates?

a.

Only annuity products

b.

Only assurance products

c.

Both annuity and assurance products

d.

Only term assurance products

Discuss
Answer: (c).Both annuity and assurance products Explanation:When determining expense rates, both annuity and assurance products are considered, including various types such as term, whole life, endowment assurance, money back products, deferred annuity, and immediate annuity products.
Q28.
What is considered when deriving expense parameter values?

a.

Historical data of the insurance company

b.

Recent experience of the insurance company for the type of business concerned

c.

Industry data or data from a life reinsurance company

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Expense parameter values are derived considering historical data of the insurance company, recent experience for the type of business concerned, and industry data or data from a life reinsurance company if necessary.
Q29.
What may be done if the company has insufficient recent experience to provide meaningful results for expense determination?

a.

Derive expenses from construction of an expense model

b.

Use data from a similar type of business

c.

Use industry data

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:If the company lacks recent experience, expense determination may involve deriving expenses from an expense model, using data from a similar type of business, or using industry data.
Q30.
What should be considered in conjunction with expected new business volumes and expected inforce policies when deriving expense costs?

a.

Persistency assumptions

b.

Market trends

c.

Economic conditions

d.

Regulatory requirements

Discuss
Answer: (a).Persistency assumptions Explanation:Persistency assumptions should be considered in conjunction with expected new business volumes and expected inforce policies when deriving expense costs, as persistency assumptions can affect the validity of expense assumptions due to their dependence on each other.
Page 3 of 9