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.

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Premium Bases Expense Rates MCQs | Page 5 of 9

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Q41.
Why is it important for expense assumptions to be consistent with competitors' rates?

a.

To determine the recent experience of the company

b.

To influence the choice of distribution channels

c.

To ensure profitability and competitiveness

d.

To determine the persistency assumption

Discuss
Answer: (c).To ensure profitability and competitiveness Explanation:It is important for expense assumptions to be consistent with competitors' rates to ensure profitability and competitiveness in the market.
Q42.
How does industry data contribute to expense assumptions?

a.

By determining the recent experience of the company

b.

By providing support from consultants

c.

By influencing the choice of distribution channels

d.

By confirming to industry-wide practices

Discuss
Answer: (d).By confirming to industry-wide practices Explanation:Industry data contributes to expense assumptions by confirming to industry-wide practices, especially when recent experience is not available or not sufficient.
Q43.
Why is expense inflation considered a separate assumption?

a.

It influences the choice of distribution channels

b.

It ensures consistency with competitors' rates

c.

It affects the profitability of the company

d.

It determines the persistency assumption

Discuss
Answer: (c).It affects the profitability of the company Explanation:Expense inflation is considered a separate assumption because it affects the profitability of the company significantly and deserves distinct consideration.
Q44.
How do the terms "fixed" and "flat" relate to expense assumptions?

a.

They refer to expenses that do not vary by premium size

b.

They determine the recent experience of the company

c.

They influence the choice of distribution channels

d.

They confirm to industry-wide practices

Discuss
Answer: (a).They refer to expenses that do not vary by premium size Explanation:The terms "fixed" and "flat" in expense assumptions refer to expenses that do not vary by premium size, although they may not be fixed or flat in the full sense of the word.
Q45.
What is the primary purpose of ensuring consistency with industry-wide practices in expense assumptions?

a.

To determine the persistency assumption

b.

To ensure profitability and competitiveness

c.

To influence the choice of distribution channels

d.

To determine the recent experience of the company

Discuss
Answer: (b).To ensure profitability and competitiveness Explanation:Ensuring consistency with industry-wide practices in expense assumptions is primarily to ensure profitability and competitiveness in the market.
Q46.
What is expense inflation?

a.

The rate of increase in expenses in the present year

b.

The rate of increase in expenses over time

c.

The rate of decrease in expenses in the future

d.

The rate of increase in premiums

Discuss
Answer: (b).The rate of increase in expenses over time Explanation:Expense inflation refers to the rate of increase in expenses over time, usually expressed as a percentage of current expense.
Q47.
How is inflation primarily affected in insurance companies?

a.

By price inflation

b.

By staff costs

c.

By investment returns

d.

By policy premiums

Discuss
Answer: (b).By staff costs Explanation:In insurance companies, inflation is primarily affected by staff costs rather than price inflation.
Q48.
What factors contribute to expense inflation?

a.

Earnings inflation only

b.

Price inflation only

c.

Both earnings and price inflation

d.

Investment returns

Discuss
Answer: (c).Both earnings and price inflation Explanation:Expense inflation is affected by both earnings inflation and price inflation.
Q49.
How does expense inflation impact initial expenses?

a.

Initial expenses remain constant over time

b.

Initial expenses decrease over time

c.

Initial expenses increase over time

d.

Initial expenses are not affected by inflation

Discuss
Answer: (c).Initial expenses increase over time Explanation:Expense inflation impacts initial expenses by causing them to increase over time.
Q50.
Why is it necessary to consider future expense assumptions in pricing contracts?

a.

To keep initial expenses constant

b.

To account for changes in staff costs

c.

To ensure pricing reflects future expenses accurately

d.

To decrease expense inflation

Discuss
Answer: (c).To ensure pricing reflects future expenses accurately Explanation:It is necessary to consider future expense assumptions in pricing contracts to ensure that pricing reflects future expenses accurately.
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