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 8 of 9

Discover more Topics under IC 92 Actuarial Aspects of Product Development

Q71.
What does "expense risk" refer to in the context of insurance?

a.

The risk of incurring less expense than expected

b.

The risk of incurring more expense than expected

c.

The risk associated with investment returns

d.

The risk of policyholders not paying premiums

Discuss
Answer: (b).The risk of incurring more expense than expected Explanation:Expense risk in the context of insurance refers to the risk of incurring more expense than expected, which can impact profitability.
Q72.
How is inflation typically accounted for in expense estimation?

a.

By ignoring its impact on expenses

b.

By assuming a fixed inflation rate

c.

By modeling inflation stochastically

d.

By considering only deterministic factors

Discuss
Answer: (c).By modeling inflation stochastically Explanation:Inflation is typically accounted for in expense estimation by modeling it stochastically, especially when a stochastic approach to investment returns is used.
Q73.
How are expenses typically covered in insurance premiums?

a.

They are deducted from the investment returns

b.

They are ignored in premium calculations

c.

They are loaded within the quoted premium rate

d.

They are explicitly charged as a separate fee to policyholders

Discuss
Answer: (c).They are loaded within the quoted premium rate Explanation:Expenses in insurance premiums are typically loaded within the quoted premium rate, especially in non-linked contracts.
Q74.
In what type of contracts are expense charges usually explicit to policyholders?

a.

Non-linked contracts

b.

Unit-linked contracts

c.

Term contracts

d.

Whole life contracts

Discuss
Answer: (b).Unit-linked contracts Explanation:Expense charges are usually explicit to policyholders in unit-linked contracts.
Q75.
How are charges for expenses sometimes deducted in unit-linked contracts?

a.

By allocating more than 100% of the premiums to units

b.

By ignoring expenses altogether

c.

By deducting them from the policyholder's salary

d.

By reducing the fund through unit cancellation

Discuss
Answer: (d).By reducing the fund through unit cancellation Explanation:Charges for expenses in unit-linked contracts are sometimes deducted from the fund through unit cancellation.
Q76.
Why is it challenging to design charges in insurance products to correspond exactly to expenses?

a.

Insurance products typically have guaranteed charges

b.

Companies lack the necessary expertise to design charges accurately

c.

Policyholders are unwilling to pay charges that accurately reflect expenses

d.

There is no correlation between charges and expenses in insurance products

Discuss
Answer: (a).Insurance products typically have guaranteed charges Explanation:It is challenging to design charges in insurance products to correspond exactly to expenses because most products have guaranteed charges in India.
Q77.
What problem may arise with heavy up-front expenses recouped gradually over the term of a policy?

a.

Policyholders may withdraw their policies

b.

The insurance company may face legal issues

c.

The expenses may exceed the policy's benefits

d.

There may be a decrease in policyholders' trust

Discuss
Answer: (a).Policyholders may withdraw their policies Explanation:With heavy up-front expenses recouped gradually over the term of a policy, the insurance company may be vulnerable to policy withdrawals.
Q78.
How can expense risk be controlled in insurance companies?

a.

By avoiding expense analysis

b.

By increasing upfront charges

c.

By outsourcing activities to third-party administrators

d.

By ignoring changes in expenses

Discuss
Answer: (c).By outsourcing activities to third-party administrators Explanation:Expense risk in insurance companies can be controlled by outsourcing activities to third-party administrators with long-term contracts, thereby transferring the expense risk to them.
Q79.
What is one way to minimize model and parameter risk in controlling expense risk?

a.

By increasing the complexity of the expense model

b.

By relying solely on internal expertise

c.

By regularly monitoring and adjusting the model

d.

By ignoring potential risks

Discuss
Answer: (c).By regularly monitoring and adjusting the model Explanation:One way to minimize model and parameter risk in controlling expense risk is by regularly monitoring and adjusting the model to ensure its appropriateness.
Q80.
Why is regular monitoring and action important in controlling expense risk?

a.

To avoid performing expense analysis

b.

To ensure that expenses exceed expectations

c.

To identify and address any major divergences from expectations

d.

To increase expenses over time

Discuss
Answer: (c).To identify and address any major divergences from expectations Explanation:Regular monitoring and action are important in controlling expense risk to identify and address any major divergences from expectations.
Page 8 of 9