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 9 of 9

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Q81.
Which type of expenses are typically classified into initial, renewal, investment, and terminal expenses?

a.

Fixed expenses

b.

Variable expenses

c.

Direct expenses

d.

Indirect expenses

Discuss
Answer: (a).Fixed expenses Explanation:In insurance companies, expenses are often categorized into various types based on their timing and nature. Initial expenses are incurred at the start of the policy term, renewal expenses occur regularly during the policy term, investment expenses relate to managing company assets, and terminal expenses arise when the policy terminates. These expenses are considered fixed as they are predetermined and not directly influenced by the size of premiums or policy activity.
Q82.
What is the purpose of expense analysis in insurance companies?

a.

To estimate future profits

b.

To determine premium rates

c.

To analyze past expenses and identify trends

d.

To assess investment returns

Discuss
Answer: (c).To analyze past expenses and identify trends Explanation:Expense analysis in insurance companies involves reviewing past expenditures to understand patterns and trends. By analyzing historical expenses, insurers can identify areas of cost inefficiency, track changes over time, and make informed decisions regarding expense management strategies.
Q83.
What does expense risk refer to in the insurance industry?

a.

The risk of incurring less expense than expected

b.

The risk of policyholders not paying premiums

c.

The risk of incurring more expense than expected

d.

The risk of investment losses

Discuss
Answer: (c).The risk of incurring more expense than expected Explanation:Expense risk in the insurance industry pertains to the possibility of incurring higher expenses than initially anticipated. This risk could lead to reduced profitability or financial losses for the insurer if expenses exceed projections.
Q84.
What factors are considered when choosing expense assumptions for insurance pricing?

a.

Extent of expense risk

b.

Recent weather patterns

c.

Government regulations

d.

Stock market trends

Discuss
Answer: (a).Extent of expense risk Explanation:When selecting expense assumptions for insurance pricing, factors such as the extent of expense risk, nature of products, sales volumes, persistency assumptions, recent company experience, infrastructure, regulatory constraints, consultant support, reinsurer input, competitor rates, and industry practices and data are taken into account. These factors help insurers make informed decisions to mitigate expense-related risks.
Q85.
How are expenses typically measured in insurance business transactions?

a.

As a proportion of sum assured

b.

As a fixed amount per policy

c.

As a percentage of investment income

d.

As a percentage of premium for a certain unit of time

Discuss
Answer: (d).As a percentage of premium for a certain unit of time Explanation:In insurance business transactions, expenses are commonly measured as a percentage of premium for a specific period, such as annually or monthly. This approach allows insurers to allocate expenses relative to the amount of premium collected, providing a standardized method for expense management and pricing decisions.
Q86.
Insurance expenses can be primarily classified as

a.

Direct expenses and indirect expenses

b.

Fixed expenses and variable expenses

c.

Capital expenses and revenue expenses

d.

Standard expenses and non-standard expenses

Discuss
Answer: (b).Fixed expenses and variable expenses Explanation:Insurance expenses can be primarily classified into fixed and variable expenses.
Q87.
Expense rate is usually measured as a proportion of:

a.

Expenses for a certain amount of premium

b.

Expenses for a certain unit of time

c.

Premium for a certain unit of time

d.

Premium for a certain amount of expenses

Discuss
Answer: (c).Premium for a certain unit of time Explanation:Expense rate is usually measured as a proportion of premium for a certain unit of time.
Q88.
Expense rates do not vary with which of the following factors?

a.

Overall Industry experience

b.

Competitor’s range of products

c.

Insurance Regulator’s terms and conditions for distributors

d.

All of the above

Discuss
Answer: (b).Competitor’s range of products Explanation:Competitor’s rates affect the expense rates and not the competitor’s range of products.
Q89.
Which of the following expenses is the most difficult to ascertain while calculating the expense rate?

a.

Nature of product

b.

Volume of sales

c.

Inflation rate

d.

Competitor’s rate

Discuss
Answer: (c).Inflation rate Explanation:Some expenses could not be estimated with ease—such as inflation
Q90.
Which of the following expense will be borne by the insurer himself initially?

a.

Acquisition of office premises

b.

Commission of agents

c.

Policy servicing

d.

Policy liability

Discuss
Answer: (a).Acquisition of office premises Explanation:Initial expenses are required to be borne by insurers.
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