Premium Bases Margins MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Premium Bases Margins, 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 Margins 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 Margins mcq questions that explore various aspects of Premium Bases Margins problems. Each MCQ is crafted to challenge your understanding of Premium Bases Margins 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 Margins MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.

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Premium Bases Margins MCQs | Page 7 of 7

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Q61.
In the CAPM formula, what is deducted from Em on the RHS?

a.

Ei

b.

rf

c.

bi

d.

Si

Discuss
Answer: (b).rf Explanation:rf (risk free rate) is deducted from Em.
Q62.
Application of margin will result into investment return assumption than best estimate?

a.

Higher

b.

Lower

c.

Both

d.

None

Discuss
Answer: (b).Lower Explanation:Application of margin will result into lower investment return assumption than best estimate.
Q63.
Which of the following APS defines the minimum MAD to be used for reserving?

a.

APS - 1

b.

APS - 2

c.

APS - 7

d.

APS - 6

Discuss
Answer: (c).APS - 7 Explanation:APS – 7 defines the minimum quantum of MAD.
Q64.
In the context of pricing, what does the term "stochastic approach" refer to?

a.

Pricing based on constant values for all parameters

b.

Pricing based on the assumption of a risk-free discount rate

c.

Pricing based on a range of possible outcomes from probability distributions

d.

Pricing based on historical data and past experience

Discuss
Answer: (c).Pricing based on a range of possible outcomes from probability distributions Explanation:The stochastic approach involves assuming probability distributions for parameters such as mortality, investment return, and expense inflation, allowing for a range of possible outcomes rather than constant values.
Q65.
How does the third approach in pricing handle risk?

a.

By incorporating margins for risk in individual parameters

b.

By assuming a higher risk discount rate to account for risk

c.

By applying a risk premium to the final premium charged

d.

By using historical data to estimate future risk

Discuss
Answer: (b).By assuming a higher risk discount rate to account for risk Explanation:The third approach in pricing handles risk by assuming a higher risk discount rate, ensuring that the company makes less profit if actual experience deviates from expectations.
Q66.
In the context of risk management in insurance pricing, what is the primary concern regarding assumptions?

a.

Overestimating assumptions leading to increased premiums

b.

Underestimating assumptions resulting in potential losses

c.

Maintaining consistency in assumptions across parameters

d.

Minimizing the variability in assumptions

Discuss
Answer: (b).Underestimating assumptions resulting in potential losses Explanation:The primary concern in risk management is the risk of underestimating assumptions, which could lead to substantial losses for the company.
Q67.
Why is it considered worse to underestimate mortality than to overestimate it in insurance pricing?

a.

Overestimating mortality leads to higher premiums, reducing sales

b.

Underestimating mortality poses a higher risk of substantial losses

c.

Overestimating mortality increases profitability for the company

d.

Underestimating mortality encourages sales of profitable business

Discuss
Answer: (b).Underestimating mortality poses a higher risk of substantial losses Explanation:Underestimating mortality poses a higher risk of substantial losses for the company, as it may result in selling loss-making business and accumulating risk before realizing it.
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