Premium Bases Mortality And Morbidity Rates MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Premium Bases Mortality And Morbidity 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 Mortality And Morbidity Rates MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Q71.
What is mortality risk primarily concerned with in insurance?

a.

Predicting future mortality rates accurately

b.

Assessing the financial impact of deviations from assumed mortality rates

c.

Minimizing the occurrence of mortality-related claims

d.

Estimating the number of deaths in a population

Discuss
Answer: (b).Assessing the financial impact of deviations from assumed mortality rates Explanation:Mortality risk in insurance is primarily concerned with assessing the financial impact of deviations from assumed mortality rates. It refers to the risk of actual experience being different from what was assumed in pricing and the significance of that variance.
Q72.
What is "model" risk in mortality assumption setting?

a.

The risk associated with incorrect or inadequate data used to derive parameters

b.

The risk that the model used to estimate future mortality may contain errors or may not be appropriate

c.

The risk of random fluctuations in mortality experience not corresponding with the adopted model and parameters

d.

The risk of mortality being more adverse than assumed due to incorrect parameter selection

Discuss
Answer: (b).The risk that the model used to estimate future mortality may contain errors or may not be appropriate Explanation:"Model" risk in mortality assumption setting refers to the risk that the model used to estimate future mortality may contain errors or may not be appropriate.
Q73.
How does parameter risk differ from model risk in mortality assumption setting?

a.

Parameter risk arises from incorrect data, while model risk arises from incorrect model selection.

b.

Parameter risk arises from incorrect or inadequate parameters, while model risk arises from errors in the estimation model.

c.

Parameter risk refers to random fluctuations, while model risk refers to deviations from assumed mortality rates.

d.

Parameter risk arises from incorrect assumptions, while model risk arises from incorrect parameter selection.

Discuss
Answer: (b).Parameter risk arises from incorrect or inadequate parameters, while model risk arises from errors in the estimation model. Explanation:Parameter risk in mortality assumption setting arises from incorrect or inadequate parameters, while model risk arises from errors in the estimation model.
Q74.
What contributes to parameter risk in mortality assumption setting?

a.

Incorrect or inadequate data

b.

Random fluctuations in mortality experience

c.

Errors in model selection

d.

Deviations from assumed mortality rates

Discuss
Answer: (a).Incorrect or inadequate data Explanation:Parameter risk in mortality assumption setting can arise from incorrect or inadequate data used to derive the parameters.
Q75.
How does data risk relate to parameter risk in mortality assumption setting?

a.

Data risk gives rise to model risk, which in turn contributes to parameter risk.

b.

Data risk gives rise to random fluctuations, which directly impact parameter risk.

c.

Data risk gives rise to errors in parameter selection, thereby contributing to parameter risk.

d.

Data risk gives rise to model risk, which directly impacts parameter risk by influencing parameter selection.

Discuss
Answer: (c).Data risk gives rise to errors in parameter selection, thereby contributing to parameter risk. Explanation:Data risk gives rise to errors in parameter selection, thereby contributing to parameter risk in mortality assumption setting. Incorrect or inadequate data can lead to incorrect parameter selection, increasing parameter risk.
Q76.
What contributes to the "random fluctuations" risk in mortality assumption setting?

a.

Small data sets that are statistically insignificant

b.

Large and stable data sets that are statistically significant

c.

Predictable trends in mortality rates

d.

Accurate modeling techniques

Discuss
Answer: (a).Small data sets that are statistically insignificant Explanation:The "random fluctuations" risk in mortality assumption setting is most likely to arise if the data is not large enough for the "law of large numbers" to apply and to be statistically significant. Smaller the data, larger will be the fluctuation.
Q77.
Which type of insurance product would typically have the maximum financial impact of mortality risk?

a.

Unit-linked insurance plans

b.

Traditional participating endowment plans

c.

Pure term insurance

d.

Whole life insurance

Discuss
Answer: (c).Pure term insurance Explanation:Pure term insurance, where the benefit is only payable on death, typically has the maximum financial impact of mortality risk because the death benefit is the only benefit payable and is impacted by this risk.
Q78.
What are the main ways of controlling mortality risk in insurance?

a.

Adjusting assumptions based on past experience

b.

Implementing strict underwriting policies

c.

Utilizing appropriate data and modeling techniques

d.

Underwriting and reinsurance

Discuss
Answer: (d).Underwriting and reinsurance Explanation:The most important ways of controlling mortality risk in insurance are underwriting and reinsurance. Other ways include utilizing appropriate data and modeling techniques.
Q79.
In an established insurance market, what factors contribute to low model and parameter risk?

a.

Predictable trends in mortality rates

b.

Large and stable data sets

c.

Significant fluctuations in mortality data

d.

Unpredictable changes in benefit structures

Discuss
Answer: (b).Large and stable data sets Explanation:In an established insurance market, factors such as large and stable data sets and reasonably stable mortality trends contribute to low model and parameter risk.
Q80.
What represents a difficult-to-quantify risk in mortality assumption setting?

a.

Established mortality trends

b.

New diseases

c.

Large data sets

d.

Stable benefit structures

Discuss
Answer: (b).New diseases Explanation:The possibility of a new disease represents a difficult-to-quantify risk in mortality assumption setting.
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