Premium Bases Persistency Rates MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Premium Bases Persistency 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 Persistency 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 Persistency Rates mcq questions that explore various aspects of Premium Bases Persistency Rates problems. Each MCQ is crafted to challenge your understanding of Premium Bases Persistency 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 Persistency 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 Persistency Rates MCQs | Page 5 of 7

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Q41.
How are first-year withdrawal rates calculated?

a.

By dividing the number of contracts issued in the last financial year by the number that survive in force until the first policy anniversary

b.

By subtracting the number of contracts surviving until the first policy anniversary from the total number of contracts issued in the last financial year

c.

By dividing the number of contracts surviving until the first policy anniversary by the total number of contracts issued in the last financial year

d.

By adding one to the inforce rate obtained by dividing the number of contracts surviving until the first policy anniversary by the total number of contracts issued in the last financial year

Discuss
Answer: (d).By adding one to the inforce rate obtained by dividing the number of contracts surviving until the first policy anniversary by the total number of contracts issued in the last financial year Explanation:First-year withdrawal rates are calculated by subtracting the inforce rate obtained by dividing the number of contracts surviving until the first policy anniversary by the total number of contracts issued in the last financial year from one.
Q42.
Which events should be excluded from the calculation of withdrawal rates?

a.

Surrenders and lapses

b.

Deaths and maturities

c.

Premium payments and policy renewals

d.

Policy modifications and claims settlements

Discuss
Answer: (b).Deaths and maturities Explanation:Deaths and maturities should be excluded from the calculation of withdrawal rates, if material, as they are not voluntary withdrawals from the policy.
Q43.
What is the purpose of regrouping data in withdrawal experience analysis?

a.

To manipulate the data to fit predetermined conclusions

b.

To identify statistically significant differences in withdrawal rates

c.

To avoid spurious results caused by small data groups

d.

To simplify the presentation of results for management information purposes

Discuss
Answer: (c).To avoid spurious results caused by small data groups Explanation:The purpose of regrouping data in withdrawal experience analysis is to avoid spurious results caused by small data groups, which may lead to statistically weird differences in withdrawal rates.
Q44.
When would the presentation of withdrawal rate results require further consolidation?

a.

When presenting results to shareholders

b.

When presenting results to regulatory authorities

c.

When presenting results to senior management

d.

When presenting results to actuaries

Discuss
Answer: (c).When presenting results to senior management Explanation:The presentation of withdrawal rate results would require further consolidation when presenting results to senior management. Senior management would likely want results split by broad product class, rather than by every product, for management information purposes.
Q45.
What factors are considered when determining the weight to give to own experience and estimation in withdrawal experience analysis?

a.

Premium frequency and size of premium

b.

Distribution channel used and target market

c.

Type of contract and duration in force

d.

Credibility analysis and past experience

Discuss
Answer: (d).Credibility analysis and past experience Explanation:When determining the weight to give to own experience and estimation in withdrawal experience analysis, factors such as credibility analysis and past experience are considered.
Q46.
What does withdrawal risk refer to in insurance?

a.

The risk of policyholders withdrawing their policies due to dissatisfaction

b.

The risk of actual experience differing from assumed experience in pricing

c.

The risk of policyholders defaulting on premium payments

d.

The risk of policyholders experiencing financial hardship

Discuss
Answer: (b).The risk of actual experience differing from assumed experience in pricing Explanation:Withdrawal risk in insurance refers to the risk of actual experience differing from assumed experience in pricing.
Q47.
How can term products be designed to mitigate withdrawal risk?

a.

By increasing the premium frequency

b.

By offering higher surrender values

c.

By ensuring nil surrender values

d.

By reducing the policy duration

Discuss
Answer: (c).By ensuring nil surrender values Explanation:Term products can be designed to mitigate withdrawal risk by ensuring nil surrender values, which reduces the incentive for policyholders to withdraw their policies.
Q48.
What is model risk associated with withdrawal risk?

a.

The risk of incorrect estimation of parameters used in the withdrawal model

b.

The risk of insufficient data for accurate withdrawal rate calculations

c.

The risk that the withdrawal model may not be appropriate or may yield inconsistent results

d.

The risk of random fluctuations affecting withdrawals

Discuss
Answer: (c).The risk that the withdrawal model may not be appropriate or may yield inconsistent results Explanation:Model risk associated with withdrawal risk refers to the risk that the withdrawal model may not be appropriate or may yield inconsistent results.
Q49.
How do withdrawals impact mortality and expense assumptions in insurance?

a.

Higher withdrawals lead to lower mortality assumptions and higher expense per policy

b.

Lower withdrawals lead to higher mortality assumptions and lower expense per policy

c.

Withdrawals have no impact on mortality or expense assumptions

d.

Withdrawals impact mortality assumptions and expense per policy

Discuss
Answer: (d).Withdrawals impact mortality assumptions and expense per policy Explanation:Withdrawals impact mortality assumptions as the number of policies remaining inforce affects the number of deaths. Additionally, withdrawals impact expense assumptions as higher withdrawals may result in higher per-policy expenses due to fixed costs being spread over fewer policies.
Q50.
What is the main factor determining the financial significance of withdrawal risk in insurance?

a.

Sales strategy

b.

Benefit structure and product design

c.

Premium payment options

d.

Agent compensation structure

Discuss
Answer: (b).Benefit structure and product design Explanation:The financial significance of withdrawal risk in insurance is mainly dependent on the benefit structure and product design, including the respective values of asset share and surrender value.
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