Pricing of Products I MCQs

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

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Pricing of Products I MCQs | Page 10 of 13

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Q91.
What is the Premium Allocation Charge in linked insurance products?

a.

A charge levied on policyholders upon policy maturity

b.

A charge applied to fund management

c.

A percentage of the premium appropriated towards charges from the premium received

d.

A charge applied to policy surrender

Discuss
Answer: (c).A percentage of the premium appropriated towards charges from the premium received Explanation:The Premium Allocation Charge in linked insurance products is a percentage of the premium appropriated towards charges from the premium received. This charge is levied at the time of receipt of premium.
Q92.
How is the Fund Management Charge (FMC) calculated in unit linked products?

a.

As a fixed amount deducted from the policy account value

b.

As a percentage of the policy account value deducted annually

c.

As a percentage of the premium deducted upon policy issuance

d.

As a percentage of the value of assets deducted from the Net Asset Value

Discuss
Answer: (d).As a percentage of the value of assets deducted from the Net Asset Value Explanation:The Fund Management Charge (FMC) in unit linked products is calculated as a percentage of the value of assets and is deducted from the Net Asset Value. This charge is levied at the time of computation of NAV, usually done on a daily basis.
Q93.
What does the Guarantee Charge represent in unit linked products?

a.

A charge levied at the time of policy surrender

b.

A charge applied to fund management

c.

A charge levied as a percentage of the value of assets and adjusted by adjusting the Net Asset Value

d.

A charge levied at the beginning of each policy month from the policy account value

Discuss
Answer: (c).A charge levied as a percentage of the value of assets and adjusted by adjusting the Net Asset Value Explanation:The Guarantee Charge in unit linked products is a charge levied as a percentage of the value of assets and is adjusted by adjusting the Net Asset Value. This charge is applied at the time of computation of NAV, usually done on a daily basis.
Q94.
What does the Policy Administration Charge represent?

a.

The expenses covered by premium allocation charges and the fund management expenses

b.

The expenses related to premium payment

c.

The expenses other than those covered by premium allocation charges and the fund management expenses

d.

The expenses associated with policy termination

Discuss
Answer: (c).The expenses other than those covered by premium allocation charges and the fund management expenses Explanation:The Policy Administration Charge represents the expenses other than those covered by premium allocation charges and the fund management expenses. This charge may be expressed as a fixed amount or a percentage of the premium or a percentage of sum assured.
Q95.
When is the Surrender Charge or Discontinuance charge levied?

a.

At the time of policy issuance

b.

When the policyholder opts for a partial withdrawal of the contract

c.

When the policyholder opts for complete withdrawal of the contract

d.

Annually, regardless of policyholder actions

Discuss
Answer: (c).When the policyholder opts for complete withdrawal of the contract Explanation:The Surrender Charge or Discontinuance charge is levied on the unit fund/policy account value when the policyholder opts for complete withdrawal of the contract. This charge is usually expressed either as a percentage of the fund or as a percentage of the annualized premiums (for regular premium contracts).
Q96.
What is the Switching Charge in unit linked products?

a.

A charge levied on fund management

b.

A charge applied when the policy is surrendered

c.

A charge levied on switching of monies from one fund to another available within the product

d.

A charge applied at the time of policy issuance

Discuss
Answer: (c).A charge levied on switching of monies from one fund to another available within the product Explanation:The Switching Charge in unit linked products is a charge levied on switching of monies from one fund to another available within the product. This charge is applied at the time of affecting the switch and can be either a flat amount or a percentage of the fund value.
Q97.
What does the Mortality/Morbidity charge represent?

a.

The cost of life/health insurance cover

b.

The expenses related to policy administration

c.

The charges levied on policy surrender

d.

The charges applied for premium allocation

Discuss
Answer: (a).The cost of life/health insurance cover Explanation:The Mortality/Morbidity charge represents the cost of life/health insurance cover. This charge is exclusive of any expense loadings levied by cancellation of units and is levied at the beginning of each policy month from the fund.
Q98.
What should the mortality/morbidity charge table reflect?

a.

The expenses for policy administration

b.

The pure risk charges for the cover offered, excluding any allowance for expenses or other parameters

c.

The charges for fund management

d.

The expenses for switching funds within the product

Discuss
Answer: (b).The pure risk charges for the cover offered, excluding any allowance for expenses or other parameters Explanation:The mortality/morbidity charge table should reflect the pure risk charges for the cover offered, excluding any allowance for expenses or other parameters. It should be reasonable and consistent with prescribed mortality tables or morbidity tables, if any, and demonstrated with the support of the insurer's own experience.
Q99.
What is the purpose of the Rider charge?

a.

To cover the cost of policy administration

b.

To cover the cost of premium allocation

c.

To cover the cost of rider cover, exclusive of expense loadings

d.

To cover the cost of fund management

Discuss
Answer: (c).To cover the cost of rider cover, exclusive of expense loadings Explanation:The Rider charge is levied separately to cover the cost of rider cover, exclusive of expense loadings. It is applied at the beginning of each policy month from the fund.
Q100.
What should the rider charge reflect?

a.

The expenses for policy administration

b.

The pure risk charges for the rider cover offered, excluding any allowance for expenses or other parameters

c.

The charges for fund management

d.

The expenses for switching funds within the product

Discuss
Answer: (b).The pure risk charges for the rider cover offered, excluding any allowance for expenses or other parameters Explanation:The rider charge should reflect the pure risk charges for the rider cover offered, excluding any allowance for expenses or other parameters. It should be reasonable and consistent with prescribed mortality/morbidity tables and demonstrated with the support of the insurer's own experience.
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