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 4 of 13

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Q31.
What do claim expenses for insurers typically include?

a.

Costs associated with advertising and marketing

b.

Costs incurred to assess the mortality risk of the life assured

c.

Costs involved in settling claims by maturity and death of life assured

d.

Costs associated with underwriting expenses

Discuss
Answer: (c).Costs involved in settling claims by maturity and death of life assured Explanation:Claim expenses for insurers typically include costs involved in settling claims by maturity and death of life assured.
Q32.
In what situations are claims considered not genuine?

a.

When the life assured has a disclosed medical condition

b.

When the age of the life assured is accurately stated

c.

When there is evidence of insurable interest and matching income levels

d.

When the life assured did not disclose pre-existing medical conditions, misstated age, or mismatched income and insurance cover

Discuss
Answer: (d).When the life assured did not disclose pre-existing medical conditions, misstated age, or mismatched income and insurance cover Explanation:Claims are considered not genuine when the life assured did not disclose pre-existing medical conditions, misstated age, or when there is a mismatch between income and insurance cover.
Q33.
Why do insurers exercise caution in designing various documents?

a.

To increase claim expenses

b.

To reduce the number of genuine claims

c.

To avoid legal cases and higher claim expenses

d.

To encourage policyholders to disclose medical conditions

Discuss
Answer: (c).To avoid legal cases and higher claim expenses Explanation:Insurers exercise caution in designing various documents to avoid legal cases and higher claim expenses.
Q34.
What does the equation E = FE + RE represent in the context of insurance expenses?

a.

Total expenses incurred by the insurer in the first year and upon renewal

b.

Total expenses discounted to the date of commencement of the policy

c.

Initial costs of procurement and renewal expenses

d.

Costs independent of premium and sum assured, but per policy

Discuss
Answer: (b).Total expenses discounted to the date of commencement of the policy Explanation:The equation E = FE + RE represents the total expenses discounted to the date of commencement of the policy, considering both first-year expenses (FE) and renewal expenses (RE).
Q35.
How can the cost of benefit be calculated in insurance terms?

a.

By multiplying the benefit amount by the probability of it being payable

b.

By adding the benefit amount to the probability of it being payable

c.

By subtracting the probability of benefit payment from the benefit amount

d.

By dividing the benefit amount by the probability of it being payable

Discuss
Answer: (a).By multiplying the benefit amount by the probability of it being payable Explanation:The cost of benefit can be calculated by discounting the value of AB, where B is the amount of benefit and A is the probability that the benefit is payable at that point in time.
Q36.
Why are insurers often reluctant to sell smaller premium policies?

a.

Smaller premium policies require large volumes of business to be profitable

b.

Smaller premium policies are less profitable for insurers

c.

Smaller premium policies have higher initial expenses

d.

Smaller premium policies have lower renewal expenses

Discuss
Answer: (a).Smaller premium policies require large volumes of business to be profitable Explanation:Insurers are often reluctant to sell smaller premium policies because these policies require large volumes of business to be profitable. If volumes do not support the insurer, they might stop selling the product as it would not yield the desired returns.
Q37.
What factors do insurers consider when determining the minimum and optimum size of a policy?

a.

The expected financial strain from new business and expected profit

b.

The availability of similar products and the competency of distribution channels

c.

The age and income profile of people and competitors' rates

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Insurers consider various factors including the expected financial strain from new business, expected profit, competitors' rates, availability of similar products, the age and income profile of people, and the competency of distribution channels when determining the minimum and optimum size of a policy.
Q38.
How does the design of an insurance product affect the expected volume of business?

a.

A complex benefit structure leads to increased sales volumes

b.

Ambiguous product design makes it easier to increase sales

c.

A simple and understandable product design facilitates increased sales

d.

Too many options for bonus payments lead to clear product design

Discuss
Answer: (c).A simple and understandable product design facilitates increased sales Explanation:A simple and understandable product design facilitates increased sales. If the design of an insurance product is simple to understand, it is easier for insurers to increase sales, even if the premium rate is highly attractive. Conversely, a complicated benefit structure or commission structure can make it difficult to increase sales.
Q39.
What impact does the size of population eligible to buy have on insurance sales?

a.

Restricting the age range increases sales volume

b.

Expanding the age range limits the volume of sales

c.

Limiting the population eligible to buy limits sales volume

d.

All of the above

Discuss
Answer: (c).Limiting the population eligible to buy limits sales volume Explanation:The size of the population eligible to buy insurance can impact sales volume. If the eligibility criteria are restricted, such as limiting the age range for entry or maturity, it can limit the potential customer base and therefore sales volume.
Q40.
How does an insurer's past track record in providing services impact sales?

a.

It has no impact on sales

b.

It may deter buyers from purchasing products

c.

It always leads to increased sales

d.

It does not affect market standing

Discuss
Answer: (b).It may deter buyers from purchasing products Explanation:An insurer's past track record in providing services can impact sales. If an insurer has a history of poor service, such as delays in granting cover, issuing policy documents, responding to queries, or settling claims, it may deter potential buyers from purchasing products. Conversely, a positive track record of providing prompt and efficient services can help increase sales and foster trust in the insurer's brand.
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