Pricing of Products II MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Pricing of Products II, 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 II 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 II mcq questions that explore various aspects of Pricing of Products II problems. Each MCQ is crafted to challenge your understanding of Pricing of Products II 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 II 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 II MCQs | Page 3 of 6

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Q21.
What is the formula for determining commission payments in insurance?

a.

C = 0.01 r Px + (Dx+1 / Dx) x 0.01 r1 Px äx+1:n-1ืš

b.

C = 0.01 r Px

c.

C = 0.01 r Ax + (Dx+1 / Dx) x 0.01 r1 Ax äx+1:n-1ืš

d.

C = 0.01 r Ax

Discuss
Answer: (a).C = 0.01 r Px + (Dx+1 / Dx) x 0.01 r1 Px äx+1:n-1ืš Explanation:The formula for determining commission payments in insurance is C = 0.01 r Px + (Dx+1 / Dx) x 0.01 r1 Px äx+1:n-1ืš.
Q22.
What are initial expenses in insurance?

a.

Expenses incurred for claim settlements

b.

Expenses incurred to procure business, including fees for medical exams, lab reports, advertisements, underwriting, and administration costs

c.

Expenses incurred for policy renewals

d.

Expenses related to premium collection

Discuss
Answer: (b).Expenses incurred to procure business, including fees for medical exams, lab reports, advertisements, underwriting, and administration costs Explanation:Initial expenses in insurance refer to expenses incurred to procure business, including fees for medical exams, lab reports, advertisements, underwriting, and administration costs.
Q23.
How are renewal expenses calculated in insurance?

a.

Renewal expenses are fixed per policy expenses

b.

Renewal expenses are calculated based on premiums

c.

Renewal expenses are calculated based on the sum assured

d.

Renewal expenses are calculated annually and incurred at the beginning of each policy anniversary

Discuss
Answer: (d).Renewal expenses are calculated annually and incurred at the beginning of each policy anniversary Explanation:Renewal expenses in insurance are calculated annually and incurred at the beginning of each policy anniversary.
Q24.
What is the formula for determining the present value of initial expenses?

a.

Present value of initial expenses = I

b.

Present value of initial expenses = c ax: n-1ืš

c.

Present value of initial expenses = 0.01 r Px

d.

Present value of initial expenses = Ax: nืš + 0.02 SP + I + K Ax: + c ax: n-1ืš

Discuss
Answer: (a).Present value of initial expenses = I Explanation:The formula for determining the present value of initial expenses is Present value of initial expenses = a)
Q25.
What are claim expenses in insurance?

a.

Expenses incurred for policy renewals

b.

Expenses incurred to procure business, including fees for medical exams, lab reports, advertisements, underwriting, and administration costs

c.

Expenses incurred to settle claims, including investigation expenses and litigation costs

d.

Expenses related to premium collection

Discuss
Answer: (c).Expenses incurred to settle claims, including investigation expenses and litigation costs Explanation:Claim expenses in insurance refer to expenses incurred to settle claims, including investigation expenses and litigation costs.
Q26.
How are claim expenses typically calculated in insurance?

a.

Claim expenses are fixed per policy expenses

b.

Claim expenses are calculated based on premiums

c.

Claim expenses are calculated based on the sum assured

d.

Claim expenses are usually related to the benefit payment and can be a percentage of the benefit amount or a fixed amount

Discuss
Answer: (d).Claim expenses are usually related to the benefit payment and can be a percentage of the benefit amount or a fixed amount Explanation:Claim expenses in insurance are usually related to the benefit payment and can be a percentage of the benefit amount or a fixed amount.
Q27.
How are claim expenses factored into the determination of premiums?

a.

Claim expenses are not factored into the determination of premiums

b.

Claim expenses are added directly to the premium amount

c.

Claim expenses are equated with the desired profit present value and included in the premium calculation

d.

Claim expenses are subtracted from the premium amount

Discuss
Answer: (c).Claim expenses are equated with the desired profit present value and included in the premium calculation Explanation:Claim expenses are equated with the desired profit present value and included in the premium calculation.
Q28.
What is the primary goal of the cash flow method in determining premiums in insurance?

a.

To maximize the insurer's expenses

b.

To minimize the insurer's profits

c.

To ensure there is no profit for the insurer

d.

To ensure there is profit for the insurer while maintaining optimal premiums

Discuss
Answer: (d).To ensure there is profit for the insurer while maintaining optimal premiums Explanation:The primary goal of the cash flow method in determining premiums in insurance is to ensure there is profit for the insurer while maintaining optimal premiums.
Q29.
What are the stages involved in the cash flow method for determining premiums?

a.

Setting commission rates and initial expenses

b.

Determining expected income and outgo for each policy year

c.

Calculating investment returns and renewal expenses

d.

Assessing optimistic and pessimistic scenarios

Discuss
Answer: (b).Determining expected income and outgo for each policy year Explanation:The stages involved in the cash flow method for determining premiums include determining expected income and outgo for each policy year.
Q30.
How is the net cash flow calculated in the cash flow method?

a.

By subtracting expected income from expected outgo

b.

By adding expected income to expected outgo

c.

By dividing expected income by expected outgo

d.

By multiplying expected income with expected outgo

Discuss
Answer: (a).By subtracting expected income from expected outgo Explanation:The net cash flow in the cash flow method is calculated by subtracting expected income from expected outgo.
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