Types of Insurance Products Group MCQs
Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Types of Insurance Products Group, 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 Types of Insurance Products Group 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 Types of Insurance Products Group mcq questions that explore various aspects of Types of Insurance Products Group problems. Each MCQ is crafted to challenge your understanding of Types of Insurance Products Group 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 Types of Insurance Products Group MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.
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Types of Insurance Products Group MCQs | Page 6 of 13
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Q51.
What is one of the significant benefits of implementing a Free Cover Limit (FCL) in an employer-employee group insurance scheme?
Answer: (b).It allows for time savings and reduction in underwriting costs.
Explanation:One of the significant benefits of implementing a Free Cover Limit (FCL) in an employer-employee group insurance scheme is that it allows for time savings and reduction in underwriting costs. By providing a level of insurance coverage without requiring individual evidence of insurability, the scheme simplifies the enrollment process, reduces administrative burdens, and decreases the costs associated with individual underwriting. This efficiency is particularly valuable for both the insurer and the insured, making the scheme more attractive and manageable.
Q52.
How does the presence of a Free Cover Limit (FCL) in a group insurance scheme impact the spread of mortality risk among the insured population?
Answer: (c).It allows for a good spread of mortality risk by covering all or a significant percentage of employees without individual evidence.
Explanation:The presence of a Free Cover Limit (FCL) in a group insurance scheme allows for a good spread of mortality risk among the insured population. Since the scheme covers all employees (in a compulsory plan) or a certain minimum percentage of employees (in a voluntary plan) without requiring individual evidence of insurability up to a certain limit, it ensures that the risk is distributed across a broad base. This distribution is beneficial because it encompasses a wide range of individuals, thereby mitigating the impact of the few who may represent a higher risk, and offsetting the extra mortality risk over the group as a whole.
Q53.
What challenge is associated with setting the Free Cover Limit (FCL) too high in an employer-employee group insurance scheme?
Answer: (b).It may invite anti-selection, requiring careful consideration in setting these limits.
Explanation:Setting the Free Cover Limit (FCL) too high in an employer-employee group insurance scheme may invite anti-selection, which is a challenge that requires careful consideration in setting these limits. Anti-selection occurs when individuals who believe they are at higher risk of claiming are more likely to take out or increase their insurance coverage than the average risk. By setting FCL too high, the scheme might attract a disproportionate number of higher-risk individuals, potentially increasing the overall cost of claims for the insurer. This challenge necessitates a balanced approach in determining the FCL to ensure that it offers sufficient coverage without unduly increasing the risk of adverse selection.
Q54.
How does the size of an employer-employee group affect the Free Cover Limit (FCL) set by insurers?
Answer: (c).Smaller groups will have a lower FCL because of the potential for anti-selection by key employees.
Explanation:The size of an employer-employee group significantly impacts the Free Cover Limit (FCL) set by insurers. Smaller groups will have a lower FCL because of the potential for anti-selection, particularly from top employees who might be in a higher age bracket or in poorer health. This phenomenon arises because the influence and health status of a small number of employees can disproportionately affect the risk profile of the entire group. Therefore, insurers vary the FCL with the size of the group and the average benefit level amongst members, taking into account the higher risk of anti-selection in smaller groups.
Q55.
What underwriting requirements may an insurer impose for coverage amounts exceeding the Free Cover Limit (FCL)?
Answer: (b).For modest amounts above the FCL at younger ages, a health declaration or short questionnaire may suffice; requirements become more comprehensive for larger amounts and older ages.
Explanation:When coverage amounts exceed the Free Cover Limit (FCL), insurers tailor their underwriting requirements based on the amount exceeding the FCL and the age of the employee. For modest amounts above the FCL at younger ages, a simple health declaration or short questionnaire may be sufficient. However, as the amount exceeding the FCL increases, or as the employee's age increases, the underwriting requirements become progressively more comprehensive, potentially including full medical and financial underwriting. This approach allows insurers to manage the risk associated with providing higher levels of coverage.
Q56.
What distinguishes compulsory plans from voluntary plans in employer-employee group insurance schemes?
Answer: (b).In compulsory plans, the employer pays the full premium, making them easier to administer than voluntary plans where employees contribute to the premium.
Explanation:Compulsory plans in employer-employee group insurance schemes are distinguished by the fact that the employer pays the full premium, which simplifies administration. Voluntary plans, on the other hand, involve employee contributions towards the premium, complicating the enrollment process since individual employees must consent to being covered. Furthermore, voluntary plans must meet minimum participation limits, adding another layer of complexity in administration compared to compulsory plans, which automatically cover all eligible employees.
Q57.
What is a potential advantage of voluntary plans in employer-employee group insurance schemes?
Answer: (c).They help in discharging the cost of insurance, potentially providing coverage better suited to employees’ needs.
Explanation:A potential advantage of voluntary plans in employer-employee group insurance schemes is that they help in discharging the cost of insurance. This cost-sharing approach can make it feasible to provide coverage options that are better suited to the diverse needs of employees, including the possibility of offering higher sums assured to higher salaried personnel. While voluntary plans are more complicated to administer due to the need for employee consent and meeting minimum participation limits, they offer the benefit of customizable coverage that can align more closely with individual employee needs and circumstances.
Q58.
What is a key characteristic of salary savings schemes for employer and employee groups in India?
Answer: (c).Contributions are automatically deducted from payroll and remitted to the insurance office by the employers.
Explanation:In India, a key characteristic of salary savings schemes for employer and employee groups is that contributions are automatically deducted from payroll by the employers and remitted to the insurance office. Unlike individual contracts where contributions are typically made directly by the insured individuals, salary savings schemes involve automatic deductions from employees' salaries by their employers. This method of contribution collection simplifies the process for both the employer and the employees, ensuring regular and timely payments towards the insurance coverage.
Q59.
What is one of the basic requirements for designing a group insurance scheme to prevent anti-selection?
Answer: (d).Insurance must be incidental to the existence of the group.
Explanation:One of the basic requirements for designing a group insurance scheme to prevent anti-selection is that insurance must be incidental to the existence of the group. This means that the group should not be formed explicitly for the purpose of obtaining insurance, but rather insurance should naturally complement the group's primary purpose or relationship, such as employer-employee relationships. By ensuring that insurance is not the primary motivation for forming the group, the scheme can avoid adverse selection and maintain the integrity of the insurance pool.
Q60.
What is the purpose of having an automatic basis to determine the level of coverage per employee in a group insurance scheme?
Answer: (c).To avoid anti-selection by ensuring that coverage is objectively determined.
Explanation:The purpose of having an automatic basis to determine the level of coverage per employee in a group insurance scheme is to avoid anti-selection by ensuring that coverage is objectively determined. By establishing predetermined criteria, such as employee rank, salary, or years of employment, for determining coverage levels, the scheme can prevent less healthy employees from selecting higher levels of coverage to exploit the insurance benefits. This helps maintain fairness and equity within the insurance pool while minimizing the risk of adverse selection.