ALU 202 EXAM ACTUAL 200 QUESTIONS AND 100

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ALU 202 EXAM ACTUAL 200 QUESTIONS AND 100%

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• Underwriting criteria generally used in the pricing of preferred policies include which of the

following? A. blood pressure

• cholesterol
• family history

• All of the following are pricing components of life insurance established by regulation

EXCEPT:

• reserve basis
• tax law
• nonforfeiture laws

D. asset risk:

• asset risk

(The risk that assets supporting the product lose some/all of their value) (Nonforfeiture law: allow return of excess premium if insured lapses policy) (Reserve basis: enough $ held to pay benefits to policy holders)

• The relationship of mortality savings from a requirement to the cost of administering the

particular requirement is:

• surplus
• protective value
• uniquely protective

D. reserve value: B. protective value

• All of the following statements regarding a protective value study of underwriting

requirements are correct EXCEPT:

• It should evaluate which requirement identified the underlying impairment.
• It should consider the proposed insured's behavior in accepting or rejecting the offered

policy.

• It should measure the difference between select and ultimate mortality. 1 / 4

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D. It should ensure that the offered product is "at the market".:

• It should measure the difference between select and ultimate mortality.

• A safety net that needs to be provided beyond the level of reserves being held in case a

company's mortality experience turns out to be much worse than expected is referred to as:

• risk-based capital (RBC)
• reserve basis
• statutory reserve

D. deferred acquisition cost:

• risk-based capital (RBC)

*reserve basis = regulation established standards to make sure enough premium held until death is greater than premium received.*statutory reserve = conservative standards that err in favor of policyholders *DAC = deduct 1st year expenses over 10yrs

• Pricing components include which of the following?
• mortality
• lapse rates
• exceptions

7. The insurance industry of today is dominated by:

• variable products
• index products
• term products

D. whole life products: C. term products

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8. The single largest expense related to a life insurance product is:

• mortality
• lapse rates
• expense levels

D. interest rate: A. mortality

9. In Canada, statutory reserve standards are established by:

• federal regulation
• insurance companies
• provincial regulation

D. NAIC legislation: A. federal regulation

• Pricing components of a life insurance product include which of the following?
• mortality costs
• lapse rates
• interest rates

• Which of the following describes a protective value study?
• Family history of proposed insured
• The proposed insured's social behavior.
• The relationship of mortality savings from a requirements to the cost of administering

the particular requirement.

• One of the two distinct issues involved in the Reasonableness of Pricing Expectations is:
• the value of underwriting requirements
• policy face amount
• preferred risk underwriting

D. interest rate risk: A. the value of underwriting requirements

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• Which of the following have a significant impact on the ultimate cost of a life insurance

product?

• target market
• sales approach
• underwriting process

• Which of the following takes place with more stringent underwriting?
• more individuals will qualify for better rates
• expected mortality decreases
• lower, more competitive prices

• The average time it takes for a carrier to recover from the expenses incurred upon issue of

an insurance product is:

• 2 years
• 3 years
• 5 years

D. 6 years: C. 5 years

• When deciding if the cost of obtaining additional requirements can be justified from an

expense perspective, which of the following would be considered?

• time taken to issue a policy
• cost of the requirement
• protective value

A, B and C are all correct

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