CAA CAA Life & Health Insurance Principles 2

Question 1

What is a 'deferred annuity' in the context of US retirement products?

Accepted Answer

An annuity where the income payments are postponed to a future date, allowing accumulated funds to grow tax-deferred in the interim

Answer

A deferred annuity accumulates value tax-deferred during a savings phase and then converts to income payments at a future annuitization date chosen by the contract holder.

Question 2

What is the 'policy reserve' in a traditional whole life insurance policy?

Accepted Answer

The liability the insurer must hold to meet future policy obligations, funded by past premiums in excess of current costs

Answer

The policy reserve is an actuarial liability representing the present value of future benefits minus the present value of future net premiums, funded by premium overpayments in early policy years.

Question 3

Under the US Affordable Care Act (ACA), what does the 'medical loss ratio' (MLR) requirement mandate for health insurers?

Accepted Answer

That at least 80–85% of premium revenue must be spent on medical claims and quality improvement activities

Answer

The ACA MLR requirement mandates that individual and small-group insurers spend at least 80% (large groups: 85%) of premiums on medical care and quality improvement, limiting administrative costs and profits.

Question 4

What is 'credibility theory' used for in group health insurance ratemaking?

Accepted Answer

Blending a group's own experience with industry-wide data to produce a more reliable rate estimate

Answer

Credibility theory provides a weighted blend of a group's own experience and a broader manual rate, with the weight on own experience increasing as the group's data becomes more statistically reliable.

Question 5

What does the term 'incurred but not reported' (IBNR) mean in health insurance reserving?

Accepted Answer

An estimated liability for claims that have already occurred but have not yet been submitted to the insurer

Answer

IBNR reserves represent the actuary's estimate of the liability for medical services already rendered but for which claims have not yet been filed or recorded by the insurer.

(CAA) Certified Actuarial Analyst Practice Test

(CAA) Certified Actuarial Analyst Practice Test

CAA CAA Life & Health Insurance Principles 2