CAA CAA Life & Health Insurance Principles 1

Question 1

What is 'term life insurance' in the context of US life insurance products?

Accepted Answer

Pure death benefit coverage for a specified period with no cash value accumulation

Answer

Term life insurance provides a death benefit only during a specified coverage period and does not accumulate cash value, making it the simplest and typically least expensive form of life insurance.

Question 2

What actuarial concept does the 'net premium' represent in life insurance pricing?

Accepted Answer

The premium calculated to cover expected mortality and interest costs only, without expense loadings

Answer

The net premium is the portion of the premium designed solely to fund expected policy benefits, calculated using mortality and interest assumptions without expense loadings.

Question 3

What is the 'mortality table' used for in life insurance actuarial calculations?

Accepted Answer

Providing probabilities of death at each age, used to price and reserve life insurance products

Answer

A mortality table provides age-specific probabilities of death that actuaries use to calculate expected claim costs, premium rates, and policy reserves for life insurance products.

Question 4

Which US regulatory framework requires life insurers to hold minimum reserves for individual life policies?

Accepted Answer

Statutory Accounting Principles (SAP) under NAIC model laws

Answer

US life insurers must hold statutory reserves under NAIC model laws, which apply Statutory Accounting Principles designed to ensure policyholder protection and solvency.

Question 5

What does 'adverse selection' mean in health insurance underwriting?

Accepted Answer

The tendency for individuals with higher health risks to be more likely to purchase insurance, skewing the risk pool

Answer

Adverse selection occurs when people with higher-than-average health risks disproportionately seek insurance, causing the actual risk pool to be worse than expected if ignored in pricing.

(CAA) Certified Actuarial Analyst Practice Test

(CAA) Certified Actuarial Analyst Practice Test

CAA CAA Life & Health Insurance Principles 1