15. Rank in ascending order (smallest to largest) the premium level of the following life
insurance policies.
I. Participating Whole Life Insurance
II. Level Term to 100 Insurance
III. Non-participating Whole Life Insurance
(A) I < II < III
(B) I < III < II
(C) II < III < I
(D) III < I < II
(E) III < II < I
COURSE 5: November 2001 - 16 - GO ON TO NEXT PAGE
Morning Session
16. Rank in ascending order (lowest to highest) the price level of a product resulting from the
following strategies:
I. Opportunistic pricing
II. Adaptive pricing
III. Predatory pricing
(A) I < II < III
(B) I < III < II
(C) II < III < I
(D) III < I < II
(E) III < II < I
COURSE 5: November 2001 - 17 - GO ON TO NEXT PAGE
Morning Session
Each of questions 17 through 18 consists of two lists. In the list at the left are two items,
lettered X and Y. In the list at the right are three items, numbered I, II, and III. ONE of
the lettered items is related in some way to EXACTLY TWO of the numbered items.
Indicate the related items using the following answer code:
Lettered Item Is Related to Numbered Items
(A) X I and II only
(B) X II and III only
(C) Y I and II only
(D) Y I and III only
(E) The correct answer is not given by (A), (B), (C) or (D).
17. X. Penetration pricing I. Different price levels for buyers with
different behaviors
Y. Segmented pricing II. Works best with commodity-like
products
III. Price set to generate high level of
sales
18. X. Low lapse rates I. Cause an increase in the average
mortality of the remaining group
Y. Selective lapse rates II. Tend to decrease the percentage of
unhealthy insureds
III. Result in mortality at older ages that
increase more slowly by policy year
COURSE 5: November 2001 - 18 - GO ON TO NEXT PAGE
Morning Session
Each of questions 19 through 23 consists of an assertion in the left-hand column and a
reason in the right-hand column. Code your answer to each question by blackening
space:
(A) If both the assertion and the reason are true statements, and the reason is a correct
explanation of the assertion.
(B) If both the assertion and the reason are true statements, but the reason is NOT a
correct explanation of the assertion.
(C) If the assertion is a true statement, but the reason is a false statement.
(D) If the assertion is a false statement, but the reason is a true statement.
(E) If both the assertion and the reason are false statements.
19.
ASSERTION
In Canada, a variable life
insurance product is taxed
annually on the “inside buildup”
of cash value.
BECAUSE
REASON
In Canada, a life insurer’s
segregated fund is not treated as a
trust for income tax purposes.
20.
ASSERTION
The amount of depreciation taken
for tax purposes usually exceeds
depreciation taken for regular
financial statements.
BECAUSE
REASON
Governments often use
depreciation allowances to
stimulate the general economy.
COURSE 5: November 2001 - 19 - GO ON TO NEXT PAGE
Morning Session
21.
ASSERTION
In life insurance, the trend has
been towards fewer risk
classifications
BECAUSE
REASON
In life insurance, the increased
cost of underwriting tests and
requirements have not made it cost
effective to create additional risk
classifications.
22.
ASSERTION
In the U.S., large employers often
use administration services only
(ASO) arrangements for health
plans.
BECAUSE
REASON
In the U.S., ASO arrangements are
exempt from the provisions of
ERISA.

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