17.
ASSERTION
Under a defined benefit pension
plan, the plan termination
liability is usually less than the
plan continuation liability.
BECAUSE
REASON
Under a defined benefit pension
plan, the plan termination
valuation omits salary projections.
18.
ASSERTION
Yearly Renewable Term (YRT)
reinsurance is commonly used
with annuities.
BECAUSE
REASON
YRT reinsurance removes the
insurer’s investment risk.
19.
ASSERTION
In the U.S., manual rates
developed for large group health
plans do not depend on the
group’s specific gender mix.
BECAUSE
REASON
In the U.S., the federal
government restricts the use of
gender-based employee
contribution rates for large group
health plans.
20.
ASSERTION
Incurred loss-development
factors may be greater than one.
BECAUSE
REASON
Final loss development in a claim
file may be negative.
COURSE 5: Fall 2003 - 13 - GO ON TO NEXT PAGE
Morning Session
21. For a property and casualty product, you are given:
Expected effective incurred losses (trended and developed) 50,000,000
Earned exposure units 2,000,000
Earned premium at current rates 66,000,000
Current average manual rate 33
Expense ratio 30%
Calculate the new average gross rate that should be charged.
(A) 25
(B) 30
(C) 36
(D) 47
(E) 83
COURSE 5: Fall 2003 - 14 - GO ON TO NEXT PAGE
Morning Session
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COURSE 5: Fall 2003 - 15 - GO ON TO NEXT PAGE
Morning Session
22. For a variable income annuity, you are given:
Initial annual income benefit = 10,000
AIR = 4%
Policy Year Net Investment Return
1 5%
2 3%
3 1%
4 7%
5 2%
Calculate the annual income benefit in policy year 5.
(A) 9,799
(B) 9,991
(C) 10,009
(D) 10,205
(E) 11,699
COURSE 5: Fall 2003 - 16 - GO ON TO NEXT PAGE
Morning Session
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COURSE 5: Fall 2003 - 17 - GO ON TO NEXT PAGE
Morning Session
23. All of the following are criteria for a risk to be insurable EXCEPT:
(A) The loss is definite.
(B) The loss is random.
(C) The exposure units are dependent.
(D) The economic value of insurance is calculable.
(E) It is economically feasible.
24. The administration of life insurance policies is similar to health insurance policies for all
of the following EXCEPT:
(A) Use of medical examination
(B) Premium collection
(C) Policy issue
(D) Application
(E) Claims administration
COURSE 5: Fall 2003 - 18 - GO ON TO NEXT PAGE
Morning Session
25. For overhead expense benefit policies, all the following are true EXCEPT:
(A) Elimination periods usually exceed 60 days.
(B) Benefit periods usually exceed two years.
(C) Actual expenses incurred are covered up to a maximum amount.
(D) Benefits are independent of other disability income policies replacing earned
income.
(E) Surrogate salary benefit is available.

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