1
Q
Underwriting criteria generally used in the pricing of preferred policies include which of the following?
A. blood pressure
B. cholesterol
C. family history
A
All are correct
2
Q
All of the following are pricing components of life insurance established by regulation EXCEPT:
reserve basis
tax law
nonforfeiture laws
asset risk
A
asset risk
3
Q
The relationship of mortality savings from a requirement to the cost of administering the particular requirement is:
A
protective value
4
Q
All of the following statements regarding a protective value study of underwriting requirements are correct EXCEPT:
A. It should evaluate which requirement identified the underlying impairment.
B. It should consider the proposed insured’s behavior in accepting or rejecting the offered policy.
C. It should measure the difference between select and ultimate mortality.
D. It should ensure that the offered product is “at the market”.
A
C. It should measure the difference between select and ultimate mortality.
5
Q
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
- deferred acquisition cost
A
risk-based capital (RBC)
6
Q
Pricing components include which of the following?
A. mortality
B. lapse rates
C. exceptions
A
A and B are correct
7
Q
The insurance industry of today is dominated by:
A
term products
8
Q
The single largest expense related to a life insurance product is:
- mortality
- lapse rates
- expense levels
- interest rate
A
Mortality
9
Q
In Canada, statutory reserve standards are established by:
A
federal regulation
10
Q
Pricing components of a life insurance product include which of the following?
A. mortality costs
B. lapse rates
C. interest rates
A
All are correct
11
Q
Which of the following describes a protective value study?
A. Family history of proposed insured
B. The proposed insured’s social behavior.
C. The relationship of mortality savings from a requirements to the cost of administering the particular requirement.
A
C only
12
Q
One of the two distinct issues involved in the Reasonableness of Pricing Expectations is:
A
the value of underwriting requirements
13
Q
Which of the following have a significant impact on the ultimate cost of a life insurance product?
A. target market
B. sales approach
C. underwriting process
A
All are correct
14
Q
Which of the following takes place with more stringent underwriting?
A. more individuals will qualify for better rates
B. expected mortality decreases
C. lower, more competitive pri
A
B and C are correct
15
Q
he average time it takes for a carrier to recover from the expenses incurred upon issue of an insurance product is:
A
5 years
16
Q
When deciding if the cost of obtaining additional requirements can be justified from an expense perspective, which of the following would be considered?
A. time taken to issue a policy
B. cost of the requirement
C. protective value
A
All are correct
17
Q
Federal taxes paid by an insurance company are income based and include which of the following?
A. tax reserves
B. deferred acquisition cost (DAC) tax
C. social security tax
A
A and B are correct
18
Q
Chapter 2
A
19
Q
When the cost of an underwriting requirement is equal to the mortality savings, it is known as:
A
break-even point
20
Q
Cost/benefit studies can be used to evaluate which of the following requirements?
A. attending physcians’ statement (APS)
B. electrocardiogram (EKG)
C. motor vehicle report (MVR)
A
All are correct
21
Q
The first step of the cost-benefit study is:
A
to determine the goal of the study
22
Q
An individual who withdraws their application for life insurance when they learn a specific test is required is an example of:
A
sentinel effect
23
Q
A “hit rate” is defined as:
A
the frequency in which debits are found
24
Q
Which of the following departments in an insurance company is/are integral parts of a cost-benefit study?
A. vendor procurement
B. actuarial
C. marketing department
A
All of the above
25
Which of the following statements regarding a cost/benefit study is/are correct?
A. One challenge that needs to be addressed is if more than one requirement identifies the impairment.
B. The study should not include cases that were "not taken".
C. A proper sample size depends on the percent of time the requirement finds debits.
A and C are correct
26
In regards to a cost/benefit study, the benefit received is defined as:
insurance benefit dollars that would be paid out if the requirement was not ordered
27
Cost/benefit studies are needed for which of the following reasons?
A. set direction for the underwriting department
B. identify break-even points
C. justify the reason for waiving a requirement
A and B are correct
28
Which of the following statements regarding cost/benefit studies is/are correct?
A. Underwriting is about rare findings.
B. Existing studies need updating due to changes in the competitive landscape.
C. The 1% rule is a comprehensive way to calculate the net single premium.
A and B are correct
29
All of the following are factors that should be taken into consideration in a cost/benefit study EXCEPT:
A. pricing horizon
B. company mortality experience
C. interest rates
D. lapse rates
company mortality experience
30
Which of the following can be used to calculate a net single premium?
A. lapse rate
B. publicly published mortality tables
C. a reasonable expected rate of return on investment
All are correct
31
In a cost/benefit study, the appropriate sample size needed for a reliable outcome depends upon:
hit rate
32
Chapter 3
33
The life table that reports the actual death rates for a group of individuals born around the same time is a:
cohort life table
34
All of the following statements regarding the ultimate period of the basic insured lives table are correct EXCEPT:
A. The mortality rate exceeds that of the general population.
B. It is the period that follows the select period.
C. It reflects the residual effect of socioeconomic status in underwriting.
Incorrect
D. It represents individuals of various ages who have kept their life insurance in force for more than 25 years.
A. The mortality rate exceeds that of the general population.
35
Which of the following statements regarding individual annuity tables is/are correct?
A. The represent the mortality expected for annuitants.
B. They have the highest mortality rates of any insured lives mortality table
C. They represent the mortality of healthy individuals having the greatest longevity.
A and C only are correct
36
The insured lives mortality table used to establish life insurance policy reserves is:
standard and ordinary
37
All of the following statements regarding population life tables are correct EXCEPT:
Your Answer:
A. They are based on death rates calculated for large segments of the population.
B. It includes both smokers and non-smokers
C. It distinguishes between the employed and the unemployed.
D. They are often segmented by gender
C. It distinguishes between the employed and the unemployed.
38
The insured lives morality table that will typically have the lowest mortality rate is:
individual annuity
39
Which of the following are considered when life insurance companies are setting price assumptions?
A. inflation
B. anticipated lapse rates
C. interest rates
A, B and C are all correct
40
In calculating mortality rates, the symbol "dx" refers to the number of individuals:
dying during a specific interval
41
Life tables based on death rates calculated for large segments of the population without regard to individual health, socioeconomic, or employment status are called:
population tables
42
The life tables that has the highest mortality rate is:
disabled life
43
Many life insurance mortality tables are expressed in terms of:
monetary value of claims
44
The difference in death rates observed in the population having a unique impairment compared to the death rates expected in a closely matched population without the impairment is:
excess death rate
45
If the excess mortality risk is thought to remain constant throughout duration of the policy then the following should apply:
flat extra premium
46
After a policy is issued, the effect of underwriting in the select period usually lasts for:
20-25 years
47
The following are all examples of an insured lives table EXCEPT:
- population
- basic
- group
- annuity
population
48
Population life tables are often segmented by which of the following?
A. gender
B. geography
C. health status
A and B are correct
49
The equation used to calculate the interval mortality ratio is:
mrx= qx / qx’
50
The best source of data to calculate substandard rates is:
inter-company mortality analysis
51
An example where one would use a temporary flat extra to cover excess risk is:
cancer
52
Chapter 4
53
The purpose of the Framingham Study was:
to identify risk factors for cardiovascular disease
54
The preferred risk stratification model employed by the majority of the life insurance industry is:
knock-out system
55
Prior to the 1970s, a standard risk was considered to be a proposed insured:
without a rating or surcharge
56
One of the key reasons for the emergence of the preferred risk classes was:
the desire to create a low-cost product
57
Companies attempt to mitigate accidental death risk by including all of the following risk factors into preferred criteria EXCEPT:
- driving
- hazardous avocations
- occupations
- family history
family history
58
One way to lower price on a life insurance product is to create a product with:
low mortality assumptions
59
In the 1980's, in an effort to identify the presence of disease and eventually, enable the ability to offer preferred rate classifications, the insurance industry started widespread use of:
blood testing
60
Which of the following statements regarding the Framingham Study is/are correct?
A. It was initiated by the life insurance industry.
B. It was designed to study cardiovascular disease.
C. Individuals participating in the study were chosen based upon their willingness to undergo annual testing.
B only is correct
61
Which of the following statements regarding the point system of preferred risk stratification is/are correct?
A. It is similar to the Framingham point system.
B. It can be overwhelmed when an extreme factor is present.
C. It can implement a secondary set of guidelines, often referred to as stretch criteria.
A and B are correct maybe only a need to confirm
62
Which of the following statements regarding predictive analytics is/are correct?
A. It often utilizes publicly available data.
B. Better credit scores are associated with higher mortality.
C. Framingham researchers employed predictive analytics to identify risk factors of developing cardiovascular disease.
A and C only are correct
63
All of the following statements regarding the point system to determine a preferred risk are correct EXCEPT:
A. The cumulative points define the risk class into which the individual falls.
B. Lower point values represent a higher mortality risk and higher point values represent a lower mortality risk.
C. The system can take favorable and unfavorable risk factors into consideration at the same time without allowing one factor to overwhelm the decision by itself, unless extreme.
D. All points associated with all risk factors are summed to produce a final point score for the individual
B. Lower point values represent a higher mortality risk and higher point values represent a lower mortality risk.
64
0 / 1 point
All of the following statements regarding the multivariate Cox proportional hazard model are correct EXCEPT:
A. A hazard ratio (HR) of 1.0 represents no change in risk from the baseline.
B. The predictor variables used for Framingham included blood pressure and build.
C. It is the basis behind the knock-out system, commonly used by the life insurance industry for stratifying preferred risks.
D. The dependent variable is the target variable of interest.
C. It is the basis behind the knock-out system, commonly used by the life insurance industry for stratifying preferred risks.
It is the basis for points system not knock out system
65
The COVID-19 pandemic influenced which of the following?
A. Many companies stopped collecting physical measurements and fluids.
B. Accelerated underwriting (AUW) was created.
C. Preferred criteria relied more on self-disclosed application responses.
A and C only are correct
66
All of the following statements regarding the future of preferred risk underwriting are correct EXCEPT:
A. Mortality slippage is somewhat offset by the reduction in underwriting expenses.
B. The shift away from paramedical exams and fluids has reduced the number of factors used for preferred risk stratification.
C. Competition continues the need for preferred risk classes.
D. Vendors entering the life insurance industry use readily available data to completely eliminate the need for preferred criteria.
D. Vendors entering the life insurance industry use readily available data to completely eliminate the need for preferred criteria.
67
All of the following statements regarding preferred risk criteria are correct EXCEPT:
A. A debit/credit system is superior to knock-out criteria because weighting is applied to each risk factor.
B. Using knock-out criteria for preferred risk selection eliminates excess relative risk in each class.
C. Framingham's use of the Cox model identified many of the criteria that carriers use to stratify preferred risk classes.
D. Relative risk is assigned based on an individual's personal attributes and forms the basis on how actuaries price preferred risk classes.
B. Using knock-out criteria for preferred risk selection eliminates excess relative risk in each class.
68
Chapter 5
69
The primary concern in underwriting policy change requests is:
mortality
70
All of the following are examples of a contractual provision EXCEPT:
grace period
risk reclassification
reinstatement
conversion privilege
risk reclassification
71
A false statement made, had the truth been disclosed, that would result in a less favorable risk class than was issued is:
material misrepresentation
72
The risk when underwriting premium waiver or disability income rider is:
morbidity
73
All the following should be taken into account when underwriting for a reinstatement of a policy EXCEPT:
policy face amount
conversion period
duration the policy has been in force
a history prior lapses of this same policy
conversion period
74
An action that takes place shortly after policy issue that may draw suspicion for stranger-owned life insurance (STOLI) is a/an:
ownership change
75
The provision that allows changing a term policy to a permanent product without additional medical requirements is:
term conversion
76
All of the following should be taken into consideration when underwriting a request to reinstate a life insurance policy EXCEPT:
age of insured
duration the policy had lapsed
disclosed health history
if the beneficiary is still alive
if the beneficiary is still alive
77
To apply for a policy change from tobacco to non-tobacco rates, which of the following is/are typically required?
A. statement of non-tobacco use
B. MIB check
C. paramedical exam
A and B are correct
78
A post-issue policy change that typically requires an underwriting review is:
face amount increase
79
Which of the the following is/are reasons why requirements for policy changes should be streamlined and minimized?
A. The risk is unmeasurable.
B. The insured may take their business elsewhere.
C. The agent is not compensated for it.
B only is correct
80
Which of the following statements regarding a request to go from tobacco to non-tobacco rates is/are correct?
A. Juvenile policies automatically revert to non-tobacco rates at the age of majority.
B. Preferred rates are contingent upon the length of time since tobacco was last used.
C. Some of the insureds will qualify for non-tobacco rates even though they use chewing tobacco.
B and C are correct
81
Which of the following statements regarding term conversions is/are correct?
A. They all expire once the insured reaches age 70.
B. If insured believe they can qualify for a better risk class, underwriting evidence will be needed.
C. There is no option to increase the face amount.
B only is correct
82
All of the following statements regarding the role of reinsurers while processing a policy change are correct EXCEPT:
- If the risk was fully retained, there are no reinsurance concerns.
- For facultatively reinsured business, consideration must be given to the reinsurer's possible role in the transaction.
- If the business was reinsured on an automatic basis, the lead reinsurer must be notified to streamline the process.
- If an exception was made at issue, it is preferable to consult with the reinsurer.
If the business was reinsured on an automatic basis, the lead reinsurer must be notified to streamline the process.
83
Term policies that have reached the end of their period of specified coverage and are considered for renewal is:
re-entries
84
Chapter 6
85
All of the following are financial objectives of a well-planned estate EXCEPT:
- maximized wealth
- efficient use of estate capital
- income replacement
- appropriate asset ownership
income replacement
86
All of the following statements regarding special use valuation are correct EXCEPT:
- Some property is taxed based upon potential uses.
- Property value is assessed according to its current use.
- The value of stocks/bonds are the price upon the date of death.
- Life insurance proceeds set aside for the benefit of the decedent’s estate are taxed as part of the estate.
Some property is taxed based upon potential uses.
87
All of the following are factors to consider in a charitable giving application for life insurance EXCEPT:
- past history of charitable contributions
- amount of annual contributions
- the state in which the charitable trust was established
- the annual premium as a percentage of client's annual income
the state in which the charitable trust was established
88
Foreign assets owned by individuals who have renounced their U.S. citizenship:
generate a decreasing proportional estate tax for ten years after US citizenship is renounced
89
All of the following are valid reasons for purchasing life insurance on an older individual EXCEPT:
- estate transfer
- long term care needs
- estate creation
- final expenses
estate creation
90
All of the following are allowable deductions when calculating the adjusted gross estate EXCEPT:
- funeral expenses
- dependent care expenses
- losses during the estate administration
- mortgage debt
dependent care expenses
91
All of the following are advantages of using life insurance for charitable purposes EXCEPT:
- If the policy is transferred to the charity during the donor's lifetime, the donor may receive a tax deduction for the policy's fair market value.
- It can replace the assets gifted, allowing the heirs to receive the full inheritance.
- A relatively small premium can results in a large charitable gift at death.
- The policy cash value can used by the charity for immediate liquidity.
The policy cash value can used by the charity for immediate liquidity.
92
Which of the following is/are jurisdictional premises that can trigger the imposition of estate tax?
A. citizenship
B. residency
C. type of asset owned
A and B are correct
93
Chapter 7
94
All of the following statements regarding the guaranteed issue (GI) method of underwriting multilife cases are correct EXCEPT:
- It is a conditional guarantee.
- Being out of work due to illness is not a disqualifying factor.
- It is commonly used for corporate-owned plans.
- This is the most efficient method of underwriting a large group of lives.
Being out of work due to illness is not a disqualifying factor.
95
The type of underwriting in which one or more modestly substandard risks are accepted at standard pricing after full underwriting is:
bundle
96
All of the following are common nonqualified executive benefit plans EXCEPT:
- section 162 bonus plan
- equity repurchase plan
- supplemental executive retirement plan (SERP)
- employee stock ownership plan (ESOP)
employee stock ownership plan (ESOP)
97
The form of underwriting characterized by an abbreviated application and the lowest underwriting expense is:
guaranteed issue
98
A separate accumulation of cash or investments established for the prompt payment of debt service or obligations is:
sinking fund
99
Which of the following statements regarding corporate owned life insurance (COLI) is/are correct?
A. It utilizes permanent products.
B. It is intended to provide benefits to meet the needs of executives.
C. Since it is a voluntary plan, it's better protected against anti-selection.
A and B only are correct
100
Face amounts for nonvoluntary group plans are determined by all of the following EXCEPT:
participant level of interest
101
Which of the following statements describe a Section 162 Bonus plan?
A. The corporation is the owner and beneficiary.
B. There is an element of anti-selection if the employee keeps the policy after retiring.
C. The amount of coverage provided is usually a set multiple of salary.
B and C are correct
102
All of the following statements regarding reinsurance for multilife business are correct EXCEPT:
- Like individual life business, it may be reinsured on an automatic basis.
- It provides additional capacity on a per location basis that might otherwise exceed the carrier's concentration-of-risk limit.
- Unlike individually underwritten business, it's not governed by a treaty.
- It spreads the risk on a group basis, reducing the impact of a catastrophic event.
Unlike individually underwritten business, it's not governed by a treaty.
103
Which of the following statements regarding multilife underwriting are correct?
A. It can utilize any variation of life insurance products.
B. It's primary focus is the avoidance of anti-selection.
C. Guaranteed issue (GI) underwriting is the preferred method for the producer, the client and the insurer.
B and C are correct
104
The average rate earned by each and every dollar invested during a specific period is:
internal rate of return (IRR)
105
All of the following statements regarding aggregate-funded plans are correct EXCEPT:
- Most deferred compensation plans are structured on this basis.
- There is a correlation between the individual's financial contribution and the amount of life insurance purchased on his/her life.
- The employee has no ownership rights in the insurance.
- The plan administrator designates how the premium is spread.
There is a correlation between the individual's financial contribution and the amount of life insurance purchased on his/her life.
106
All of the following conditions eliminate anti-selection in a multilife insurance plan EXCEPT:
- mandatory participation
- a fixed face amount
- the ability to opt out
- corporation is the owner of the policy
the ability to opt out
107
Which of the following statements regarding the tiered plan design in multilife insurance plans is/are correct?
A. It presents a better spread of risk compared to aggregate-funded plans.
B. The amount of insurance based upon title or salary grouping results in a highly variable spread of risk.
C. The most heavily insured group is comprised of a small number of senior executives.
B and C are correct
108
Which of the following statements regarding charity-owned life insurance (CHOLI) is/are correct?
A. There is little to no control over who is and who is not insured.
B. One of the conditions is that the individual must be actively-at-work.
C. The key purpose is to generate tax-deferred cash value.
A only is correct
There is no stipulation in CHOLI that the member must be actively at work. The ages of this group tends to be skewed to a significantly older demographic.
109
The set amounts of death benefit that are multiplied by the number of plan participants to determine the maximum amount of death benefit available on any one life is:
multiples
110
All of the following statements regarding multilife insurance plans are correct EXCEPT:
- Supplemental Executive Retirement Plans (SERPs) are funded on a non-aggregate basis.
- Private placement products are used to maximize cash value for qualified investors.
- Qualified pension plans can have excess mortality concerns due to insuring nonexecutives.
- Because selectivity can exist with Equity Repurchase plans, GI underwriting is the best option.
Because selectivity can exist with Equity Repurchase plans, GI underwriting is the best option.
111
Which of the following statements regarding nonqualified executive compensation plans is/are correct?
A. The most easily underwritten multilife plan is the deferred compensation plan.
B. A supplemental executive retirement plan (SERP) is often aggregately funded.
C. A section 162 bonus plan has an element of anti-selection because the policy is individually owned.
A and C are correct
112
Chapter 8
113
Long-term care insurance underwriting generally requires all of the following EXCEPT:
attending physician statements (APS)
paramedical exams
cognitive testing
face-to-face interviews
paramedical exams
114
When underwriting an application for disability insurance, which of the following tools is/are commonly used to assess cognitive impairment?
A. get up and go test
B. delayed word recall (DWR)
C. in-person interviews
B and C are correct
115
All of the following are medical histories that warrant special consideration in the course of underwriting long-term care insurance EXCEPT:
co-morbid conditions
COPD with continued smoking
osteopenia
chronological age vs physiological age
osteopenia
116
Which of the following is/are part of a disability insurance policy structure?
A. waiting period
B. premium rating
C. benefit payment
A and C are correct
premium rating is an option for a counter offer, but not part of the fundamental DI policy structure.
117
Which of the following should be taken into consideration when underwriting disability insurance?
A. all earnings listed on the individual tax return
B. avocations
C. duties of the job
B and C are correct
118
Which of the following expenses is/are commonly covered under an overhead expense insurance policy?
A. interest on debt
B. depreciation
C. income tax
A and B are correct
property taxes are covered. Income tax is not.
119
Which of the following statements regarding long-term care insurance are correct?
A. It provides payment for ongoing care of an individual who is unable to live independently.
B. The target market includes individuals who are close to retirement.
C. The shorter the waiting period, the lower the annual premium will be.
A and B are correct
120
All of the following are standard contract exclusions for disability insurance policies EXCEPT:
accidental injury
121
Which of the following are payment modes in which long-term care benefits can be made?
A. indemnity
B. expense incurred
C. disability
A, B, and C are all correct
122
The type of disability insurance policy in which the insurance company cannot increase the premium without the agreement of the policy owner as long as the premiums are paid on time is:
non-cancelable
123
Critical illness insurance products typically cover all of the following medical impairments EXCEPT:
multiple sclerosis
stroke
diabetes
heart attack
diabetes
124
All of the following statements regarding long-term care insurance products are correct EXCEPT:
- The average age at underwriting tend to be older.
- Most are conditionally renewable.
- They can offer financial protection in case of catastrophic illness.
- Benefits are payable if the insured is receiving home health care based upon the loss of two or more activities of daily living (ADLs).
Most are conditionally renewable.
*Most are guaranteed renewable
125
All of the following are examples of activities of daily living (ADLs) EXCEPT:
- the ability to get on and off the toilet
- the ability to manage your own finances
- the ability to dress and undress
- the ability to feed oneself
the ability to manage your own finances
managing your finances is an example of IADLs - a "social survival skill"
126
Which of the following statements regarding critical illness (CI) insurance is/are correct?
A. Benefits would not be payable if the covered condition was incurred due to a self-inflicted injury.
B. Deafness is a commonly covered condition.
C. There is no limit in the amount of benefits that can be paid.
A and B are correct
Policy terminates once the full benefit is paid.
127
The advance cash payment made by a life insurance company to an insured who has been determined to be terminally ill is:
accelerated death benefit
128
Chapter 9
129
Which of the following is/are types of quota share reinsurance?
A. first dollar
B. coinsurance
C. facultative-obligatory
A and B only are correct
130
Which of the following are risks covered by financial reinsurance?
A. policy persistency
B. ceded risks
C. return of premium
A and C only are correct
131
Which of the following provisions are included in a reinsurance treaty?
A. product-specific mortality assumptions
B. reinsured risk amount
C. commencement of liability
B and C only are correct
132
Which of the following are benefits of using reinsurance?
A. prevention of catastrophic loss
B. unlimited death benefit
C. capacity
A and C only are correct
133
All of the following are risks that a direct writing company is subject to when entering a new insurance market EXCEPT:
- lack of underwriting expertise
- small block of business results in skewed actual mortality experience
- unknown target market
- high financial impact when only a small number of policies are in force
unknown target market
134
All of the following are non-mortality risk that financial reinsurance can provide relief for EXCEPT:
secondary guarantees
return of premium
policy persistency
agent commissions
agent commissions
135
An agreement in which one company permanently transfers full responsibility for a block of policies to another company is:
assumption reinsurance
136
Which of the following statements regarding financial reinsurance is/are correct?
A. It is typically arranged by the actuarial and finance department.
B. The underwriting department is always involved.
C. It is obtained on blocks of business rather than individual cases.
A and C are correct
137
All of the following are factors in life reinsurance pricing EXCEPT:
distribution system
policy reserves
product
underwriting guidelines
policy reserves
138
The limit placed on the total amount of coverage in force and applied for on an individual life is:
jumbo limit
139
The risk ceded by a reinsurer is:
retrocession
140
All of the following are types of risk transfer from a ceding company to a reinsurer EXCEPT:
YRT-quota share
coinsurance
fac-ob reinsurance
YRT-excess of retention
fac-ob reinsurance
*fac-ob is a type of reinsurance arrangement, not an actual risk transfer.
141
The claims provision in the reinsurance treaty addresses all of the following EXCEPT:
- copy of death certificate
- refund provision for cases of misrepresentation
- determining whether an exception on a case will be covered
- notification requirements involving contestable claims
determining whether an exception on a case will be covered
142
Which of the following statements regarding reinsurance audits is/are correct?
A. Exceptions can be allowed based upon sound judgement.
B. Clear communication to the field is a nominal factor.
C. Reinsurers place a significant value on internal audits.
A and C are correct
143
The form of reinsurance that provides coverage for multiple losses involving an accident or natural causes is:
catastrophic coverage
144
Chapter 10
145
Which of the following is/are considered examples of sins of omission?
A. failure to establish financial justification/economic loss
B. waiving age and amount requirements
C. failure to adhere to facultative reinsurance single case and jumbo limits
A and C are correct
146
All of the following parties are involved in a living rescission EXCEPT
the legal department
the underwriting department
the claims department
the insured
the claims department
147
Which of the following is/are considered examples of sins of commission?
A. delaying the underwriting process
B. making derogatory comments in the underwriting file
C. failing to establish sufficient insurable interest
A and B are correct
148
All of the following are general rules for giving depositions EXCEPT:
- Avoid all adjectives and superlatives.
- Use all recesses to follow counsel to a place where you can confer in private.
- Always agree to supply information or documents requested by the examiner.
- Never express anger.
Always agree to supply information or documents requested by the examiner.
149
Which of the following is/are reason that many contestable claim cases are settled out of court?
A. The facts are overwhelmingly in favor of the insurance company.
B. The settlement will be less than "the cost of the defense".
C. The court systems cause so many delays that the plaintiff will often abandon their case.
A and B are correct
150
Which of the following statements regarding file documentation is/are correct?
A. Telephone conversations should always be captured in the case file notes.
B. It's common to destroy file documents after a certain amount of time has passed.
C. Since emails become part of the file, they should always be professional and appropriate.
A and C are correct
151
The intentional giving up of a known privilege or right, either expressed or implied is:
waiver
152
A designated underwriter in a claims investigation provides all the following EXCEPT:
- determines whether there was material misrepresentation.
- makes a recommendation on whether or not a claim ought to be paid.
- identifies if the proper underwriting procedures were followed.
- assess any underwriting factors that could involve the principles of waiver and estoppel.
makes a recommendation on whether or not a claim ought to be paid.
153
In the course of a legal dispute involving a rescission, which of the following factors of underwriting can be considered?
A. time delays
B. reinsurance treaties
C. prior underwriting manuals used
A and C are correct
154
In order to rescind a life insurance policy on the basis of misrepresentation on the application, the insurer must show all of the following EXCEPT:
- The statement or omission was unknowingly made.
- The application contained a false statement or an omission.
- The false statement or omission materially affected the risk the insurer assumed.
- The insurer relied upon the false statement or omission of fact, to its detriment, in assuming the risk and issuing the policy.
The statement or omission was unknowingly made.
155
The type of interim or temporary life insurance coverage that is provided without conditions is:
temporary insurance agreement (TIA)
156
Which of the following statements is/are rules for deposition witnesses?
A. Speak in full, complete sentences.
B. Always elaborate on your answers.
C. Guess when you don't know.
A only is correct
157
Chapter 11
158
In the US, which of the following statements regarding the Health Insurance Portability and Accountability Act (HIPAA) is/are correct?
A. It applies to many industries besides the life insurance industry.
B. The Privacy Rule does not apply if a health care provider uses a third party to transmit health information.
C. Any individually identifiable health information is referred to as protected health information (PHI).
A and C are correct
159
In Canada, the agency that protects policyholders when an insurer is insolvent is the:
Assuris
160
The process of converting a life insurance company from a policyholder-owned company to a shareholder-owned company is:
demutualization
161
Which of the following are key goals of the regulatory environment of the U.S. and Canada?
A. financial integrity of the insurance companies
B. the protection of the consumer
C. ensuring a competitive marketplace
A and B are correct
162
All of the following statements regarding the Office of the Superintendent of Financial Institutions (OSFI) are correct EXCEPT:
- It oversees the business practices of provincially regulated financial institutions.
- Their guidelines cover capital adequacy requirements.
- It was established through a merger of the Department of Insurance and the Office of the Inspector General of Banks.
- It interacts with the life insurance industry by issuing guidelines that reflect best practices.
It oversees the business practices of provincially regulated financial institutions.
163
In the U.S., trade associations for life insurance companies do which of the following?
A. help influence public policy
B. write model laws
C. maintain a set of guidelines that members must adhere to
A only is correct
164
In the event that a life insurer fails in the U.S., which of the following statement is/are correct?
A. Each state in which the failed insurer was licensed to do business is responsible for activating their state guaranty association.
B. Policyholders who reside in states where the insolvent insurer was not licensed will not be covered.
C. Member insurers doing business in the state are assessed based upon the amount of premiums they collect in that state on that kind of business for which benefits are required.
A and C are correct
165
In the U.S., all of the following would be defined as a "covered entity" under the Health Insurance Portability and Accountability Act (HIPAA) EXCEPT:
- health care clearinghouse
- physician
- hospital
- pharmaceutical company
pharmaceutical company
Explanation:
unless they provide health services or handle patient information
166
Which of the following statements regarding life settlements and viatical settlements in the U.S. and Canada is/are correct?
A. Life settlements only involve the purchase of a policy on the life of someone who is terminally ill.
B. In Canada, viatical settlements are only permitted in Quebec.
C. In some U.S. states, the insurance commissioner has the authority to revoke a license of an agent found guilty of fraud.
B and C are correct
167
Which of the following is/are issues related to stranger-owned life insurance (STOLI)?
A. rebating
B. insurance capacity
C. tax-free death benefits
A, B and C are all correct
168
All of the following statements regarding the oversight of the life insurance industry are correct EXCEPT:
- In Canada, the Office of Superintendent of Financial Institutions (OSFI) is the primary federal regulator.
- In the U.S., the McCarran-Ferguson Act of 1945 declared that the federal laws takes precedence over state regulations.
- The National Association of Insurance Commissioners (NAIC) was formed to create a more uniform set of laws via the development of model insurance laws.
- The Dodd-Frank Act is an example where the federal government stepped in due to perceived lack of state regulation in a national insurance market.
In the U.S., the McCarran-Ferguson Act of 1945 declared that the federal laws takes precedence over state regulations.
169
The law that requires financial institutions in the U.S. to provide annual privacy notices to customers is:
Gramm-Leach Bliley Act (GLBA)
170
Which of the following statements regarding the regulation of genetic testing is/are correct?
A. In the U. S., only one state has passed legislation prohibiting life insurance companies from using genetic testing in their underwriting process.
B. In Canada, the Genetic Non-Discrimination Act prohibits life insurers from requiring individuals to disclose results from a genetic test.
C. Under U.S. law, the Genetic Information Non-discrimination Act (GINA) prohibits the use of genetic information in life insurance underwriting.
A and B are correct
C is not correct. GINA only applies to health insurers. For life insurance, the US is "silent".
171
All of the following statements regarding the regulation of "big data", predictive modeling and algorithms are correct EXCEPT:
- In Canada, federal efforts are underway to enact a law that would govern the use of autonomous systems.
- In the U.S., the NAIC has developed a comprehensive model law but no states have taken any action to pass state legislation.
- In Canada, legislation has been drafted to address life insurers who use an artificial intelligence systems to underwrite life business.
- In the U.S., the "Blueprint for an AI Bill of Rights" offers a frameworks for developing responsible AI
In the U.S., the NAIC has developed a comprehensive model law but no states have taken any action to pass state legislation.
In the U.S., the NAIC has developed a comprehensive model law but no states have taken any action to pass state legislation.
172
Chapter 12
173
Which of the following is/are applications of predictive modeling in underwriting?
A. approve/decline decisions
B. propensity scoring
C. triage
All are correct
174
Which of the following are key factors that need to be addressed when implementing and monitoring a predictive model?
A. model validation
B. reasons codes for decisions
C. ongoing monitoring
B and C are correct
175
Variables used in a model are called:
features
176
Which of the following statements regarding data used to develop a predictive model is/are correct?
A. Data to build a mortality scoring model is readily accessible and highly reliable.
B. A common way to fill in missing data is to impute the mean or median value.
C. When there is an insufficiency amount of data, it would be considered to be underfitted.
B and C are correct
177
A purpose of using predictive modeling in life insurance underwriting is:
to estimate future death claims
178
All of the following are challenges encountered in the development of predictive modeling EXCEPT:
model validation
179
A statistical technique commonly used in predictive modeling is:
regression analysis
180
In context of predictive model fitting, overfitting refers to:
when a model is too complex and captures noise instead of patterns
181
In regards to predictive modeling, which of the following statements on feature selection is/are correct?
A. It dictates the type of model that will be ultimately be used.
B. A goal is to select the minimum number of features that retain the most predictive value but are least correlated with each other.
C. Statistical techniques can be used to score and rank the optimal subset that will be used in the model development.
B and C are correct
182
When building a predictive model, one should split data into "build" and "validation" datasets in order to:
When building a predictive model, one should split data into "build" and "validation" datasets in order to:
"overfitting" pg276
183
All of the following are benefits of using predictive models in life insurance underwriting EXCEPT:
more accurate pricing
higher placement ratio
immediate mortality savings
better underwriter utilization
immediate mortality savings
184
Which of the following statements pertaining to data availability in building a predictive mortality model is/are correct?
A. Life insurance underwriting hasn't dramatically changed over the past 30 years.
B. It is critical to have mortality outcomes on all proposed insureds, not just those who were issued and accepted policies.
C. Alternative modeling targets can be used, but they can be an imperfect proxy of mortality.
B and C are correct
185
Which of the following statements regarding predictive model fitting is/are correct?
A. When the model was built on insufficient data, missing one or more key factors, it's referred to as underfitting.
B. When missing data results in a model that is not predictive for certain segments of the population, it's referred to as a "blind spot".
C. Overfitting can be avoided by narrowing the sample data set.
A and B is correct
Overfitting can be addressed by partitioning the dataset into two - the build and the validation datasets.
186
All of the following statements regarding the ethical and legal use of consumer data in a predictive model are correct EXCEPT:
The Fair Credit Reporting Act (FCRA) provides consumer protections but life insurers are not obligated to disclose their source of data.
If models are simply being used to triage work, there is no possible negative impact on the consumer.
Many databases such as public records are FCRA-compliant.
An applicant has the right to dispute a report that may have adversely impacted the underwriting process.
The Fair Credit Reporting Act (FCRA) provides consumer protections but life insurers are not obligated to disclose their source of data.
pg 284. The FCRA requires data to be disclosable, disputable and correctable in order to be compliant.
187
Chapter 13
188
Types of premium financing include which of the following?
A. non-recourse
B. hybrid
C. guaranteed
A and B
189
ll of the following are flags for anti-selection at the time of underwriting EXCEPT:
request to utilize reinsurance
stacking of coverage
elderly proposed insured with little or no medical history
overseas income and assets
request to utilize reinsurance
190
Which of the following are considered inappropriate sales practices of life insurance products?
A. hybrid premium financing
B. rebating
C. churning
B & C
191
The type of financing of life insurance policies that involve a fully collateralized loan arrangement is:
recourse premium financing
192
Which of the following can impact actuarial pricing principals by the action or inaction of the underwriter?
A. anti-selection
B. simplified issue risk selection
C. approving cases at rates more favorable than company guidelines allow
All are correct
193
All of the following are red flags seen with possible agent identity theft EXCEPT:
The agent is difficult to reach by phone or is unresponsive.
The proposed insured's occupation is typically listed as "owner" or "self-employed".
It involves an agent who has been actively submitting business for years.
Agent contact information does not match with other third-party database searches.
It involves an agent who has been actively submitting business for years.
194
Which of the following is/are red flags commonly seen with potential stranger-owned life insurance (STOLI) activity?
A. Proposed insured with previous life settlement activity.
B. Recent change of ownership or beneficiary shortly after issue.
C. A middle-aged individual applying for a large death benefit.
A and B
195
Which of the following are flags in regards to the irrevocable life insurance trust (ILIT) trustee in relation to stranger owned life insurance (STOLI)?
A. Multiple proposed insureds from the same writing agent have the same trustee.
B. The trustee is well known to the proposed insured.
C. The trustee lives in a different state than the proposed insured.
A and C
196
Applying for multiple simplified issue policies in order to avoid full underwriting is:
Stacking
197
All of the following are often seen in cases involving rebating EXCEPT:
The proposed insured does not know the trustee, the face amount or premium to be paid.
Frequent replacement or lapsing of policies three years old or less.
Target premium to be paid on the insured to maximize commissions.
The trustee is in Wisconsin where rebating is legal and the agent or proposed insured reside in different states.
The trustee is in Wisconsin where rebating is legal and the agent or proposed insured reside in different states.
198
All of the following are tools that can be used by an underwriter to uncover fraudulent activity at the time of underwriting EXCEPT:
MIB Plan F
credit reports
pharmaceutical (Rx) databases
income tax returns
MIB Plan F
199
Which of the following statements regarding insurance fraud is/are correct?
A. Costs are passed on to customers by increasing premiums to offset losses.
B. A majority of consumers believe that fraud happens because people believe they can get away with it.
C. A majority of insurers have found ways to lower the incidence of fraud, despite an increase in the complexity of the fraud being committed.
A and B
200
Which of the following are tools that can be used to uncover fraudulent intent at the time of underwriting?
A. USA Patriot Act Form 314(b)
B. biometric data
C. lab slip
B and C are correct
The USA Patriot Act Form 314(b) is not a tool per se, but underwriters should be aware of its existence and how its possible to track the flow of money between customers, agents, trustees and various financial institutions (pp 338-339)
