CAA CAA Life & Health Insurance Principles

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

Permanent insurance that builds cash value over time

Answer

An annuity that pays income for life

Answer

A policy that covers medical expenses during hospitalization

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 gross premium minus the insurer's profit margin

Answer

The premium charged to the policyholder after tax deductions

Answer

The reinsurance premium ceded to a third party

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

Tracking the investment returns of insurance company portfolios

Answer

Listing the names of deceased policyholders for claims processing

Answer

Calculating the tax liability of life insurance companies

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

Generally Accepted Accounting Principles (GAAP)

Answer

International Financial Reporting Standards (IFRS 17)

Answer

Federal Reserve Regulation W

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

The insurer selecting only the healthiest applicants

Answer

A regulatory penalty for unfair underwriting practices

Answer

An actuary choosing conservative assumptions

Question 6

In US employer-sponsored group health insurance, what is the purpose of 'experience rating'?

Accepted Answer

Rating a group based on its own historical claims experience to reflect its actual risk profile

Answer

Using the national average health cost to price all groups uniformly

Answer

Adjusting premiums based solely on the age of the group's employees

Answer

Setting premiums based on the insurer's investment experience