3. Life Insurance Product Information

Question 1

After a full valuation, the actuary who has established a surplus, could declare a profit that gets paid to …

Answer 1

policyholder’s that have with-profit policies

Question 2

As the performance of portfolios started indicating better returns than policyowners were getting from their (1)…, demand arose for a share in these profits. The result hereof was the development of (2)…

Answer 2

1. with-profit policies

2. investment linked policies

Question 3

Each insurance company needs to do a … as its required as a ruling in the Insurance Act.

Answer 3

valuation

Question 4

Future mortality rates are influenced by HIV Aids because the:

• The rapid (1)… of infected numbers.
• The long period of (2)… (7 to 10 years).
• The absence of (3)… during the first part of the incubation.
• The (4)… of treatment.
• The (5)… attached to the disease

Answer 4

(1) growth
(2) incubation
(3) any obvious signs of HIV
(4) high cost
(5) social stigma

Question 5

An … will occur when the actual expenses incurred in running the business are less than the expenses assumed.

Answer 5

expenses surplus

Question 6

An … is the amount by which the interest actually earned on the assets of the insurer is greater than the interest earnings assumed.

Answer 6

investment earnings surplus

Question 7

A … arises if the claims experience is less than that assumed.

Answer 7

mortality surplus

Question 8

A … happens when policies are surrendered and the reserve (liability) no longer needs to be held.

Answer 8

surrender surplus

Question 9

List five types of expenses the underwriter needs to consider when determining the premium:

Answer 9

1. Paying doctors to do medicals
2. New business acquisition expenses
3. Underwriters
4. Claims assessors
5. Policy servicing clerks

Question 10

More conservative investors with investment linked policies would utilize the (1)… whereas the more aggressive investors would (2)… their minimum guaranteed return for the higher potential return at maturity.

Answer 10

(1) minimum guaranteed return

(2) forfeit

Question 11

Mortality rates are used in calculations for four different things?

Answer 11

1. premium rates
2. rates of annuities
3. reserve values
4. contribution rates for pension funds

Question 12

Name 6 life insurance policies:

Answer 12

1. Term insurance
2. Decreasing term insurance
3. Whole life insurance
4. Reinforced whole life insurance
5. Pure endowment
6. Endowment insurance

Question 13

The balance of such surplus is then held in the insurer’s …

Answer 13

reserve funds

Question 14

The growth of investment linked policies was often linked to a …

Answer 14

minimum growth factor

Question 15

The main reasons for carrying out a valuation is to test the (1)… of a life office - especially if there is any doubt about its financial standing. This is a test of the insurer’s (2)…

Answer 15

(1) solvency

(2) financial strength

Question 16

The probabilities used to work out the mortality tables are based on average people therefore it means these are people who are …

Answer 16

not overweight, or not too healthy or too sick

Question 17

The results of the valuation (valuation report) must be sent to the …

Answer 17

Registrar of Insurance

Question 18

The second reason for carrying out a valuation is to determine the amount of … available.

Answer 18

surplus funds

Question 19

The two valuation methods are:

Answer 19

1. prospective method

2. retrospective method

Question 20

The … owner may “unbundle” the component parts of the product (i.e. the allocation amounts and decreasing term insurance).

Answer 20

universal life policy

Question 21

Universal Life products usually do not maintain a … in the decreasing term insurance component of the product.

Answer 21

fixed rate of decrease

Question 22

Universal Life contracts usually also maintain a separate … in which a record is kept of the expenditures and killed in terms of the contract as it progresses overtime.

Answer 22

“memorandum-type” account

Question 23

Under … the reserve value of a policy is calculated as the excess of the present value of future claims over the present value of future net premiums.

Answer 23

prospective method of valuation

Question 24

Under … the reserve is the amount by which the premiums paid to the date of calculation, accumulated at the valuation rate of interest exceed the accumulated value of claims.

Answer 24

the retrospective method of valuations

Question 25

… is a benefit that will pay an amount in the event of the accidental death or loss of hand, eye or foot of the insured.

Answer 25

Accidental benefits

Question 26

… is a benefit that ensures that the sum insured (the death claim value) under the basic policy to which it is attached is “accelerated” and paid in a single lump sum to the beneficiary (usually the policyowner) in the event of the disability of the life insured rather than upon his death.

Answer 26

Capital Disability Benefits

Question 27

… is when the insurance is only for a specific term but also decreasing over that term. These insurances are mainly used for mortgages that decrease over time.

Answer 27

Decreasing term insurance

Question 28

… is benefit that provide a stated regular income during the period of a predefined form of disability.

Answer 28

Disability Income Benefits

Question 29

… are benefits that provide for the payment of a lump sum in the event of an insured suffering a disabling health event as defined in the policy.

Answer 29

Dread Disease Benefits

Question 30

… was issued for a fixed period as a combination of a term insurance and pure endowment.

Answer 30

Endowment insurance

Question 31

… is a benefit that allows the insured to exercise an option at given intervals (usually every third policy anniversary) to increase the sum insured without having to provide evidence of continued insurability (i.e. Health, occupation or recreation).

Answer 31

Guaranteed Insurability benefits

Question 32

… are benefits that provide for the regular payment or release of a portion of the total sum insured where long term treatment or care is required to take place in a registered nursing home or equivalent.

Answer 32

Long Term Care (LTC) or Frail Care Benefits

Question 33

… are benefits that provide stated lump sum payments, irrespective of the actual cost of specifically defined medical treatments that may become necessary such as cardiovascular surgery, hip replacements and cornea grafts.

Answer 33

Major Medical Expense (MME)

Question 34

… is about a person’s chances of being disabled.

Answer 34

Morbidity

Question 35

… refers to a person’s death or chances of dying.

Answer 35

Mortality

Question 36

… is a statistical factor used to determine the likelihood of something happening. Actuaries use these factors to build mortality tables to help them determine at what age an average person is likely to die.

Answer 36

Probabilities

Question 37

… are issued for a fixed period to provide a stipulated sum (with or without profits) on a certain date in the future (the maturity date) if the policyholder is still living on that date.

Answer 37

Pure endowments

Question 38

… is basically decreasing term insurance but supplemented with a bonus which keeps a level amount of cover. The bonus offsets the decrease in cover because it is decreasing term cover.

Answer 38

Reinforced whole life insurance

Question 39

… is the simplest form of insurance and is only payable if death occurred in that term.

Answer 39

Term insurance

Question 40

… is a benefit that provides for the acceleration of the payment of the death claim benefit in the event of an insured being diagnosed as suffering from a terminal illness.

Answer 40

Terminal illness benefits

Question 41

… is a benefit that provides when a person is both the insured and the payer of premiums and where that person becomes disabled in terms of the given definition of disability, the insurer will waive all future premiums as an immediate benefit and then maintain the policy in force until normal expiry or maturity, with no further premiums payable by the policyholder.

Answer 41

Waiver of Premium (WOP) Disability Benefits

Question 42

… covers the insured life not only for a given period but for the whole length of his life.

Answer 42

Whole life insurance