GBA 1

Question 1

What method of risk management involves retaining or bearing risk internally?

Answer 1

Self-insuring

Question 2

The fundamentals of group insurance include…

Answer 2

Insured ee cannot determine the amount or type of coverage; ee must be actively at work; there must be a spread of risk; and any ee contributions are made thru payroll deductions

Question 3

Some types of insurable groups can be:

Answer 3

Creditor groups, multi employer groups and association groups.

Question 4

Factors that are generally considered in a plan sponsor’s benefit plan funding decision include:

Answer 4

Tax considerations, type of benefits, size of plan, regulatory requirements and volume of claims.

Question 5

Common law rules that apply to benefits plan trustees include:

Answer 5

Standard of care rule, conflict of interest rule, no delegation and evenhanded rule.

Question 6

In a MEP (multi employer plan), what is the structure commonly used to hold plan assets?

Answer 6

Trust

Question 7

An employer’s benefits objectives typically address:

Answer 7

Premium contribution basis for insured benefits; specific competitive objectives; extent of coverage; level of expenditure, coverage, eligibility for different ee groups.

Question 8

A systematic method for classifying and analyzing the risks and needs of ees into logical categories of exposures to loss and ee needs is:

Answer 8

The functional approach to benefits plan design

Question 9

Under the functional approach, categories of individuals that an employer might want to protect include:

Answer 9

Disabled ees and their dependants; surviving dependents of deceased ees; part time ees; dependents of active full time ees

Question 10

An approach to benefits plan design that provides an er paid level of basic benefits, and gives ees the option of purchasing optional benefits using flex credits is:

Answer 10

Core plus options approach

Question 11

Circumstances that require an ee to provide satisfactorily evidence of insurability include:

Answer 11

Applies for coverage that was previously refused; applies for life insurance that exceeds a predefined max; elects optional life insurance coverage; and is considered a late applicant.

Question 12

Risk avoidance techniques can include:

Answer 12

Substitution, elimination and separation.

Question 13

A group contract defines the benefits provided and includes:

Answer 13

Types and level coverage provides; claims provision; premium provisions; insuring provisions such as eligibility requirements.

Question 14

The classification of risk where the insured’s likelihood of loss is not significantly greater than average is:

Answer 14

Standard risk

Question 15

Factors which influence the viability of an er association plan include:

Answer 15

A close relationship between members and association; close proximity of members; association administration capability; and a committed association exec.

Question 16

The independent national complaint resolution and information service for consumers of Canadian life and health insurance products is?

Answer 16

Ombudservice for life and health insurance.

Question 17

Plan administration activities may include:

Answer 17

Evaluating the overall program and specific benefits against performance standards; negotiating/monitoring service provider agreements; performing plan member enrolments; and determining the appropriate administrative structure.

Question 18

Benefits which are best suited to short probationary periods include:

Answer 18

Life insurance and STD

Question 19

Deciding to self fund certain benefits is an element of?

Answer 19

Cost containment

Question 20

Which of the following statements correctly describes a fully pooled insurance arrangement?

Answer 20

Even if a particular group has favourable experience during the previous contract experience, its premium rates might increase if the experience of the pool is unfavourable.

Question 21

What is the statistical concept of the law of large numbers?

Answer 21

Future probabilities of loss aren’t valid unless a large number of incidents exist to ensure the outcomes are less likely to deviate.

Question 22

If the probability that an individual will live one year is .95 and the probability of dying in the next year is .10, what’s the probability that an individual will survive both years?

Answer 22

.855

Question 23

An insurance comp. had established a waiver of premium reserve of $100,000 and will have to pay out an optional life insurance benefit of $200,000. With an interest of 6% compounded annually, how many years will it take for the $100,000 reserve to accumulate $200,000?

Answer 23

12 years

Question 24

A comp. is expecting to pay total death benefits of $150,000 at the end of 4 years. Assuming the interest rate is6% per year compounded semi-annually, what reserve level must be held today to meet this future obligation?

Answer 24

$118,412

Question 25

With respect to marketing group insurance, which of the following best describes account execs?

Answer 25

They’re involved in enrolling group members and installing new plans.

Question 26

What effecting annual rate is equivalent to a nominal rate of 18% per annum compounded every month?

Answer 26

19.56%

Question 27

If an ee works full time and becomes sick, and unable to work; and cannot purchase disability insurance. This is an example of?

Answer 27

Accepting risk.

Question 28

Under the COB provision, which plan is the first payer for a claim of a covered dependent child under a single custody arrangement?

Answer 28

Plan of the parent with custody of the child.

Question 29

What correctly describes processing health care claims under a group benefits plan?

Answer 29

Plan member must submit a completed claim form and written proof of the expense within a specified time period to recover eligible expenses.

Question 30

What correctly describes eligibility requirements under most group insurance plans?

Answer 30

Unmarried children under a specified age and dependent on the plan member for support- are eligible for coverage.

Question 31

A type of service offered under a TPA’s claims settlement only arrangement is?

Answer 31

Adjudicating and paying claims.

Question 32

What best describes an insured plan that is insured administered?

Answer 32

For insured plans with ASO, the insured bills the plan sponsor for monthly admin. fees.

Question 33

What describes mortality tables?

Answer 33

A select mortality table is NOT used for group life products, since evidence of insurability is not usually required.

Question 34

What best describes income replacement benefit provided under a group benefits plan?

Answer 34

Sick leave plans typically provide full pay for absences from work due to sickness or injury for a short period.

Question 35

What best describes a characteristic of an insurance risk?

Answer 35

A loss must have financial

significance to the insured.

Question 36

If a plan pays a $5000 if a plan member is hospitalized, but actual expenses are $4000. What is this an example of?

Answer 36

A contract of indemnity.

Question 37

Which group satisfies all 5 fundamental principles of group insurance?

Answer 37

Single employer groups.

Question 38

Type of organization and working climate impact a company’s total compensation philosophy. Which toe of company would emphasize long term, security oriented benefits in their total compensation package?

Answer 38

Conservative financial companies.

Question 39

With designing a benefit plan, what best describes a benefit/needs oriented philosophy?

Answer 39

Health care = needs oriented benefit

Question 40

What best describes the enrolment process for new ees?

Answer 40

An ee can enrol in the plan anytime between their date of hire and end of a waiting period.

Question 41

What best describes the predictability of an event and the cost of insurance under a plan?

Answer 41

OOC emergencies are an unforeseen event with a potentially high cost.

Question 42

What best describes prospectively rated u/w?

Answer 42

It bases premium rates in whole or in part on the group’s own claims experience.

Question 43

What best describes direct offsets?

Answer 43

They include primary benefits payable under Canada/Quebec pension plan disability pensions and workers compensation benefits.

Question 44

What is a taxable benefit to the plan member?

Answer 44

LTD

Question 45

Under the functional approach to benefits plan design, one method for determining the length of service required for benefit eligibility considers whether the benefit is protection oriented or accumulation oriented. Under this method, which of the following types of benefits plans is likely to have the longest required waiting period?

Answer 45

Stock bonus

Question 46

It was reported that 20 ppl under the age of 50 died. If the population of ppl under the age of 50 in the town is 10,000, what is the probability of a resident under the age of 50 dying?

Answer 46

0.2%

Question 47

What correctly describes the term “graduation” as it applied to mortality tables?

Answer 47

It is a mathematical process that removes anomalies that should not appear in the mortality data.

Question 48

What describes the application of the CLHIA’s COB guidelines for OOC/OOP claims?

Answer 48

The first carrier is the insurer or plan administrator first contacted in the event of a claim.

Question 49

What best describes correctly describes the negotiated placement method of marketing a group benefits plan?

Answer 49

Once potential insurers are identified, each company submits a brief report that highlights its general strategy, philosophy and proposed group benefits plan.

Question 50

Which benefit is most likely to have a premium rate guarantee of more than one year?

Answer 50

LTD

Question 51

If the probability that a pregnant woman will bear twins is .10, triplets is .05, quadruplets is .005 and quintuplets is 0, what is the probability that a pregnant woman will give birth to more than one child at the end of her pregnancy?

Answer 51

.155

Question 52

What correctly describes a disabled life reserve?

Answer 52

It is the estimate of the current value of all future periodic payments to an LTD claimant.

Question 53

What correctly describes marketing a group benefits plan?

Answer 53

If a plan sponsor decides to cancel a plan, it typically must notify the insurer within 30 to 60 days before the effective date of cancellation.

Question 54

What is the premium renewal rating process?

Answer 54

The objective of renewal rating is to set future premium rates at a level that supports projected claims charges and expenses.

Question 55

For refund accounting plans, what is the possible initial source of funds for offsetting a deficit for a particular accounting period?

Answer 55

Claims fluctuation reserve (CFR)

Question 56

What is the phase of a group plan marketing?

Answer 56

Plan features of both contributory and non-contributory benefit plans must be communicated to plan members during the enrolment process

Question 57

What describes static tables and tables with projection?

Answer 57

In tables with projection, it is assumed that the mortality rate at a particular age will improve in the future by 1-2% per year.

Question 58

What describes the difference between mortality tables and morbidity tables?

Answer 58

It’s more difficult to predict morbidity than mortality, since there are fewer sources of credible data.

Question 59

What describes individual large amount pooling?

Answer 59

It protects the plan sponsor from claims payments with respect to any one insured individual in excess of the pooling limit or pool ceiling.

Question 60

What best describes avoiding adverse selection?

Answer 60

The choice of benefits and amount of coverage must be restricted.

Question 61

What best describes an MEP?

Answer 61

Employer contributions to a MEP are typically a specified amount per hour worked per employee.

Question 62

How is the insurance marketplace regulated in Canada?

Answer 62

Federally incorporated insurers are subject to the financial soundness/solvency regime administered by the office of the superintendent of financial institutions (OFSI)

Question 63

What is a group benefits plan?

Answer 63

Insurance is usually less expensive to obtain under a group plan than under an individual plan.

Question 64

What is u/w?

Answer 64

It is used by insurers to evaluate the risk of a group benefits plan; it’s used by insurers to establish a premium rating basis.

Question 65

According to CLHIA guidelines related to insurance product disclosure, the plan description provided to each individual insured under a plan should include?

Answer 65

Name of plan sponsor, insurer and group policy number; claims provision including a description on how to submit a claim and proof of loss time limits.

Question 66

What type of ees would a single employer want to cover?

Answer 66

Active permanent ees and their dependants; surviving dependents of deceased ees; ees temporarily separated from the er service due to layoffs, leaves of absence, military duties or strikes.