Tutorial 1 Flashcards

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1
Q

List 4 groups may life insurance actuaries carry a responsibility

A
  • Client / employer
  • Policyholders
  • The actuarial profession (incl. public interest)
  • The regulators
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2
Q

Explain how the early life insurance companies tried to reduce lapse rates in the industrial branch

A

By making commission related to premiums collected rather than basing it on new business sold.

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3
Q

Outline the risk for the individual in respect of a contract of indemnity insurance

A
  • Has reduced exposure to risk
  • The chanse of the insured event occurring is unchanged, but the individual has exchanged the uncertainty of a large loss for the certain loss in respect of premium payments
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4
Q

Outline the risk for the insurer in respect of a contract of indemnity insurance

A
  • Has accepted the risk of having to pay out more than expected
  • The larger the group insured the more predictable the outcome should be
  • The insurer is also exposed to risks such as high running expenses, moral hazard, etc.
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5
Q

Outline the risk for the country as a whole in respect of a contract of indemnity insurance

A
  • The total number of occurrences of losses will be (approx.) unchanged
  • Total costs will have increased as insurers will have expenses and profit requirements (individuals less careful)
  • Presence of insurance benefits the country as it aids the development of businesses
  • Insurance should be a more efficient way of managing the problem than each individual setting aside enough capital to cover any risks.
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