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　　4 Calculate a net level premium ( PNL ) based on the plan of insurance at
　　issue, using valuation assumptions, and assuming gross premiums are
　　paid.
 
　　5 Calculate the net level reserve at time t as NL NL
　　tV =PVFBt?P
 
　　6 Calculate the CRVM expense allowance (EACRVM) for the plan of
　　insurance generated at issue using valuation assumptions and assuming
　　that PNL is paid.
 
　　7 Calculate the CRVM reserve at time t as CRVM NL CRVM
　　tV =tV ?EA
　　COURSE 8I: Fall 2004 -7- STOP
　　Individual Insurance – U.S.
　　Morning Session
　　7. (5 points) Your company is designing a product for the Lottery Commission. Winners
　　have a choice between a lump sum payment and an equivalent 25-year period certain
　　annuity.
　　(a) Describe key considerations in developing pricing assumptions for the annuity.
　　(b) You are considering the following product design features for the annuity:
　　? Surrender provision
　　? Medical bailout provision
　　? Variable payout based on investment results
　　Describe advantages and disadvantages of including these features in the product
　　design.
 
　　8. (4 points)
　　(a) (3 points) Describe the indicators being used as preferred risk criteria for life
　　insurance according to the Report of the Society of Actuaries Task Force on
　　Preferred Underwriting.
　　(b) (1 point) A company with a single non-smoker class would like to introduce a
　　preferred class.
　　You are given:
　　? Male age 55 aggregate mortality is 6.00 per thousand.
　　? 30% of the non-smoker class is expected to qualify for the new preferred
　　class.
　　? A 15% reduction in mortality is expected for the new preferred nonsmoker
　　class.
　　Calculate the expected mortality rate for both the preferred non-smoker and the
　　residual non-smoker classes. Show all work.
　　**END OF EXAMINATION**
　　MORNING SESSION
　　COURSE 8I: Fall 2004 -8- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　**BEGINNING OF EXAMINATION 8**
　　INDIVIDUAL INSURANCE – U.S.
　　AFTERNOON SESSION
　　Beginning with question 9.
 
　　9. (6 points) ABC Life offers a disability premium waiver benefit rider sold with life
　　insurance products.
　　(a) (5 points) Explain the assumptions required to calculate the experience premiums
　　for this rider.
　　(b) (1 point) You are given the following information for an individual insured
　　age 55:
　　? Level annual premium waived is $100.
　　? Disability occurs at the middle of the policy year when the insured is age 55.
　　? Waiver benefits end at age 60.
　　? There is a 6-month waiting period, with coverage retroactive to the date of
　　disability.
　　? Premium and benefit payments are payable continuously throughout the
　　policy year.
　　[ 1] 1
　　x+k+ 2 +s+ 2 1 1
　　2 2
　　i
　　x k s D ?? + + ??+ +
　　1 1
　　2 2
　　i
　　x k s D ?? + + ??+ +
　　[ 1] 1
　　55 2+ 2 97.80 100.16
　　[ 1] 1
　　552+12 93.19 95.47
　　[ 1] 1
　　552+ 22 88.72 90.94
　　[ 1] 1
　　552+ 32 84.38 86.53
　　[ 1] 1
　　552+ 42 80.18 82.27
　　[ 1] 1
　　552+ 52 76.09 78.12
　　Calculate the present value of the net benefit at the end of the waiting period.
　　Show all work.
　　COURSE 8I: Fall 2004 -9- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　10. (12 points) You are given the following features for a proposed single-premium equityindexed
　　annuity product:
　　Index S&P 500
　　Index Period 3 years
　　Index Growth Method Point-to-Point
　　Ratchet Annual
　　Participation Rate 90%
　　Margin 0.5%
　　Cap 15%
　　The participation rate, margin and cap features are applied in the order
　　listed above.
　　The product provides a Guaranteed Minimum Account Value of 90%
　　of the single premium, accumulated at 3% annual interest rate.
　　You are also given the following information:
　　? The net earned rate is 5.5%.
　　? The marketing area estimates it will sell $100 million in single premium in the
　　first year.
　　? The annuity product will be marketed primarily through independent
　　stockbrokers.
　　? Variable expenses are 4% of the single premium.
　　? Fixed expenses are $1 million in each of the next 3 years.
　　? To improve policyholder persistency, the marketing area has proposed a series
　　of discretionary “customer appreciation campaigns” that enhance the
　　product’s account values. The revised present value of index-based interest
　　budget to support these campaigns is estimated to increase from 6% to 9%.
　　COURSE 8I: Fall 2004 -10- GO ON TO NEXT PAGE
　　Individual Insurance – U.S.
　　Afternoon Session
　　高顿网校之名人名言：先付报酬的工作是肯定干不好的。 —— 约·弗洛里奥