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CEBS - GBA 1 - Practice Exam- 98 Questions and Answers
CEBS - GBA 1 - Practice Exam- 98 Questions and Answers
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CEBS - GBA 1 - Practice Exam- 98Questions and Answers
Which of the following statements correctly describes minimum
requirements that group benefit plans typically must meet in order to be
prospectively rated on contract renewal? - -The more unpredictable the
event that will trigger a claim, the larger the minimum group size and
premium requirements
-Which of the following statements correctly describes the term graduation
as it applies to mortality tables? - -It is a mathematical process that removes
anomalies that should not appear in the mortality data
-If the plan sponsor pays the premium, which of the following group insured
benefits is taxable to the plan member? - -Long-term disability (LTD)
-Which of the following statements correctly describes phases of a group
plan marketing? - -Plan features of both contributory and noncontributory
benefit plans must be communicated to plan members during the enrollment
process
-Which of the following statements correctly describes a characteristic of an
insurable risk? - -The loss must have financial significance to the insured
(The loss must not be catastrophic to the insurer. Option C: The loss must
occur by chance. Option D: The loss must be predictable for the insurer.)
-With respect to marketing a group insurance plan, which of the following
statements best describes insurer representatives known as account
executives? - -They are involved in enrolling group members and installing
new plans
-Which of the following statements correctly describes the statistical
concept known as the law of large numbers? - -Future probabilities of loss
are not valid unless a large number of incidents exist to ensure the outcomes
are less likely to deviate
-Which of the following statements correctly describes an insured plan that
is insurer-administered? - -For self-insured plans with an administrative
services only (ASO) arrangement, the insurer bills the plan sponsor monthly
for administration fees
-If the probability that an individual will live one year is 0.95 and the
probability of dying in the following year is 0.10, what is the probability that
,an individual will survive both years? - -0.855 (P (Survive both years) =
(0.95) x (1 - 0.1) = 0.95 x 0.90 = 0.855.)
-Which of the following statements correctly describes the group benefits
enrollment process for new employees? - -An employee can enroll in the
plan any time between his or her date of hire and the end of a waiting period
-A type of service offered under a third-party administrators (TPAs) claims
settlement only arrangement is: - -Adjudicating and paying claims
-Unless otherwise specified in the group insurance contract, a plan
member's status under a group benefits plan terminates the earliest at
which: - -The plan member retires (Unless otherwise specified in the group
insurance contract, the order in which coverage terminates is effective the
earliest date the plan member retires, the plan member's service with the
plan sponsor is terminated, the plan member ceases active work, and the
plan member is no longer a member of an eligible class and premium
payments stop.)
-Which of the following statements correctly describes eligibility
requirements under most group insurance plans? - -Unmarried children
under a specified age and dependent on the plan member for support are
eligible for coverage
-Which of the following statements correctly describes the negotiated
placement method of marketing a group benefits plan? - -Once potential
insurers are identified, each company submits a brief report that highlights
its general strategy, philosophy and proposed group benefits plan
-True North Insurance has 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 rate of 6% compounded annually, how many
years will it take for the reserve of $100,000 to accumulate to $200,000? - -
12 years (Use the relationship between future value and present value to
solve for the number of time periods.
FVt = PV x (1 + r)^t
$200,000 = $100,000 x (1 + 6%)^t
$200,000/$100,000 = (1.06)^t
2.00 = (1.06)^t
The number of time periods can be approximated using the future value
table. With an interest rate of 6%, it will take 12 years to accumulate to a
sum of $200,000 (or 2.01220).)
, -Which of the following statements correctly describes a group insurance
policy? - -It is issued on a group of individuals for protection against financial
hazards, such as death, accident and sickness
-Last year, a small town reported that 20 people under the age of 50 died. If
the population of people under the age of 50 in the town is 10,000, what is
the probability of a resident under the age of 50 dying? - -0.2% (Probability
of a resident under the age of 50 dying is 20/10,000 = 0.002 = 0.2%.)
-Which of the following statements correctly describes the predictability of
an event and the cost of insurance under a group benefits plan? - -An out-of-
country emergency is an unforeseen event with a potentially high cost
(Disability is an unforeseen event with a potentially high cost. Option C:
Basic dental services are a predictable event with a low cost. Option D:
Paramedical services are an unforeseen event with a low cost.)
-Which of the following statements best describes individual large amount
pooling? - -It protects the plan sponsor from claims payments with respect
to any one insured individual in excess of the pooling limit or pool ceiling.
-Nevaeh works full¬time as a business manager on her family's dairy farm.
She has an allergy to grain that is triggered by direct contact. If she becomes
sick and is unable to work, she loses her only source of income and her
lifestyle will change significantly. Which of the following risk management
approaches would BEST address Nevaeh's need to protect her income? - -
Transfer the risk of becoming sick (Assuming Nevaeh wants to stay in
farming, avoidance is not an option. Nevaeh can do everything she can to
take measures to reduce her exposure, but if becoming sick jeopardizes her
only source of income, Option C, purchasing insurance, is the best option.)
-Under the coordination-¬of-¬benefits (COB) provision, which of the
following plans is the first payer in respect of a claim for a covered
dependent child under a single-custody arrangement? - -Plan of the parent
with custody of the child
-In terms of designing a group benefits plan, which of the following
statements correctly describes a benefit/needs-oriented philosophy? - -An
example of a needs-oriented benefit is health care
-Which of the following statements correctly describes static tables and
tables with projection? - -In "mortality tables with projection," it is assumed
that the mortality rate at a particular age will improve in the future by a
certain percentage per year (Static tables include mortality rates that are not
adjusted for expected future mortality improvements. Option B: Instead of
replacing tables, actuaries typically make adjustments for unexpected
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