SOA Disability, Long-Term Care, and Long-Duration Health Contracts Examination Practice Test
The SOA Disability, Long-Term Care, and Long-Duration Health Contracts Examination concerns actuarial analysis of health insurance promises that may extend over many years. Relevant concepts include disability income benefits, long-term care coverage, claim obligations, policyholder behavior, and the financial effects of contract features such as benefit limits and inflation protection.
Exam overview
About the SOA Disability, Long-Term Care, and Long-Duration Health Contracts… Exam
The work involves translating contract provisions into assumptions and projected cash flows. For disability income coverage, distinguish benefit periods and pre-existing-condition limitations; for long-term care, consider care definitions, benefit triggers, and activities of daily living. Claim analysis requires separating frequency from severity and recognizing obligations for incurred but unreported claims. Long-duration contracts also call for attention to premium constraints, changing claim costs, lapse behavior, and the possibility that policyholders who persist differ from those who terminate. These factors affect pricing, liability measurement, and assessment of profitability over the life of a contract. Practice with scenarios by identifying the provision or assumption at issue, then tracing its effect on expected claims, premiums, or insurer risk.
Sample Practice Questions
Review a selection from this exam's published US Practice Tests practice bank.
When projecting future health claims, an actuary separates expected claim frequency from expected claim severity. What does claim severity generally measure?
Show answer
Correct answer: AClaim severity concerns the cost or amount of claims, commonly assessed on an average or distributional basis. Claim frequency instead concerns how often claims occur.
A long-term care contract distinguishes between skilled nursing care and custodial care. Which statement best describes custodial care in general?
Show answer
Correct answer: ACustodial care generally assists with personal needs and daily functioning rather than providing primarily skilled medical treatment. Whether and under what conditions it is covered depends on the contract.
A disability income policy includes a benefit maximum period. What does this limit generally specify?
Show answer
Correct answer: AThe benefit maximum period sets the longest duration for which benefits are payable for a covered disability, subject to the policy’s terms and continuing eligibility.
An insurer estimates a liability for claims that have occurred but have not yet been reported. What type of claim obligation is this estimate intended to capture?
Show answer
Correct answer: AAn incurred-but-not-reported (IBNR) estimate represents claims that have already occurred but have not yet been reported to the insurer by the valuation date. Estimation is needed because reporting may lag the underlying event.
For an insurer's long-duration health contract, actual lapse rates are substantially lower than assumed. If continuing coverage is less profitable than expected, which risk is most directly illustrated?
Show answer
Correct answer: APersistency or lapse experience affects how long policies remain in force and the mix of risks retained. If policies persist longer than expected and are less profitable at later durations, lower lapses can adversely affect results.
In a long-term care contract, what is the main purpose of an inflation protection feature?
Show answer
Correct answer: BInflation protection increases benefit amounts or limits over time, according to the selected feature, to help preserve purchasing power as care costs rise. It does not guarantee full coverage of all future expenses.
An actuary is evaluating a long-duration health contract and finds that policyholders who remain insured differ systematically from those who lapse. What is the actuarial concern most directly associated with this pattern?
Show answer
Correct answer: AIf lapse behavior is associated with health or expected claim costs, the composition of the remaining insured group can change. This selection effect may influence future claim projections and profitability.
How to use this practice test
The free US Practice Tests bank contains 50 published practice questions. Each session presents up to 20 questions selected at random, with results shown after the session. Use the questions to test interpretation of contract terms and actuarial implications, then revisit any missed concepts such as claim reserves, lapse effects, or benefit triggers.
Preparation tips
- For claim projections, work through how frequency and severity affect expected claims separately before combining them.
- Compare skilled nursing and custodial care, and practice identifying how activities of daily living may support a long-term care benefit trigger.
- For disability income provisions, explain the practical effect of benefit maximum periods and pre-existing-condition limitations.
- Analyze how lower-than-assumed lapse rates can change profitability when continuing coverage has unfavorable expected margins.
- For long-duration contracts with restricted premium changes, consider how uncertainty in future claim costs affects pricing and liability assumptions.