1/19/23, 11:45 PM 1 of 20 Questions -

Question 1: STAM_LS0034

Wrong 4.41 0:11 2:19

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

Brock is an actuary in Assure Insurance Company. To mitigate risk, the company plans to cede some of its risks to a
reinsurance company.

Brock has two options: a 60% quota share treaty or a 40% surplus share treaty with a net retention of 1,000,000. Assure
pays 60% of the shared costs in the quota share treaty and 40% of the shared costs in the surplus share treaty.

Given a loss of 1,750,000, calculate the absolute difference of payments by Assure under these two treaties.

A 150,000

B 250,000

C 350,000

D 550,000

E 750,000

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Solution

Under the quota share treaty, Assure covers:

0.60 (1,750,000) = 1,050,000

Under the surplus share treaty, Assure covers:

1,000,000 + 0.40 (750,000) = 1,300,000

The absolute difference is 250,000.

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Question 2: STAM_TC0224

Wrong 2.34 0:11 4:56

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

You are given the following in-network benefit provisions for five PPO deductible type plans. All five plans have the
same monthly premium.

Type of Service Plan A Plan B Plan C Plan D Plan E

Annual deductible 1,200 1,200 1,500 1,000 1,100

Coinsurance 90% 90% 90% 75% 85%

Out-of-Pocket Limit 2,000 2,500 2,000 2,000 2,300

Prescription Drug Copay

15/25/80 10/30/100 15/25/120 20/40/160 10/35/110
(Generic/Brand/Specialty)

The coinsurance is applied after the deductible has been met. Copays do not contribute to the deductible, but do
contribute to the out-of-pocket limit.

Eugene, a prospective insured, expects to incur 8,000 in health care costs per year. He also expects to need three brand-
name drug prescriptions per year.

Determine the plan that minimizes Eugene's expected out-of-pocket expenses.

A Plan A

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B Plan B

C Plan C

D Plan D

E Plan E

Solution

We could calculate Eugene's expected out-of-pocket expenses for all 5 plans and select the plan with the lowest
expected expenses, but we can eliminate several plans by visual inspection.

Plans A and B have the same deductible and coinsurance, but Plan B has a higher OOP limit and slightly higher
brand-name prescription drug copay. This makes Eugene slightly prefer Plan A (because of the slightly lower
copay) until Plan A's OOP limit is reached, after which Eugene would much prefer Plan A.

Plans A and C have the same coinsurance, OOP limit, and brand-name prescription drug copay, but Plan C has a
higher deductible. So, Plan A is superior regardless of incurred costs.

Thus, eliminate Plans B and C.

Calculate the expected out-of-pocket expenses for Plans A, D, and E. In words, start with the deductible, add the
portion payable by the insured for the layer of costs between the deductible and 8,000, and then add the copays.
Compare that sum to the OOP limit and take the smaller value. Note that coinsurance the the portion payable by the
insurer.

Plan A: min [1,200 + (8,000 − 1,200) (1 − 0.90) + 3 (25) , 2,000] = 1,955

Plan D: min [1,000 + (8,000 − 1,000) (1 − 0.75) + 3 (40) , 2,000] = 2,000

Plan E: min [1,100 + (8,000 − 1,100) (1 − 0.85) + 3 (35) , 2,300] = 2,240

Eugene should choose Plan A based on his expected expenses.

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Note: Here are the expected out-of-pocket expenses for Plans B and C for comparison.

Plan B: min [1,200 + (8,000 − 1,200) (1 − 0.90) + 3 (30) , 2,500] = 1,970

Plan C: min [1,500 + (8,000 − 1,500) (1 − 0.90) + 3 (25) , 2,000] = 2,000

Attempts

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Discussion

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ANSWERED
copays after coinsurance
3 EZOUA BEKRO Sep 28 2019

ANSWERED
Intuition
2 John Ulrich Apr 24 2020

ANSWERED
Plan C
1 Santiago Rodríguez Jun 12 2020

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Question 3: STAM_LS0033

Wrong 2.7 0:09 2:46

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

Assure Insurance Company has a surplus share reinsurance treaty with Baric Insurance Company. Assure's net retention
is 1,500,000. The reinsurance treaty is structured in layers as follows:

Layer 1: 50% of 500,000 in excess of 1,500,000

Layer 2: 70% of 1,000,000 in excess of 2,000,000

Layer 3: 90% in excess of 3,000,000

The percentages given are the portion covered by Baric.

Given a loss of 2,750,000, calculate the percentage of the total loss covered by Assure.

A 17%

B 28%

C 66%

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D 72%

E 83%

Solution

Based on the treaty, Assure pays:

the first 1,500,000 since that is Assure's net retention

50% of 500,000 in excess of 1,500,000

30% of 1,000,000 in excess of 2,000,000

Since the loss does not exceed 3,000,000, layer 3 is not in effect. Assure's portion is:

1,500,000 + 0.50 (500,000) + 0.30 (750,000) = 1,975,000

1,975,000
Assure pays = 0.7182 of the total loss.
2,750,000

Attempts

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Question 4: FAM-S-HM-0014

Wrong 3.03 0:10 4:15

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

A reinsurance treaty covers all claims that exceed the attachment point of 1 million.

You are given historical data on all of the large claims that the primary insurer had.

Claim Number Ground-up Loss

1 880,000

2 930,000

3 1,050,000

4 1,600,000

5 2,800,000

Total 7,260,000

Inflation of 10% increases all losses uniformly.

Calculate the percentage increase in the amount paid under this reinsurance treaty by the reinsurer due to inflation.

A 23%

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B 25%

C 27%

D 29%

E 31%

Solution

The amount paid by the excess loss treaty is max[0, X − 1,000,000].

Claim Number Original Loss Paid By Reinsurer Inflated Loss Paid by Reinsurer

1 880,000 0 968,000 0

2 930,000 0 1,023,000 23,000

3 1,050,000 50,000 1,155,000 155,000

4 1,600,000 600,000 1,760,000 760,000

5 2,800,000 1,800,000 3,080,000 2,080,000

total 7,260,000 2,450,000 7,986,000 3,018,000

The percentage increase in the amount paid by the reinsurer is:

3,018,000
− 1 = 23.2%
2,450,000

Attempts

Jan 19 at 11:45 PM · 0:10 time spent · VIEW EXAM

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Question 5: STAM_TC0208

Wrong 3.02 0:05 0:51

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Determine which of the following is/are essential health benefits under the Affordable Care Act (ACA).

I. Laboratory services

II. Mental health and substance use disorder services

III. Oral and vision care for adults

IV. Rehabilitative and habilitative services and devices

A I, II and III only

B I, II and IV only

C I, III and IV only

D II, III and IV only

E The correct answer is not given by (A), (B), (C), or (D).

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Solution

Here is the list of 10 essential health benefits (EHBs) that non-grandfathered individual and small group major medical
plans under the ACA must cover:

1. Ambulatory patient services

2. Emergency services

3. Hospitalization

4. Maternity and newborn care

5. Mental health and substance use disorder services, including behavioral health treatment

6. Prescription drugs

7. Rehabilitative and habilitative services and devices

8. Laboratory services

9. Preventive and wellness services and chronic disease management

10. Pediatric services, including oral and vision care

Oral and vision care under pediatric services is one of the ten EHBs; oral and vision care for adults is not.

Attempts

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Question 6: STAM_TC0256

Wrong 3.87 0:15 5:35

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Sasha has an individual health insurance policy from Le Manach Insurance Company. Her policy has the following
benefit provisions:

Benefit Provision
Type of Cost Sharing
In-Network Out-of-Network

Overall Deductible 2,000 8,000

Coinsurance (%) 80% 50%

Out-of-Pocket Limit 8,000 13,000

The overall deductible resets on January 1 of every year. There are no other deductibles for specific health care
services. The coinsurance is applied after the overall deductible has been met.

Over the last 3 years, Sasha used out-of-network providers and incurred the following charges:

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Year Total Billed Charges Total Allowed Charges

2019 35,000 32,000

2020 11,000 10,000

2021 8,000 5,000

Calculate how much Sasha would have saved in out-of-pocket expenses (excluding balance billing) had she used in-
network providers over the last 3 years.

A 6,600

B 7,700

C 12,800

D 15,500

E 19,800

Solution

Billed charges are based on the retail, un-discounted price the provider charges for a service. Allowed charges are the
amounts permitted in benefit calculations. So, calculate Sasha's yearly expenses using the allowed charges.

Note that most insurers prohibit in-network providers from balance billing, i.e. seek payment from the insured for
the difference between the billed charges and allowed charges. However, out-of-network providers are usually not
subject to the same restriction, which means the insured is usually on the hook for the difference. We do not have
to worry about balance billing here because the problem explicitly excludes it.

There is a general formula to calculate Sasha's yearly expense (as shown below), but it is not necessary. The expenses
can easily be deduced using logic as shown in the table below.

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⎧ Allowed charges, Allowed charges≤

Insured's expense = ⎨ Deductible + (1 − Coinsurance)(Allowed charges − Deductible), Deductible < Allo

⎩
Out-of-pocket limit, Allowed charges >

Out-of-pocket limit − Deductible

where m = + Deductible
1 − Coinsurance

Allowed
Year Expense if In-Network Expense if Out-of-Network Sa
Charges

2019 32,000 2,000 + (1 − 0.8) (32,000 − 2,000) = 8,000 8,000 + (1 − 0.5) (32,000 − 8,000) = 20,000 > 13,000 ⇒ 13,000 5

2020 10,000 2,000 + (1 − 0.8) (10,000 − 2,000) = 3,600 8,000 + (1 − 0.5) (10,000 − 8,000) = 9,000 5

2021 5,000 2,000 + (1 − 0.8) (5,000 − 2,000) = 2,600 5,000 < 8,000 ⇒ 5,000 2

The total savings over 3 years is 12,800.

Attempts

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Question 7: STAM_LS0042

Wrong 2.06 0:05 3:48

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

Amity Insurance Company has a surplus share reinsurance treaty with Abnegation Insurance Company. Amity's net
retention is 1,000,000. The reinsurance treaty is structured in layers as such:

Layer 1: 60% of 1,000,000 in excess of 1,000,000

Layer 2: 70% of 1,000,000 in excess of 2,000,000

Layer 3: 80% of 1,000,000 in excess of 3,000,000

Layer 4: 90% in excess of 4,000,000

The percentages given are the portion covered by Abnegation.

Calculate the maximum percentage of total loss paid by Amity given that Amity experienced a catastrophic loss of at
least 4,000,000.

A 45.0%

B 47.5%

C 50.0%

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D 52.5%

E 55.0%

Solution

Let X be the catastrophic loss amount in millions. Amity would pay:

1 + 0.4 (1) + 0.3 (1) + 0.2 (1) + 0.1 (X − 4) = 1.5 + 0.1X

The percentage of total loss paid by Amity is:

1.5 + 0.1X

This percentage is a decreasing function, thus its maximum value is when X = 4 . Therefore, the maximum percentage
of total loss paid by Amity given that X > 4 is:

1.5 + 0.1 (4)

= 0.475
4

Attempts

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Sep 28 2022 · 1:13 time spent · VIEW EXAM

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Question 8: STAM_LS0035

Wrong 1.26 0:05 4:05

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

Kyle is an actuary in Sion Insurance Company. To mitigate risk, the company plans to cede some of its risks to a
reinsurance company.

Kyle has two options: a 70% quota share treaty or a 35% surplus share treaty with a net retention of 1,200,000. Sion
pays 70% of the shared costs in the quota share treaty and 35% of the shared costs in the surplus share treaty.

Given a loss of X in millions, the amount paid by Sion under both treaties is the same.

Calculate X .

A 1.83

B 2.10

C 2.23

D 2.65

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2.74

Solution

The amount paid by Sion under the quota share treaty is:

0.7X

The amount paid by Sion under the surplus share treaty is:

1.2 + 0.35 (X − 1.2)

Solve for X .

0.7X = 1.2 + 0.35 (X − 1.2)

0.7X = 1.2 + 0.35X − 0.42

0.35X = 0.78

X = 2.2286

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Question 9: STAM_TC0231

Wrong 3.29 0:04 2:13

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

An insurance company issues two types of policies:

Type A has a 25% deductible and no policy limit.

Type B has a franchise deductible of 300 and a policy limit of 3,000.

For a claim amount of X , a policy of Type A pays 2,400.

Calculate the amount that a policy of Type B will pay for the same claim amount.

A 2,400

B 2,700

C 2,900

D 3,000

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E 3,200

Solution

Type A

A 25% deductible functions as a 25% coinsurance, where the insured pays for 25% of each claim and the insurer pays
for the remaining 75%.

Therefore,

(1 − 0.25) X = 2,400

X = 3,200

Type B

For claims up to the deductible of 300, the insured will pay the full amount. For claims above 300, the insurer will pay
the full amount up to the policy limit of 3,000, rather than the claim amount less 300. This is because the deductible is a
franchise deductible.

So, for a claim amount of 3,200, a policy of Type B will pay 3,000, since 3,200 exceeds the policy limit.

Attempts

Jan 19 at 11:45 PM · 0:04 time spent · VIEW EXAM

Dec 20 2022 · 0:00 time spent · VIEW EXAM

Oct 6 2022 · 0:00 time spent · VIEW EXAM

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Sep 18 2022 · 0:00 time spent · VIEW EXAM

Sep 16 2022 · 0:10 time spent · VIEW EXAM

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Question 10: STAM_TC0118

Wrong 2.71 0:14 4:43

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Russ and his family have a major medical policy with the following cost sharing provisions:

The annual individual deductible is 2,500.

The annual family deductible is 5,000.

The coinsurance is 90%.

Before the family deductible is met, coinsurance applies to all healthcare costs incurred by family members whose
individual deductibles have been met. After the family deductible is met, coinsurance applies to all healthcare costs
incurred by the family. All out-of-pocket expenses count towards the deductible.

Over the last 12 months, Russ and his family submitted the following claims, in the order listed:

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Husband's annual physical: 500

Wife's annual physical: 500

Husband's surgery: 3,000

Son's doctor visit: 300

Wife's blood test: 200

Daughter's X-ray: 800

Calculate the insurance benefit paid to Russ and his family.

A 0

B 100

C 270

D 450

E 900

Solution

The first 2 transactions contribute 1,000 to the family deductible and 500 each to the husband and wife's individual
deductibles.

2,000 of the cost of the surgery goes toward meeting the husband's individual deductible. The remaining 1,000 is
subject to coinsurance. The insurer pays 1,000 (0.9) = 900 while the insured pays 100, which counts toward the
family deductible.

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The surgery also contributes 2,000 + 100 = 2,100 to the family deductible. The portion that is covered by coinsurance
(900) does not count toward the family deductible.

The last 3 transactions contribute 1,300 more toward the family deductible, for a total of 4,400. Neither the wife, son,
and daughter's individual deductibles or the family deductible is met. So the insurer will not pay anything for these
transactions.

In total, the insurer pays 900.

Attempts

Jan 19 at 11:45 PM · 0:14 time spent · VIEW EXAM

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Discussion

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ANSWERED
What happens after the family met the family deductible of 5,000?
7 Deb Feb 8 2019

ANSWERED
I got a little confused for the "coinsurance" term.
4 Daqian Huang Jun 15 2019

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Question 11: FAM-S-HM-0017

Wrong 3.56 0:05 6:58

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Below is the benefit structure of a dental plan:

Type I Type II Type III Type IV

Copay $20 for all procedures $40 for all procedures $80 for all procedures $100 for all procedures

In-network: 100% In-network: 90% In-network: 80% In-network: 60%

Coinsurance
Out-network: 90% Out-network: 70% Out-network: 40% Out-network: 20%

Below are the claims for one family:

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Service Type Total Allowed Amount

X-Rays I $100

Routine cleaning I $200

Filling II $500

Root Canal II $800

Partial Denture III $1,000

Emergency treatment for molar pain I $1,500

Molar extraction II $2,000

Braces IV $3,000

Calculate the absolute difference in the total cost for the family, if the family went to only in-network providers
compared to if the family went to only out-of-network providers.

A $1,500

B $1,700

C $1,900

D $2,100

E $2,300

Solution

The insurer's payment amount is:

[(Allowed − Copay) − Deductible] ⋅ Coinsurance

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The family's payment amount is:

Allowed − Company Amount

Create a table outline the costs for each service:

Total Allowed In-Network Out-Networ

Service
Amount Insurer Family Insurer

X-Rays: Type I $100 (100 - 20)(100%) = 80 100 - 80 = 20 (100 - 20)(90%) = 72

Routine Cleaning: Type I $200 (200 - 20)(100%) = 180 200 - 180 = 20 200 - 20)(90%) = 162

Filling: Type II $500 (500 - 40)(90%) = 414 500 - 414 = 86 (500 - 40)(70%) = 322

Root Canal: Type II $800 (800 - 40)(90%) = 684 800 - 684 = 116 (800 - 40)(70%) = 532

Partial Denture: Type III $1,000 (1,000 - 80)(80%) = 736 1,000 - 736 = 264 (1,000 - 80)(40%) = 368

Emer. treatment for molar pain: Type I $1,500 (1,500 - 20)(100%) = 1,480 1,500 - 1,480 = 20 (1,500 - 20)(90%) = 1,332

Molar Extraction: Type II $2,000 (2,000 - 40)(90%) = 1,764 2,000 - 1,764 = 236 (2,000 - 40)(70%) = 1,372

Braces: Type IV $3,000 (3,000 - 100)(60%) = 1,740 3,000 - 1,740 = 1,260 (3,000 - 100)(20%) = 580

Total 7,078 2,022 4,740

With the totals, we can calculate the difference:

4,360 − 2,022 = 2,338

Attempts

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Question 12: FAM_DZ0003

Wrong 2.9 0:04 0:42

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Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Determine which of the following make(s) a risk less likely to be insurable.

I. The loss is definite.

II. The loss is random in nature.

III. The exposures in a rate class are nonhomogeneous.

A I only.

B III only.

C I and II only.

D I and III only.

E The answer is not given by (A), (B), (C), or (D).

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Solution

I makes a risk more likely to be insurable. After the loss occurs, if the loss amount is not definite, there is room for
fraud by the policyholder. Having a definite loss helps guard against policyholder manipulation and moral hazard.

II makes a risk more likely to be insurable. The insured event must be beyond the control of the policyholder. If the
loss is not random in nature, the premium charged would need to include the known loss amount and the cost of
maintaining the insurance mechanism. So, it would make more sense to just pay for the loss amount for a risk if it is not
random, which means there is no purpose to have insurance for that risk.

III makes a risk less likely to be insurable. All units in a class should have the same loss expectation, or equivalently,
the same probability of incurring losses. Otherwise, predicting the claims and thus charging sufficient premium would
become much more difficult.

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Statement I
2 Nate Sep 22 2022

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 1/19/23, 11:48 PM 13 of 20 Questions -

Question 13: STAM_TC0222

Wrong 7.36 0:04 1:26

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Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Determine which of the following statements about major medical coverage is/are true.

I. Major medical coverage was introduced because medical care costs became much more significant than they
were previously.

II. There were coverages introduced prior to major coverage that also combined disparate sources of health care
costs into a common policy.

III. Policies are required to meet a minimum combination of covered services to be called "major medical".

A None

B I and II only

C I and III only

D II and III only

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E The answer is not given by (A), (B), (C), or (D).

Solution

I is true. Major medical coverage was introduced as a response to significant increases in medical costs. It became
apparent that only covering hospital or physician costs was inadequate for the policyholders.

II is false. One distinguishing factor between major medical coverage and earlier coverages is that major medical
coverage was the first time disparate sources of health care costs, such as hospital, physician, and ancillary, were
combined into a common policy.

III is true. Regulators require a minimum combination of covered services to be provided if a policy is to be called
"major medical". This is presumably to

prevent insurers from misleading consumers with subpar policies that use the name "major medical".

prohibit policies with unexpected holes in the benefit plan that will disadvantage the policyholder.

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 1/19/23, 11:48 PM 14 of 20 Questions -

Question 14: STAM_TC0223

Wrong 1.62 0:06 1:16

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Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Determine which of the following statements about cost sharing in the context of major medical coverage is false.

A plan with a $1,000 deductible should have a lower premium than an otherwise equivalent plan with a $500
A
deductible.

B An out-of-pocket limit is the amount the insured needs to pay out of pocket before any benefits are payable.

C Maximum limits can be expressed in terms of benefits per year, over the life of the individual, or both.

D The ACA prohibits internal limits on essential health benefits that are based on a dollar value.

E A copay is the cost that the insured pays each time a service is provided.

Solution

A is true. The higher the deductible, the less expensive the plan, all else equal.

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B is false. This statement describes a deductible, not an out-of-pocket limit. An out-of-pocket limit is the maximum
amount an insured will need to pay out of pocket. This relieves the insured of the cost of any additional covered
expenses once he/she has reached the limit.

C is true. Maximum limits are the overall maximum benefit payable by the insurer.

D is true. Internal limits are benefit limits that apply only to specific subsets of benefits. Some benefits can also have
per-service limits. Because the ACA does not prohibit limits on the number of services, many plans replaced annual
dollar limits with annual limits on the number of services.

E is true. Copays commonly apply to physician office visits, prescription drugs, emergency room, or other specific
benefits.

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ANSWERED
Copays after out of pocket max is reached
1 Emme Jan 16 2020

Don't see what you're looking for?

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 1/19/23, 11:48 PM 15 of 20 Questions -

Question 15: FAM_DZ0002

Wrong 2.32 0:05 0:50

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Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Which of the following statements is not a criterion that makes a risk insurable?

A The loss is definite.

B The economic value of the insurance is calculable.

C Exposure units are spatially and temporally dependent.

D The risk is economically feasible.

E The exposures in any rate class are homogeneous.

Solution

A is a criterion. After the loss occurs, if the loss amount is not definite, there is room for fraud by the policyholder.
Having a definite loss helps guard against policyholder manipulation and moral hazard.

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B is a criterion. There needs to be enough data available to support the insurer's calculations with a high degree of
confidence. Without this, the event would likely be too uncertain to insure.

C is not a criterion. If exposure units are spatially and temporally dependent, then one insured having a claim could
greatly increase the chances of another insured having a claim, which could lead to the insurer having to cover huge
losses at the same time. Exposure units should instead be independent with regard to location and time.

D is a criterion. For a risk to be insurable, the insurer must be able to collect enough premium to cover the losses and
the cost of maintaining the insurance, e.g., office expenses and sales commissions.

E is a criterion. All units in a class should have the same loss expectation, or equivalently, the same probability of
incurring losses.

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Chau Nguyen

SUMMARY:

MESSAGE:

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 1/19/23, 11:48 PM 16 of 20 Questions -

Question 16: SOA FAM-S 65

Wrong 1.69 0:05 1:59

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

An individual purchases a homeowners policy with an 80% coinsurance clause. The home is insured for 150,000. The
home was worth 180,000 on the day the policy was purchased. Lightning causes 20,000 worth of damage. On the day
of the storm the home is worth 250,000.

Calculate the benefit payment the individual receives from the policy.

A 15,000

B 16,000

C 17,500

D 18,000

E 20,000

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Solution
Based on the question, we can deduce that:

I = 150,000

c = 0.80

L = 20,000

F = 250,000

Note that 180,000 is a red herring.

The house is insured less than the coinsurance requirement, i.e. 150,000 < 0.80 (250,000) = 200,000. the
policyholder receives:

I
P = × L
cF
150,000
= × 20,000
200,000

= 15,000

01:37

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 1/19/23, 11:48 PM 17 of 20 Questions -

Question 17: SOA FAM-S 67

Wrong 3.76 0:16 2:24

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Individual 1 has an automobile insurance policy with the ABC Insurance Company. She has 200,000 of third party
liability coverage (bodily injury/property damage) and has a 1,000 deductible on her collision coverage.

Individual 1 is at fault for an accident that injures Individual 2, who is insured by XYZ Insurance Company. Individual
1 is successfully sued by Individual 2 for these injuries. The court orders Individual 1 to pay 175,000 to Individual 2.

Other expenses incurred are:

i. Legal fees to ABC on behalf of Individual 1: 45,000

ii. Collision costs to repair Individual 1's car: 20,000

Calculate the total amount ABC pays out for this occurrence.

A 175,000

B 195,000

C 200,000

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D
219,000

E 239,000

Solution

ABC has to pay:

175,000 + 45,000 + (20,000 − 1,000) = 239,000

Note that 200,000 is a combined single limit for the total liability coverage. Legal fees (defense costs) do not contribute
to the policy limit.

01:36

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Question 18: STAM_TC0210

Wrong 3.43 0:05 1:28

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Determine which of the following statements about the Affordable Care Act (ACA) is/are true.

I. The ACA prohibited lifetime and annual dollar limits on essential health benefits.

II. A gold level ACA-compliant plan must be expected to pay 68% to 72% of essential health benefits claim costs.

III. Plans must set an overall out-of-pocket (OOP) maximum limit on member cost sharing for essential health
benefits. This OOP maximum cannot exceed the published limits.

IV. Plans certified for sale on a public exchange must pass a meaningful difference test.

A I, II and III only

B I, II and IV only

C I, III and IV only

D II, III and IV only

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E The correct answer is not given by (A), (B), (C), or (D).

Solution

I is true. Starting September 23, 2010, the ACA prohibited lifetime and annual dollar limits on essential health benefits
(EHBs). It also eliminated cost sharing on many preventive services.

II is false. All ACA-compliant plans sold after January 1, 2014 must meet an actuarial value metal level (platinum,
gold, silver, and bronze). A silver level plan must be expected to pay 68% to 72% of EHB claim costs.

III is true. Furthermore, all cost sharing, (other than cost sharing under a standalone pediatric dental policy) must
accumulate to the OOP maximum.

IV is true. Plans certified for sale on a public exchange must meet these market rules:

Pass a meaningful difference test, in order to prevent insurers from saturating the market with many very similar
plans

Network adequacy tests

Tests for discriminatory service areas

Tests for discriminatory cost sharing

Tests by the government for "outlier" premium rates

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Question 19: FAM-S-HM-0034

Wrong 3.01 0:09 0:42

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.1 Short-Term Insurance Coverages

Problem MARK

Determine which of the following factors does not affect the premiums for homeowners insurance.

A Location of the home

B Limits of liability chosen

C Construction of the home

D Value of the home

E All of A, B, C, D affect the premium

Solution

Besides the property portion of the homeowners coverage, there is liability coverage. If the homeowners buys higher
limits of liability, then they pay more premium for more coverage.

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Question 20: STAM_TC0238

Wrong 3.41 0:05 5:58

Your Attempt Difficulty Your Last Time Global Avg Time

Section: S1.2 Other Topics

Problem MARK

An auto insurance policy has the following deductible structure:

i. For claims up to 6y, the deductible is y where y < 300 .

ii. For claims between 6y and 10y, the deductible disappears linearly such that there is no deductible for claims 10y
and above.

For a claim of 1,900, the insurer pays 1,750.

Calculate the amount paid by the insurer for a claim of 2,100.

A 1,900

B 1,950

C 2,000

D 2,050

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E
2,100

Solution

We know the deductible at 3 distinct points:

Claim Amount Deductible

6y y

1,900 150

10y 0

Note: Because y < 300 , we know 6y < 1,900 . Furthermore, since a claim of 1,900 has a non-zero deductible, we
know 1,900 is in the interval of claim amounts where the deductible disappears linearly.

Using linearly interpolation,

1,900 − 6y 10y − 6y
= = −4
150 − y 0 − y

1,900 − 6y = −4 (150 − y)

y = 250

Therefore, the deductible disappears linearly from claim amount 1,500 to 2,500.

For a claim of 2,100, the deductible d satisfies the equation

1,900 − 1,500 2,100 − 1,500

=
150 − 250 d − 250

Solve for d = 100. The insurer pays 2,100 − 100 = 2,000.

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