Faculty of Actuaries Institute of Actuaries EXAMINATION September 2005 Subject CT5 Contingencies Core Technical EXAMINERS REPORT Faculty of Actuaries Institute of Actuaries Subject CT5 (Contingencies Core Technical) September 2005 Examiners Report In general, this examination was done well by students who were well prepared. Several questions gave difficulties particularly Question 7 and 12(ii) the latter one being very challenging. To help students comments are attached to those questions where particular points are of relevance. Absence of comments can be indicate that the particular question was generally done well. 1 Adverse selection is the manner in which lives form part of a group, which acts against a controlled process of selecting the lives with respect to some characteristic that affects mortality or morbidity. An example is where a life insurance company does not distinguish between smokers and non-smokers in proposals for term assurance cover. A greater proportion of smokers are likely to select this company in preference to a company that charges different rates to smokers and non-smokers. This would be adverse to the company s selection process, if the company had assumed that its proportion of smokers was similar to that in the general population. Other examples were credited. 2 Occupation can have several direct effects on mortality and morbidity. Occupation determines a person s environment for 40 or more hours each week. The environment may be rural or urban, the