Faculty of Actuaries Institute of Actuaries
Subject CT5 Contingencies
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