Estimating the premiums needed to fund future promises is called:

Question

Options

• AProspective funding
• Bimminent procedure
• Cratemaking
• Dpotential funding

• A
  8% (2)
• B
  4% (1)
• C
  77% (20)
• D
  12% (3)

Explanation

Ratemaking (C) is the actuarial/insurance term specifically for the process of calculating and estimating the premiums necessary to cover future claims and obligations - it is the industry-standard word for pricing insurance promises.

• A. Prospective funding is a real actuarial concept, but it refers to a method of valuing pension liabilities (looking forward to estimate plan costs), not the premium estimation process itself - it's a close-sounding distractor but wrong context.
• B. Imminent procedure is not a recognized term in insurance or actuarial science; it's a fabricated distractor.
• D. Potential funding is similarly not a defined industry term - it sounds plausible but has no specific meaning in this field.

Memory tip: Think of "ratemaking" literally - actuaries make the rates (premiums) that will fund future promises. If you remember that insurance premiums = rates, and that setting them requires estimation, "ratemaking" is the natural match.

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