What requires the full-term premium for each policy that has not expired at the Annual Statement date be determined?

Question

Options

• Ain-force premium method
• Bstability of premium investor
• Cpremium period
• DGross premium rated reinsurance

• A
  78% (28)
• B
  8% (3)
• C
  11% (4)
• D
  3% (1)

Explanation

In-force premium method requires the insurer to identify every policy still active at the Annual Statement date and determine its full written (term) premium, from which the unearned portion is then calculated pro-rata. This makes it the most accurate - but most labor-intensive - method for establishing unearned premium reserves, because it works policy-by-policy rather than using aggregate estimates.

Why the distractors are wrong:

• B (stability of premium investor) is not a recognized actuarial or accounting term - it's a fabricated distractor.
• C (premium period) simply describes the time span over which premiums are collected; it's a temporal concept, not a valuation method.
• D (Gross premium rated reinsurance) is a reinsurance pricing approach where the cedant's gross premium is used as the rating basis - unrelated to the Annual Statement reserve methodology.

Memory tip: Think of "in-force" literally - only policies currently in force (unexpired) matter, and you need the full premium for each one to know how much is still "unearned." The phrase "in-force → full-term → unearned" chains the logic together.

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