IIQE Paper 3 Introduction to Life Insurance question: natural premium system

Answer: D. (ii), (iii) and (iv)

Answer: (ii), (iii) and (iv). Statements (ii), (iii) and (iv) are true; (i) is not.(i) False. Under the natural system premiums were recalculated each year; level premiums belong to the later system.(ii) True. Mortality risk rises with age, so each year's premium rose too.(iii) True. Better risks left as cover grew dearer, while poorer risks stayed.(iv) True. The system is no longer practised for genuinely long-term policies.Why not the others:• (i), (ii) and (iii): includes (i), which is false, and leaves out (iv), which is true.• (i), (ii) and (iv): includes (i), which is false, and leaves out (iii), which is true.• (i), (iii) and (iv): includes (i), which is false, and leaves out (ii), which is true.Watch out: Mixing up the natural premium system (yearly, rising) with the level premium system now in use.Rule: Natural premium: recalculated each year, rising with age, prone to anti-selection, abandoned for long-term business.Source: IA Long Term Insurance (Paper III) Study Notes, 2022 Edition (8th ed., June 2022; for exams from 24 Oct 2022), 1.3.2a, p. 1/13-1/14