100+ Free Life Insurance Applications (LIA) Practice Questions

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Superannuation and Retirement Applications (SRA) — Actuaries Institute Fellowship Program

Practice Questions100 questions

2026 Statistics

Key Facts: Life Insurance Applications (LIA) Exam

3 hours

Exam Duration

Actuaries Institute

$3,800 AUD

2026 Subject Fee

Actuaries Institute Fee Schedule

Syllabus Areas

AIA LIA Syllabus

LPS 340

Key APRA Standard

APRA Prudential Framework

100

Practice Questions

OpenExamPrep

Life Insurance Applications (LIA) is one of four Applications subjects in the Actuaries Institute Fellowship Program, delivered 100% online over a 16-week semester. It is assessed by an open-book written examination of three hours plus 15 minutes reading time worth 80% and an assignment worth 20%, with a 2026 subject fee of $3,800 AUD; no item count and no pass mark are published, and results are set each semester by the Board of Examiners. The 2026 syllabus publishes eight weighted learning-objective groups, led by the valuation cycle at 30% and product management at 25%, with the regulators at 10% and risk management and business planning at 10% each. These 100 free questions are an English-language multiple-choice study adaptation of that syllabus — not an official item bank and not a simulation of the real written-answer paper. Note that the Institute has advised LIA will run in Semester 1, 2027 and may not run in Semester 2, 2027, so check the current timetable before planning your pathway.

Sample Life Insurance Applications (LIA) Practice Questions

Try these sample questions to test your Life Insurance Applications (LIA) exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under Part 4 of the Life Insurance Act 1995 (Cth), what is the statutory requirement regarding 'Statutory Funds' for Australian registered life insurance companies?

A.A life company must establish and maintain one or more statutory funds, and must keep the assets and liabilities of each statutory fund strictly distinct and separate from the assets of the company's other funds and the shareholders' fund

B.A life company must hold all policyholder premiums in an unrestricted general bank account shared with all commercial subsidiaries

C.A life company is prohibited from establishing more than one statutory fund under any circumstances

D.A life company must invest all statutory fund assets in physical currency stored in cash vaults

Explanation: Part 4 of the Life Insurance Act 1995 mandates the establishment of statutory funds to protect policyholders. All premiums must be paid into the appropriate statutory fund, and its assets can only be applied to meet liabilities and expenses of that fund (or distributed as profits strictly in accordance with statutory rules).

2Under APRA Prudential Standard LPS 110 (Capital Adequacy), what is the regulatory capital requirement that an Australian life company must meet, and at what level is it applied?

A.The capital base must exceed the Prescribed Capital Amount, and the requirement applies to each statutory fund and to the company as a whole

B.Common Equity Tier 1 capital must exceed total policyholder liabilities for the company as a whole only

C.Annual premium income must exceed the maximum death benefit sum insured in each statutory fund

D.A cash settlement reserve must be held equal to the previous year's reinsurance recoveries

Explanation: LPS 110 requires a life company to hold a capital base in excess of its prescribed capital amount (PCA), and the requirement bites at both the statutory fund level and the company level, reflecting the statutory fund ring-fencing in Part 4 of the Life Insurance Act 1995. The PCA is built from the asset risk, insurance risk, asset concentration risk and operational risk charges in LPS 114, LPS 115, LPS 117 and LPS 118.

3Under accounting standard AASB 17 (Insurance Contracts), how is the 'Contractual Service Margin' (CSM) defined for a group of life insurance contracts at initial recognition under the General Measurement Model (GMM)?

A.A component of the asset or liability that represents the unearned profit the insurer will recognize as it provides insurance contract services in the future, measured as the excess of expected present value of inflows over outflows and risk adjustment

B.The total commissions paid to retail financial advisers at policy inception

C.The statutory tax paid to the Australian Taxation Office on investment earnings

D.The penalty fee charged to policyholders who cancel their policy within 30 days

Explanation: Under AASB 17 GMM, if the present value of future cash inflows exceeds outflows plus the Risk Adjustment at initial recognition, the contract is profitable. This expected profit cannot be recognized immediately; it is recorded as the Contractual Service Margin (CSM) and amortized into profit over the coverage period as services are provided.

4A cohort of 10-year term life policies is underwritten. At initial recognition, the Present Value of Future Cash Inflows (premiums) is AUD 50,000,000, the Present Value of Future Cash Outflows (claims, expenses) is AUD 38,000,000, and the Risk Adjustment for non-financial risk is AUD 4,000,000. Under AASB 17, what is the initial Contractual Service Margin (CSM) for this cohort?

A.AUD 8,000,000

B.AUD 12,000,000

C.AUD 50,000,000

D.AUD 4,000,000

Explanation: Net Fulfillment Cash Flows = Outflows (AUD 38M) + Risk Adjustment (AUD 4M) - Inflows (AUD 50M) = -AUD 8,000,000 (net cash inflow). Under AASB 17, this negative fulfillment cash flow represents an unearned profit, which is established as an initial CSM of +AUD 8,000,000 on the balance sheet.

5In Australian retail life insurance product design, what was the primary driver of the severe multi-billion dollar industry losses in 'Individual Disability Income Insurance' (IDII / Income Protection) over the decade leading up to 2020?

A.Flawed product design featuring loose 'own occupation' disability definitions to age 65, high replacement ratios (>75-85%), agreed-value benefits, and generous ancillary add-ons that created significant moral hazard and disincentives to return to work

B.A sudden catastrophic doubling of mortality rates among young drivers

C.A complete collapse in the Australian commercial property market

D.A statutory ban by APRA on charging annual premiums

Explanation: Australian retail IDII suffered extensive losses (over $5B across the industry) due to unsustainable product features: agreed-value policies (benefits exceeding pre-disability income), loose own-occupation definitions for life, long benefit periods to age 65, and inadequate claims management, destroying financial return-to-work incentives.

6Following APRA's intervention on Individual Disability Income Insurance (IDII) sustainability, which of the following product design rules became mandatory for new retail IDII contracts issued in Australia from October 2021 / October 2022 onwards?

A.Discontinuation of Agreed-Value contracts (requiring Indemnity-based income at disability), capping income replacement ratios at 70-75% for the first 2 years (and lower thereafter), stricter 'any occupation' disability definitions after 2 years, and contract term review periods of no more than 5 years

B.Guaranteed lifetime payments of 100% of pre-tax salary regardless of employment status

C.A mandatory requirement that all IDII policies be sold with zero medical underwriting

D.A complete prohibition on selling income protection insurance to any Australian worker

Explanation: APRA's IDII sustainability measures required: (1) Indemnity-only policies based on earnings at time of disability, (2) Income replacement ratios capped (e.g. 70% post-2 years), (3) Transition to 'any suited occupation' after 2 years on claim, and (4) Policy contract terms capped at 5 years to allow reassessment of terms.

7In life insurance product design, what is the distinction between 'Own Occupation' Total and Permanent Disablement (TPD) and 'Any Occupation' TPD?

A.Own Occupation TPD pays if the insured is permanently unable to perform their specific usual occupation, whereas Any Occupation TPD pays only if the insured is permanently unable to work in any occupation for which they are reasonably suited by education, training, or experience

B.Own Occupation applies only to doctors, while Any Occupation applies only to commercial pilots

C.Own Occupation is funded entirely by the federal government

D.Any Occupation TPD is legally prohibited inside Australian superannuation funds

Explanation: Own Occupation TPD covers inability to perform one's specific pre-disability profession (e.g. a surgeon who loses fine hand dexterity can claim Own Occ TPD even if they can teach medicine). Any Occupation TPD requires inability to engage in any suited work, which is the standard definition permitted inside superannuation to satisfy SIS condition of release rules.

8Why is 'Own Occupation' TPD insurance generally PROHIBITED from being held directly within an Australian complying superannuation fund for new policies since July 2014?

A.Because an insured could qualify for an Own Occupation TPD claim payout under the policy while remaining capable of working in another suited occupation, failing the mandatory SIS Act 'Permanent Incapacity' condition of release and trapping insurance proceeds inside the fund

B.Because superannuation trustees are prohibited from purchasing any insurance policies

C.Because Own Occupation TPD requires medical premiums to be paid in foreign currency

D.Because the Australian Taxation Office taxes Own Occupation claims at 100%

Explanation: Under the Superannuation Industry (Supervision) Regulations (SIS Reg 4.07D), insurance held inside super must align with SIS conditions of release. If an Own Occ claim pays into the fund but the member can work in another job, the permanent incapacity test is not met, trapping the cash inside the super fund until retirement age.

9Under APRA Prudential Standard LPS 115 (Insurance Risk Charge for Life Insurers), what are the five key insurance risk components that generate capital charges?

A.Mortality Risk, Morbidity Risk, Longevity Risk, Lapse Risk, and Expense Risk

B.Equity Risk, Property Risk, Credit Spread Risk, Currency Risk, and Interest Rate Risk

C.Cyber Attack Risk, IT Hardware Risk, Fire Risk, Flood Risk, and Theft Risk

D.Corporate Tax Risk, Stamp Duty Risk, GST Risk, Carbon Tax Risk, and Tariff Risk

Explanation: LPS 115 prescribes capital charges for biometric and operational policyholder behavior risks: (1) Mortality Risk (stress of +death rates), (2) Morbidity Risk (stress of +incidence / -termination), (3) Longevity Risk (stress of -mortality for annuitants), (4) Lapse Risk (stress of +upward, -downward, and mass lapse events), and (5) Expense Risk (stress of +unit cost and inflation).

10In group life insurance inside Australian superannuation funds, what is the 'Automatic Acceptance Limit' (AAL)?

A.The maximum dollar amount of death and TPD insurance coverage provided to an eligible fund member automatically upon joining the super fund without requiring individual medical underwriting

B.The maximum balance a member can hold in a superannuation accumulation account

C.The maximum age at which a person can work in Australia

D.The statutory limit on superannuation guarantee contributions

Explanation: The AAL is the threshold up to which default group insurance (Death/TPD/GSC) is provided automatically based on employer group risk pooling, eliminating medical evidence requirements for standard group members while managing anti-selection.

About the Life Insurance Applications (LIA) Exam

Life Insurance Applications (LIA) is an Applications subject in the Actuaries Institute Fellowship Program. It teaches how a life insurance company operates in Australia and the legal, regulatory and professional framework that governs the industry, then applies the actuarial control cycle across the four cycles where actuaries have a core advisory function: product management, valuations, risk management and business planning.

Assessment

Open-book written examination (3 hours plus 15 minutes reading time) worth 80% plus a written assignment worth 20%, per the 2026 LIA subject syllabus. Assessment is delivered 100% online.

Time Limit

3 hours plus 15 minutes reading time

Passing Score

not-published

Exam Fee

$3,800 AUD (2026 Fellowship Program subject fee, GST exempt) (Actuaries Institute (Australia))

Life Insurance Applications (LIA) Exam Content Outline

Components of and trends in the Australian life insurance market

Consider trends and recent issues, identify the major players and organisational structures, assess the types of products sold and their features and profitability, explain distribution, consider consumer needs and best interests, and assess publicly available industry data.

The legislative environment for life insurance in Australia

Consider the key requirements of the Life Insurance Act 1995 and their application to actuarial practice, explain the impact of other relevant legislation, and explain how Australian taxation affects product design, pricing and profitability, valuations and capital.

10%

Regulators supervising life insurers and their effect on actuarial practice

Apply APRA's standards and guidance relevant to life insurance practice, explain ASIC's regulatory guides relevant to actuarial practice within a life company, and consider the implications of investigations or reviews undertaken by the regulators.

Roles and responsibilities of the actuary within a life insurance company

Consider the roles, requirements and legal and professional responsibilities of the Appointed Actuary, apply the Actuaries Institute's professional standards and guidance relevant to life insurance practice, and describe the roles of the Auditor and Actuarial Auditor.

25%

Actuarial control cycle applied to product management

Describe the key stakeholders in the product management cycle, evaluate pricing assumptions, prepare and interpret product profitability outputs, and explain how product management feeds valuations, risk management and business planning.

30%

Actuarial control cycle applied to valuation

Describe the stakeholders in the valuation cycle, apply experience analysis to set policy liability assumptions, prepare valuation inputs and outputs under prudential and accounting requirements, and explain the role of the valuation cycle in the wider control cycle.

10%

Actuarial control cycle applied to risk management

Apply a risk management framework against prudential and professional requirements, suggest methods of allocating capital to business lines, consider the Internal Capital Adequacy Assessment Process, and prepare components of a Financial Condition Report.

10%

Actuarial control cycle applied to business planning

Describe the key stakeholders in business planning, consider the business planning process in the context of relevant prudential requirements, and explain how business planning interacts with product management, valuations and risk management.

How to Pass the Life Insurance Applications (LIA) Exam

What You Need to Know

Passing score: not-published
Assessment: Open-book written examination (3 hours plus 15 minutes reading time) worth 80% plus a written assignment worth 20%, per the 2026 LIA subject syllabus. Assessment is delivered 100% online.
Time limit: 3 hours plus 15 minutes reading time
Exam fee: $3,800 AUD (2026 Fellowship Program subject fee, GST exempt)

Keys to Passing

Work through all 100 available questions
Review every answer and explanation
Track weak areas and revisit them
Use our AI tutor for tough concepts

Life Insurance Applications (LIA) Study Tips from Top Performers

1Understand the mechanics of statutory funds under Part 4 of the Life Insurance Act 1995, including rules for transfers between funds and restrictions on distributions.

2Master the AASB 17 balance sheet components: Present Value of Future Cash Flows (PVFCF), Risk Adjustment (RA), and Contractual Service Margin (CSM).

3Be familiar with APRA's IDII sustainability measures, including indemnity-only contracts, income replacement ratio caps and stricter disability definitions after two years on claim.

4Review the reports CPS 320 requires of the Appointed Actuary — the Financial Condition Report and the Actuarial Valuation Report — including business plan review, stress testing and capital projections. CPS 320 replaced the older LPS 320 from 1 July 2019.

Frequently Asked Questions

What is the assessment format for the LIA subject?

The 2026 subject syllabus states LIA is assessed by an open-book written examination of three hours plus 15 minutes reading time worth 80% of the mark, and an assignment worth 20%. Both are delivered online through Canvas.

What is the role of the Life Insurance Act 1995 in this exam?

The Life Insurance Act 1995 governs the operation and regulation of life insurance companies in Australia, including the mandatory establishment of statutory funds, policyholder protection provisions, and the statutory obligations of the Appointed Actuary.

How is capital adequacy calculated for Australian life insurers?

Capital adequacy is governed by APRA's LAGIC (Life and General Insurance Capital) framework under LPS 110, requiring insurers to maintain capital above the Prescribed Capital Amount (PCA), covering asset risk, insurance risk, asset concentration risk, and operational risk.

What is the fee for the AIA Life Insurance subject in 2026?

The 2026 subject enrolment fee is $3,800 AUD (GST exempt).

Are these practice questions the same format as the official exam?

No. The official LIA paper requires extended written answers and case-study analysis. This bank is an English-language multiple-choice study adaptation of the official syllabus, built to drill the Australian legislation, prudential standards, valuation methods and judgement the paper assumes. It is not an official item bank and does not replace practising extended written answers.