All Practice Exams
100+ Free IAI SP8 Practice Questions
IAI Subject SP8 General Insurance Pricing practice questions are available now; exam metadata is being verified.
✓ No registration✓ No credit card✓ No hidden fees✓ Start practicing immediately
100+ Questions
100% Free
1 / 100
Question 1
Score: 0/0
An IBNR adjustment is applied to recent accident years in a pricing analysis because:
A
B
C
D
to track
Same family resources
Explore More Institute of Actuaries of India Exams
Continue into nearby exams from the same family. Each card keeps practice questions, study guides, flashcards, videos, and articles in one place.
2026 Statistics
Key Facts: IAI SP8 Exam
4
Syllabus Areas
IAI SP8 syllabus
35%
Largest Domain Weight
Rating bases and methodology
3h 15m
Exam Duration
IAI SP8 format
~60%
Guide Pass Mark
IAI committee per diet
CS2 + CM2
Prerequisite Knowledge
IAI Core Principles
IFoA-mirrored
Syllabus Basis
IAI / IFoA SP8
IAI Subject SP8 General Insurance Pricing is a Specialist Principles paper, mirroring the IFoA SP8 syllabus within the Indian (IRDAI) jurisdiction. It is a written application exam of about 3 hours 15 minutes that tests building a technical price from claims, expense, capital and profit components using frequency-severity methods, GLMs, credibility and reinsurance pricing. The syllabus weights Rating Bases and Methodology most heavily at 35%, with General Insurance Products and Data each at 25% and Credibility, Reinsurance and Catastrophe Modelling at 15%. The IAI sets the pass mark per diet rather than publishing a fixed cut-off, and SP8 builds on the CS2 and CM2 Core Principles subjects.
Sample IAI SP8 Practice Questions
Try these sample questions to test your IAI SP8 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.
1In general insurance pricing, the technical premium is best described as the premium that:
A.Covers expected claims, expenses, cost of capital and a profit margin, before competitive adjustment
B.Reflects only the expected cost of claims with no other loadings
C.Is the lowest price a regulator will permit an insurer to charge
D.Equals the office premium after deducting commission only
Explanation: The technical (or risk-adequate) premium is built up from expected claims (risk premium) plus loadings for expenses, reinsurance, cost of capital and a profit margin. It is the price required for financial soundness before any commercial or competitive adjustment is applied to reach the office (actual market) premium.
2An actuary decomposes the office premium into its components. Which sequence correctly orders the build-up from the most fundamental component outward?
A.Office premium, profit loading, expenses, risk premium
B.Risk premium, expense loading, cost-of-capital loading, profit margin, commercial adjustment
C.Commercial adjustment, risk premium, expenses, profit
D.Expenses, risk premium, commission, reinsurance recoveries
Explanation: Premium build-up starts with the pure risk premium (expected claim cost), then adds loadings for expenses, reinsurance and cost of capital, then a profit margin to give the technical premium, and finally a commercial adjustment for market position to give the office premium. The order moves from the most fundamental cost outward.
3The frequency-severity approach to estimating the risk premium models the risk premium per policy as:
A.The sum of paid and outstanding claims only
B.Total claims divided by total premium
C.Expected claim frequency multiplied by expected claim severity
D.Earned premium multiplied by the expected loss ratio
Explanation: Under the frequency-severity method the pure risk premium equals expected claim frequency (claims per unit exposure) multiplied by expected claim severity (average cost per claim). Modelling the two components separately lets the actuary capture different drivers and trends for the number and the size of claims.
4A motor portfolio has expected claim frequency of 0.12 claims per vehicle-year and expected severity of INR 40,000 per claim. The pure risk premium per vehicle-year is:
A.INR 3,333
B.INR 333,333
C.INR 48,000
D.INR 4,800
Explanation: Risk premium equals frequency multiplied by severity: 0.12 x 40,000 = INR 4,800 per vehicle-year. This is the expected claim cost before any expense, capital or profit loading.
5A rating factor is most usefully described as:
A.A measurable policyholder or risk characteristic used to vary the premium
B.Any variable that influences claims but cannot be measured
C.The final premium charged to a policyholder
D.A loading applied uniformly to all policies
Explanation: A rating factor is a measurable characteristic of the policyholder, the insured object or the cover (such as age, vehicle group or sum insured) that is correlated with risk and is used to differentiate premiums. It must be objectively measurable and acceptable to use for the cover to be priced consistently.
6Which of the following best distinguishes a risk factor from a rating factor?
A.A risk factor is always cheaper to collect than a rating factor
B.A risk factor is a true underlying driver of risk, while a rating factor is a measurable proxy actually used in the tariff
C.Rating factors affect claims but risk factors do not
D.There is no practical difference between the two terms
Explanation: A risk factor is a genuine cause or driver of the risk; a rating factor is a measurable proxy that is actually built into the rating structure. Where a true risk factor cannot be measured or is not permitted, the actuary selects correlated rating factors as proxies, accepting some loss of accuracy.
7When selecting rating factors, an actuary should normally avoid factors that:
A.Are highly predictive of claims experience
B.Are objectively measurable at the point of sale
C.Are prohibited by regulation or give rise to unfair discrimination
D.Are easy for the policyholder to verify
Explanation: Even a statistically predictive factor must be discarded if it is legally prohibited (for example certain uses of gender or ethnicity) or socially unacceptable as unfair discrimination. Practical and regulatory acceptability is a screen applied alongside predictive power when choosing rating factors.
8A one-way analysis of motor claims frequency by age band may be misleading because:
A.It uses too much data
B.It always understates the true frequency
C.It cannot produce a frequency estimate
D.It ignores correlations between age and other rating factors such as vehicle power
Explanation: A one-way (univariate) analysis examines each factor in isolation and so attributes to age any effect that is really driven by correlated factors, for example younger drivers also tending to drive higher-powered cars. Multivariate methods such as GLMs disentangle these correlations and avoid double counting.
9A generalised linear model extends ordinary linear regression principally by:
A.Allowing the response to follow a distribution from the exponential family and linking the mean to a linear predictor via a link function
B.Forcing the response to be normally distributed
C.Removing the need for any explanatory variables
D.Restricting the link function to be the identity function only
Explanation: A GLM allows the response variable to follow any distribution in the exponential family (such as Poisson, gamma or binomial) and connects the mean of that response to a linear combination of predictors through a link function. This flexibility makes GLMs the standard tool for modelling claim frequency and severity.
10In pricing GLMs, which distribution and link function combination is most commonly used to model claim frequency?
A.Gamma distribution with a log link
B.Poisson distribution with a log link
C.Normal distribution with an identity link
D.Binomial distribution with a logit link
Explanation: Claim counts are non-negative integers, so a Poisson (or over-dispersed Poisson) distribution with a log link is standard. The log link makes the rating structure multiplicative, so each factor relativity multiplies the base frequency, which is convenient and interpretable.
About the IAI SP8 Practice Questions
Verified exam format metadata for IAI Subject SP8 General Insurance Pricing is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.