Life & Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The actuarial department is responsible for calculating policy reserves and dividends because this department specializes in using mathematics, statistics, and financial theories to assess risk in the insurance industry. Actuaries analyze various factors such as mortality rates, policyholder behavior, and investment returns to estimate the amount of money that must be set aside to ensure that future claims can be paid (policy reserves) and to determine how much, if any, dividend can be returned to policyholders based on the insurer's financial performance.

In contrast, the underwriting department focuses on evaluating and accepting or rejecting insurance applications based on risk assessment, while the claims department deals with processing and settling claims made by policyholders. The human resources department, on the other hand, manages employee-related functions and does not engage in any financial calculations related to policy reserves or dividends. Thus, the actuarial department plays a crucial role in maintaining the financial stability and obligation of insurance companies through accurate calculations of reserves and dividends.