PCE PART B - SET C

Sample Questions with Answers

1. The Risk of War in All Risks Policy is _________________
A an insured risk
B an excluded risk
C an insurance risk for an additional premium
D B and C

2. Which of the following statements is correct regarding Private Motor Car Insurance?
A Insurable interest is not required at all.
B Insurable interest is required only at the time of loss.
C Insurable interest is required only at the time of taxing the insurance.
D Insurable interest is required at the inception and throughout the duration of the
insurance.

3. Quick Rich Sdn Bhd insured its building and stock for RM500,000. There was a fire on 25
June 1990 damaging the back portion of its building and some of the stock. The damage was
assessed as Building RM100,000 Stocks RM 50,000 Salvage value RM 10,000 What is the
amount payable?
A RM500,000
B RM150,000
C RM140,000
D RM160,000

4. Mr Lim insured his house under a fire insurance for the period 1 Jan 1987 to 1 Jan 1988. On
15 May 1987, he sold his house to John for RM100,000. When must be the assignment of Mr.
Lim’s fire insurance to John be made?
A On 1 Jan 87
B Before 1 Jan 88
C On or before 15 May 87
D After 15 May 87

5. For good commercial practice, _____________ is usually sent to the insured by the
insurance company before the expiry date.
A A cover note
B An insurance policy
C A renewal notice
 D A proposal form

6. Comprehensive Cover as provided by motor insurance provides cover for the following.
A Third Party property damage
B Third Party plus own vehicle damage
C Third Party, fire, and theft plus other own vehicle damage specified in the policy
D Own Vehicle damage only

7. The No Claim Discount ranges for private cars are normally set up between the following
percentages.
A 15% to 50%
B 20% to 45%
C 25% to 55%
D 35% to 55%

8. Which of the following benefits are under Personal Accident Insurance?

A Weekly benefits and Medical expenses
B Interest on unclaimed accident
C No claim bonus
D None of the above

9. Which of the following policies protects the aircraft operator from his legal liability to the
owners or cargo carried on the aircraft?
A All risk policy
B Freight Liability Policy
C Loss of License Policy
D Professional Indemnity Policy

10. In fire insurance, if the period of insurance is effected for less than one year, the insurer will
_________
A apply a pro rata premium to the insured
B apply a short period scale as per Fire Tariff
C refund half of the premium to the insured
D not refund any premium to the insured

11. Which of the following factors is significant to Workman’s Compensation Insurance rating?
A Type of organization involved
 B Duration of the contract
C Occupation of the employees
D Facilities and remuneration provided by the employer

12. The peril "explosion" in a standard fire policy is ____________

A covered
B excluded except for explosion of gas used for lighting or domestic purpose provided the
building is not part of any gas works
C not covered at all
D covered except for coal

13. The following appear in the schedule of a policy EXCEPT ___________

A name of insured
B period of insurance
C location of property insured
D exclusion

14. The following extensions can be made to fire policy EXCEPT ____________
A boiler breakdown
B riot, strike
C landslide
D explosion

15. The following are the classification for commercial vehicles EXCEPT ____________
A bus
B special types
C private cars
D motor trade

16. Section II of the motor policy covers the following EXCEPT ____________
A death or bodily injury to third parties
B damage to third party property
C reasonable cost of protection of insured’s vehicle after an accident
D legal fees

17. Insurers are not liable for motor accident claims caused by the following EXCEPT _________
A motor vehicle is used otherwise then as stated in the limitations as to use
 B it is driven by an L license driver
C outside the geographical area
D motor vehicle is not driven by authorized driver

18. Under the Inter-Company Agreement on Motor Tariff, the following are stipulated EXCEPT
_________
A member companies shall comply strictly with No Claim Discount
B an underwriting agent may be paid an additional commission of 5% above an ordinary
agent of gross tariff rate
C no part of commission shall be rebated to the insured
D policy documents must be sent to the insured within 30 days of inception of risk

19. Exclusion under a standard fire policy include ____________

A loss by theft, during or after fire
B war
C typhoon
D all of the above

20. Which of the following is not covered under the consequential loss policy?
A loss of net profit
B standing chargers
C increased cost of working due to interruption of business
D damage to the building

21. Which of the following is not a liability class of insurance?

A Theft Insurance
B Motor Insurance
C Workmen’s Compensation Insurance
D Public Liability Insurance

22. Why is the claim form necessary?

A It is a requirement by law
B It is a formality
C To gather relevant information
D To provide information to the claimant

23. In many cases, both insurer and insured may refer to an arbitration because ____________.
 A it is easier although a little bit expensive
B anybody can be called up as an arbitrator
C arbitration is less expensive and speedier than court action
D the court would reject awarding any compensation if an arbitration is appointed C13

24. ___________ arises when sum insured is smaller than the value of property at the time of
loss.
A Over insurance
B Co-insurance
C Self insurance
D Under insurance

25. Which of the following are insurance documents?

A Agent’s monthly statements
B Proposal form
C Cover note
D B and C only

26. Information found in a cover note includes ____________

A name and address of the insured
B period of insurance
C past loss experience
D A and B only

27. The function of a cover note is to ____________.

A provide evidence of insurance for a temporary period of time
B replace the insurance policy
C form the basis of insurance contract
D all of the above

28. General Takaful Scheme is basically ____________ contract that provides cover to
participants against loss or damage due to a catastrophe or disaster, usually inflicted upon
properties or assets.
A long-term donation
B short-term donation
C short-term indemnity
D long-term indemnity
29. Which of the following sources of risks would not be classified with the other three?
A fire
B flood
C obsolescence of stocks
D arson

30. ‘Risk’ can be simply defined as:

A Uncertainty
B Uncertainty about losses
C Hazard
D Losses

31. In an insurance policy, losses are payable only when it is brought about by ____________
A an insured peril
B an excepted peril
C an uninsured peril
D a valid peril

32. The Inter-Company Agreement on General Insurance Business came into effect on
____________
A 1st January 1988
B 1st March 1992
C 1st July 1987
D 24th April 1992

33. Which of the following policies only requires insurable interest to be present at the time of a
loss?
A Fire policy
B Burglary policy
C Personal Accident policy
D Marine Cargo policy

34. Which of the following policies is not a policy of indemnity?

A Fire policy
B Burglary policy
C Public Liability policy
 D Personal Accident policy
35. Which of the following requires a reinstatement of sum insured to its original cover once an
insurer has paid a partial loss?
A Motor policy
B Fire policy
C Marine policy
D Public Liability policy

36. This policy covers loss or damage from fire, theft and any accidents not specifically excluded
by the terms of the policy.
A Burglary policy
B All Risk policy
C Fire policy
D Equipment policy

37. The principle of contribution does not apply in which of the following policies:
A Personal Accident policy
B Fire policy
C Money policy
D All Risk policy

38. The principle of subrogation allows an insurer:

A to pay only the rateable proportion of a loss in the event of more than one policy covering
the loss of a subject matter insured.
B to be paid the rateable proportion of a loss by another insurer who has also provided the
same coverage, after the insurer has settled a claim in full.
C to avail itself of the rights of an insured after having indemnified the insured
D to avail itself of the rights of an insured to recovery from a third party, after having
indemnified the insured.

39. What are the conditions that must be present for a risk to be insurable?
I. Loss must be fortuitous.
II. There must be interest in the subject matter.
III. It must not be against public policy.
IV. The loss must be measurable.

Select one of the combinations below:

 A I and IV only
B I, II and IV only
C I, III and IV only
D All of the above

40. Who is responsible or the supervision of insurance companies to ensure compliance with the
Insurance Act?
A Director General of Insurance
B Chairman of PIAM
C Technical committee of MNRB
D Accountant General

41. An insurer can cancel a motor insurance policy by sending __________ days notice by
registered letter to the insured at his last known address
A 7
B 14
C 21
D 3

42. A standard fire policy does not cover

A fire damage caused by negligence of insured
B fire damage caused by negligence of insured’s employees
C fire damage caused by bush fires
D fire damage caused by explosion of domestic boilers

43. Which of the items below will not be in an agent’s marketing plan?
A Goals
B Strategies
C Reviews
D Survey of insured’s premises

44. Policy endorsements are prepared to record in the policy the following situations EXCEPT:
A the occurrence of a partial damage
B the change of values at risk
C the change of occupation
D the change of address
45. Losses suffered by an employer or as a result of acts of dishonesty by employees may be
covered by:
A a money policy
B a fidelity guarantee policy
C a financial bond
D a burglary policy

46. Which of the following documents needs to be stamped?

A proposal form
B cover note
C certificate of insurance
D policy document

47. Which of the following statements are true?

Type of insurance Minimum premium

I. Motorcycle 15.00
II. Workmen Compensation Insurance 35.00
III. Fire Insurance 50.00
IV. Motor Insurance 50.00

A I and II only
B II and III only
C I, II and III only
D II, III and IV only

48. Which of the following statements are correct regarding ‘rating’?

I. The rates charged can be broadly categorized as individual rates, class rates, standard
rates and merit rates.
II. Individual rate is the rate to be charged on each risk separately without referring to an
established formula or manual
III. When there is a small number of risks to be insured under a class of insurance, it is
possible to classify the risks by certain characteristics into various classes.
IV. A merit rating plan is a combination of class rating and individual rating.

A I and III only

B II and IV only
C I, II and III only
 D All of the above
49. If there is a surplus to the fund after deducting all operational costs, the surplus
A shall be retained by takaful company
B shall be shared between the shareholders and the takaful company
C shall be shared between the participants and the takaful company in accordance with the
principle of mudharabah
D shall be distributed to shareholders only
50. When under-insurance exists and the policy is subject to average. Based on the information
below:-

Sum Insured - RM50,000

Value of property - RM80,000
Amount of loss - RM5,000
NCB - RM25%

What is the amount payable by insurer?

A 5000.00
B 3125.00
C 781.25
D 2343.75

51. Insurer will repudiate liability based on several ground. There are:-
I. There was no loss or damage as reported
II. The claim form is not fully completed
III. The loss or damage for which a claim has been made was not caused by a peril or was
excluded by the policy
IV. The policy has been rendered void as a result of a breach in condition (implied or
express) or warranty
A I and III only
B II, III and IV only
C I, III and IV only
D All of the above

52. Which of the following statements are correct regarding Marine Insurance?
I. Type of policy – Marine Hull, Marine Cargo, Marine Freight and Marine Building Risk
II. Claim forms are used in marine insurance except in respect of inland transit claims
III. Proposal form are not used in Marine Cargo Insurance and for large risks
 IV. Pirate, thieves, deliberate damage or destruction perils are not covered under institute
cargo clause B and C only

A I and III only

B I, II and III only
C I, III and IV only
D All of the above

53. What is Fidelity guarantee insurance?

A It is used predominantly in relation to building or engineering projects where the
contractor is often required by the employer to furnish a performance bond to guarantee
his performance of the contract.
B This policy incorporates an inspection service and provides cover against loss of money
resulting from dishonest acts of his customers.
C This policy covers the employer against loss of money or stocks resulting from dishonest
or fraudulent acts of any of his employees.
D This policy covers public liability arising out of professional negligence.

54. ‘Act only cover’ is a form of cover that provides the minimum form of indemnity required by
the Road Transport Act 1987. The cover required is in respect of :-
I. Loss or damage to the insured vehicle
II. Legal liability for death or bodily injury to any third party person
III. Expenses incurred for hospital treatment for injured persons subject to a maximum of
RM40 for outpatient and RM400 for impatient treatment
IV. Personal accident insurance to insured

A I and II only
B II and III only
C I, II and III only
D II, III and IV only

55. Which of the following statements are correct regarding Motor Insurance?

Motor Insurance Cover Legal Liability

I. Act only For death/bodily injury to third party
II. Third party Act only + third party property
III. Third party, Fire and Theft Third party cover + loss/damage to third party
vehicle by fire and theft
 IV. Comprehensive Third party, fire and theft cover + accidental
damages + medical expenses

A I and II only
B II and IV only
C I, II and IV only
D II, III and IV only

56. Which of the following formula is correct when average clause applies? Amount payable =
A Value of property X Amount of Loss Sum Insured
B Value of property X NCB X Amount of Loss Sum Insured
C Sum Insured X Amount of Loss Value of property
D Sum Insured X NCB X Amount of Loss Value of property

57. When a property is underinsured, the premium paid by the insured is based on the sum
insured instead of its full value. This means
A the insurer will make a profit.
B the insured will be making a contribution to the general fund which is less than the risk
transferred to the insurer.
C the average clause will not be applied.
D insurer will pay sum insured upon total loss on insured vehicle. C13
58. Generally arbitration is preferred to litigation because the former is ____________
A speedier
B less costly
C negotiable
D A and B

59. When making a preliminary check on a claim, the claim official may, among others, check the
following:-
I. Is the policy inforce?
II. Has premium been paid?
III. Is the loss caused by an insured peril?
IV. Has claim form been submitted.
A I and II only
B I, II and III only
C II, III and IV only
D All of the above
60. Which of the following statements are implied conditions in policy form?
I. Duty of utmost good faith
II. Subrogation
III. Existence of insurable interest
IV. Existence of subject matter of insurance
A I and III only
B II and IV only
C I, III and IV only
D II, III and IV only
ANSWERS (PCE Part B Set C):

1.B 21.A 41.B

2.D 22.C 42.C
3.B 23.C 43.D
4.D 24.D 44.A
5.C 25.D 45.B
6.C 26.D 46.D
7.C 27.A 47.D
8.A 28.B 48.B
9.B 29.C 49.C
10.B 30.B 50.B
11.C 31.A 51.C
12.B 32.D 52.C
13.D 33.D 53.C
14.A 34.D 54.B
15.C 35.B 55.C
16.C 36.B 56.A
17.B 37.A 57.B
18.D 38.D 58.D
19.D 39.D 59.B
20.D 40.A 60.C