Q 1.

_______ is that part of the premium in a policy which is being

earned as the risk period progresses.
Earned Premium
Increasing Premium
Decreasing Premium
Modified Premium

UnAttempted

CORRECT ANSWER:

Earned Premium

Q 2. Certificate by Appointed Actuary is in which form?

Form A
Form B
Form C
Form D
Form E

UnAttempted

CORRECT ANSWER:

Form C

Q 3. Cargo insurance, Group insurance for PA or health, Motor

fleets, Hull insurance are examples of which rated products?
Individual experience rated products
Exposure rated products
Insurance of large risks
 Internal tariff rated products

UnAttempted

CORRECT ANSWER:

Individual experience rated products

Q 4. Which of these comes under the corrective actions for

Reunderwriting?
Modification of pricing
Modification of coverage
Modify the underwriting guidelines
All of the above

UnAttempted

CORRECT ANSWER:

All of the above

Q 5. Which of these documents is required for class rated

products ? a) Claim form b) Proposal form c) Policy wording d)
Sales literature
Both a and c
Both b and c
a, b and d
All a, b, c and d

UnAttempted

CORRECT ANSWER:
 All a, b, c and d

Q 6. Which of the following is an example of Class Rated products?

Exposure rated products
Insurance of large risks
Individual Experience rated products
Package or Customised products

UnAttempted

CORRECT ANSWER:

Package or Customised products

Q 7. If the proposers who are issued policies with standard rates

fall within the normal boundaries of underwriting standards for
that type of policy, than _______ .
Policy to be issued on a standard basis
Policy to be issued on a sub-standard basis
Policy to be issued on a preferred basis
Proposal to be declined
None of the above

UnAttempted

CORRECT ANSWER:

Policy to be issued on a standard basis

Q 8. Which of the following comes under prior approval laws ?

 Eliminates all filing requirements but insurers may have to
furnish rate schedules to the state insurance department
Only requires prior approval if the rate change is substantial
Rates must be filed and approved before they can be used
None of the above

UnAttempted

CORRECT ANSWER:

Rates must be filed and approved before they can be used

Q 9. In which policy, the property insurance cover in which the

policy holder arranges cover for an amount below the full
value of items insured and for this the insurer agrees not to
penalise him for under insurance?
Packaged Policy
First Loss Policy
Customised Insurance Policy
None of the above

UnAttempted

CORRECT ANSWER:

First Loss Policy

Explanation:

A first-loss policy is a type of property insurance policy that provides

only partial insurance. In the event of a claim, the policyholder agrees to
accept an amount less than the full value of damaged, destroyed or
stolen items or property. In return, the insurer agrees to not penalize the
policyholder for under-insuring their goods or property.
Q _____ is the intimation given by the insurer to the insured,
10. informing him of expiry date of the existing policy and date
before which he should review his policy by paying premium
mentioned in the notice.
Renewal Notice
Cover Note
Exclusions
Deductible
None of the above

UnAttempted

CORRECT ANSWER:

Renewal Notice

Q A cover note is valid for how many days ?

11. 7
15
30
45
60

UnAttempted

CORRECT ANSWER:

30

Explanation:

A Cover Note is valid for 30 days

Q In a certain state, all insurance rates must be approved by the
12. state insurance department before the rates can be used. This
type of rating law is called _____ .
Flex Rating
No filing required
File and Use
Prior Approval
Use and File

UnAttempted

CORRECT ANSWER:

Prior Approval

Explanation:

Under prior-approval, state regulators must approve the rates before

they can be used.

Q In which of the following systems is a range established for

13. insurance rates ?
Prior Approval System
Use and File System
Flex Rating Regulation
File and Use Laws
None of the above

UnAttempted

CORRECT ANSWER:

Flex Rating Regulation

 Explanation:

Under the flex rating system, a range is established for insurance rates
and insurers are permitted to change their rates in both upward and
downward directions within the established range in response to market
conditions.

Q Any communication received from a policyholder shall be

14. responded to within ____ days of its receipt.
5
10
15
30
45

UnAttempted

CORRECT ANSWER:

10

Explanation:

Any communication received from a policyholder shall be responded to

within 10 days of its receipt.

Q In claims where a surveyor has to be appointed, it shall be so

15. done within _____ of the receipt of intimation from the insured.
12 hours
24 hours
48 hours
72 hours
96 hours
 UnAttempted

CORRECT ANSWER:

72 hours

Q An insurance policy covers perils which can be cause of

16. ______ .
Loss
Damages
Injury
All of above
None of above

UnAttempted

CORRECT ANSWER:

All of above

Explanation:

A peril can be the cause of injury, damages or loss. No matter what the
classification is, the insurance policy covers a peril or a combination of
perils.

Q The statement(s) which is true with respect to Fire Declaration

17. policy is - 1. Stock Declaration is not required 2. The Policy is
given in cases where total loss is impossible 3. Declaration
has to be made periodically by the policy holder regarding the
actual values of stock
Only 1
Only 2
 Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 3

Explanation:

Fire Declaration policy is issued on stocks which are subject to market

fluctuations in quantity. The insured is required to take the policy for
the highest sum insured & he has to declare periodically the actual
values of stock.

Q While checking the records of a town for car thefts, it was

18. observed that for every 1000 cars insured, which were valued
at Rs 7 lakh each, on an average 5 cars were stolen ever year.
Calculate the pure premium that needs to be charged.
Rs. 7500
Rs. 3500
Rs 12,500
Rs. 14,000
Rs. 4,500

UnAttempted

CORRECT ANSWER:

Rs. 3500

Explanation:

Pure premium refers to the premium which is sufficient to meet the

 losses.

Value of 5 stolen cars @ Rs. 7,00,000 per car is Rs. 35,00,000 when
divided by 1000 insured cars, the premium comes to 3500000/ 1000 =
3500 i.e. each car owner is required to contribute Rs. 3500 to cover the
loss of 5 cars i.e. Rs.35,00,000.

Formula: L / V X 100. L is losses; V is value of all the cars. Pure

premium is also known as ‘Burning Cost’.

Q Who regulates the insurance sector in India ?

19. LIC
SEBI
IRDA
RBI
NSDL

UnAttempted

CORRECT ANSWER:

IRDA

Explanation:

In India, the insurance sector is regulated by IRDAI in tune with the best
practices of insurance traditions. It ensures that the insurers establish
reasonable, non-discriminatory standards of accepting risks.
Q What is the process by which policy wordings can be changed
20. / revised ? 1. By way of attaching riders 2. By way of
endorsement in the policy 3. By revising the complete policy
wordings
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

Any change in the policy is done by way of endorsement in the policy.

Revising the entire policy wordings or attachment of riders is generally
not done by the insurers.

Q From the given options select those covered under 'pure

21. premium' .
Operating expenses
Claim cost
Underwriting expenses
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Claim cost
 Explanation:

Pure premium is the premium which is sufficient to pay for the losses
incurred. No other expenses are taken into account in calculating the
pure premium. The formula for calculating the pure premium i.e. L / V X
100 (loss divided by value) also suggests that no expenses are to be
accounted in its calculation.

Q Perils which can be a cause of ________ are covered under an

22. insurance policy. 1. Injury 2. Loss 3. Damage
Only 1
Only 2
Only 3
Both 2 and 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

All 1, 2 and 3

Explanation:

The perils classified under the non-life insurance can be broadly divided
under various loss producing events. These perils include Damage,
Injury & Loss.

Q ______ can be termed as an example of packaged / customized

23. product.
Health insurance
Burglary insurance
Fidelity insurance
Personal accident insurance
 Bankers blanket insurance

UnAttempted

CORRECT ANSWER:

Bankers blanket insurance

Explanation:

A policy which combines two or more types of insurance covers into

one policy is called packed policy. The policy may be customized
according to the specific need of the customer as per the risk profile.
One of such policy is ‘Bankers blanket insurance’ covering the risk
associated with in banking system.

Q In cases where the acquisition costs are pegged too low in

24. relation to the sales channel to be used, there is likely to be
___________
Adverse selection
Anti- selection
Moral hazard
Morale hazard
Regulatory breaches

UnAttempted

CORRECT ANSWER:

Adverse selection

Explanation:

If the acquisition costs are pegged too low in relation to the sales
channel to be used, there is likely to be adverse selection of risks
offered for insurance or sales target may not be realized.
Q Determine why an 'Unearned premium reserve' is an insurer’s
25. liability? 1. Because it is the premium which the insurer has
yet to receive 2. Because it is insurance premiums that has
been prepaid by insurerd's for services that the insurance
company has not yet given 3. Because the insurer has to pay
interest on the this reserve
Only 1
Only 2
Only 3
Both 2 and 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

Unearned premium is the premium corresponding to the time period

remaining on an insurance policy. Unearned premiums are
proportionate to the unexpired portion of the insurance and appear as a
liability on the insurer's balance sheet, since they would be paid back
upon cancellation of the policy.

Q The needs of the customers can be identified by monitoring

26. _______.
Regulatory changes
Underwriters report
Policies of the state
Growth of competition
Various economic cycles
 UnAttempted

CORRECT ANSWER:

Underwriters report

Explanation:

Insurers product innovation process involves identifying customer’s

needs & other factors. This need analysis is done through various
processes including underwriters reports.

Q Select the correct rating approach in which the premium rate is

27. decided by an assessment of the exposure to loss in respect
of the risk concerned, independent of the actual claims -
Risk ratio method
Loss ratio method
Retrospective rating method
Exposure rating method
Prospective rating method

UnAttempted

CORRECT ANSWER:

Exposure rating method

Explanation:

Under exposure rating method, the premium rate is determined by an

evaluation of the exposure to loss in respect of the risk concerned
independent of the actual claims. It aims at a premium rate or price
based on portfolio analysis rather than actual loss experience.
Q With respect to the insurance policies, appropriate data
28. includes information on - 1. All the relevant factors 2. The
insurance agent 3. The insurance regulator
Only 1
Only 2
Only 3
Both 1 and 3
All1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

All relevant factors pertaining to the risk are important for issuing an
insurance policy. For any data mining task, the basic requirement is
availability of appropriate & creditable data. In context of insurance
policies, the information is required on a variety of additional factors
that may be relevant.

Q The risk of 'Workmen’s compensation' is classified under

29. which class of insurance ?
Liability
Miscellaneous
Fire
Marine
Personal

UnAttempted

CORRECT ANSWER:

Personal
 Explanation:

The insurers are specialists in different classes of insurance

underwriting proposals. The Workmen’s Compensation falls under the
category of Personal Lines of insurance.

Q Select the benefit that can be achieved through technology

30. based underwriting.
Ethical underwriting
Fraud detection
Adverse selection
Moral hazard
Centralization of risk management

UnAttempted

CORRECT ANSWER:

Fraud detection

Explanation:

Amongst the various benefits derived from technology based

underwriting is fraud detection. The benefits can also be achieved in the
financial bottom line.

Q The risk factors used for rating should be _____ . 1. Practical

31. for implementation 2. Impractical for implementation 3. Non-
discriminatory
Only 1
Only 2
Only 3
Both 1 and 3
 Both 2 and 3

UnAttempted

CORRECT ANSWER:

Both 1 and 3

Explanation:

Risk factors used for rating should be non-discriminatory and they must
be practical for implementation.

Q In accordance to the File and Use guidelines, what are large

32. risks ?
Large risks are those which cannot be managed
Large risks are those which are Rs 100 crores or more per
event for liability insurance
Large risks are those which cannot be predicted
Large risks are those which cannot be controlled
Large risks are those which cannot be quantified

UnAttempted

CORRECT ANSWER:

Large risks are those which are Rs 100 crores or more per event for
liability insurance

Q Under the ________ systems, a period of time in the range of

33. 30-90 days varying from regulator to regulator is prescribed for
approval or disapproval of rates by the Authority?
 Use and File
File and Use
Prior approval
Premium rating
Flex rating

UnAttempted

CORRECT ANSWER:

Prior approval

Explanation:

Under prior approval system, a period of time in the range of 30-90 days
varying from regulator to regulator is prescribed for approval or
disapproval of rates by the Authority. The regulator may return the
documents to the insurer if they they do not meet the specific needs of
the regulator.

Q List the exclusions under All Risk policies is / are - 1. Wear and
34. Tear of delicate and fragile articles 2. Fire 3. Theft
Only 1
Only 2
Only 3
Both 1 and 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:
 All Risk gives an impression that all risks are covered. However no
insurer issues a policy covering all possible risk. It covers all fortuitous
i.e. accidental risks causing damages, in accidental manner. The policy
does not specify perils but states exclusions. One of the exclusions
under All Risk policy is ‘Wear and Tear of fragile articles’.

Q The complaints registered to the Ombudsman can be about - 1.

35. The costs of policy 2. Dispute about premium paid or payable
in terms of the policy 3. The attitude of the insurance agent
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

As a measure of grievance redressal, if an individual insured is

aggrieved by certain personal lines of insurance products/ services
including loss settlement delay or other issue, complaint can be lodged
with ‘Ombudsman’. The grievance may be in the form of any dispute
about premium paid or payable in terms of the policy.

Q The case where the combined ratio is over 100 % means

36. ________
Dynamic growth
Underwriting profits
Underwriting loss
 Deficit reserves
Surplus reserves

UnAttempted

CORRECT ANSWER:

Underwriting loss

Explanation:

There are number of ratios the insurer uses to measure the profitability
of their operations. There are three commonly used ratios by any
insurer i.e. ‘Loss Ratio’, ‘Expense Ratio’ and ‘Combined Ratio’. Each
ratio gives specific area of profitability. A combined ratio over 100% is
indicative of underwriting losses.

Q What corrective actions can be taken by an insurance

37. company to reduce losses ?
Change the pricing
Invest the premiums collected in high risk assets like equities
which can give better returns to mitigate the losses
Have a difficult to understand policy wordings
Revitalise the economy to achieve growth
Sell policies for bigger time spans with auto renew features

UnAttempted

CORRECT ANSWER:

Change the pricing

Explanation:

Losses can be reduced by either increasing the rates to get additional

premium or the volume can be increased by lowering the rates. This
 increase of decrease can be in stages or through sudden large increase/
decrease.

Q Which type of policies are designed based on customers

38. specific needs?
Direct Endowment Policies
Package policies
Named peril policies
Whole cover policies
Special contingency policies

UnAttempted

CORRECT ANSWER:

Special contingency policies

Explanation:

Special contingency policies are designed based on customer’s specific

needs in term of scope of cover, basis of insurance, deductibles, rates,
terms and conditions of the cover. This is also known as ‘Packaged or
Customized Products’.

Q Which of the below options can be considered under

39. Miscellaneous insurance ?
Motor
Fire
Cargo insurance
Hull insurance
Material damage
 UnAttempted

CORRECT ANSWER:

Motor

Explanation:

Although as per Insurance Act, 1938 the non-life business is divided

under 3 categories Fire, Marine & Miscellaneous, for specialized risks,
further classification was felt necessary. The Motor insurance thus falls
under miscellaneous class of business.

Q Based on the area of specializations which of the given

40. underwriters can be classified as Liability Underwriters?
Product underwriters
Group underwriters
Miscellaneous underwriters
Commercial liability underwriters
Motor underwriters

UnAttempted

CORRECT ANSWER:

Commercial liability underwriters

Explanation:

Specialist underwriters based upon their underwriting skills &

specialisation, underwrites the insurance business associated with
‘Commercial Liability’.
Q How can faulty information can enter the insurance system ? 1.
41. Due to careless processing of the information 2. Due to
incomplete disclosure 3. Due to inappropriate rate structure
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Both 1 and 2

Explanation:

Faulty information can enter the insurance system as a result of

incomplete disclosure & careless processing of the information. The
insured may not disclose the information other than asked for &
careless processing of the information can also effect proper
underwriting.

Q While conducting a market research, which factor(s) should be

42. considered by the insurer. 1. Suitability of proposed products
or plan if any 2. Over capacity of the insurer 3. Determining the
customer’s needs, taste, preference, purchasing power
capacity
Only 1
Only 3
Both 1 and 2
Both 1 and 3
All 1, 2 and 3
 UnAttempted

CORRECT ANSWER:

Both 1 and 3

Explanation:

Insurers perform marketing research to determine whether the

customer’s needs, taste, preference, purchasing power capacity &
suitability of proposed products or plan if any are correct.

Q Reinsurance is considered as an essential part of underwriting

43. as it is a tool that enables the insurer to- 1. Make more profits
2. Expand underwriting capacity 3. Get away with claims
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

Reinsurance is insurance of insurance. It spreads risk of insurers to

limit their exposure. It enables to insurers to accept catastrophic &
manage large losses & unexpected liabilities. It becomes an essential
part of underwriting tool helping an insurer to expand underwriting
capacity.
Q A discount in the premium which is given on the renewal of the
44. policy if no claim is made in the previous year is known as
______ .
Premium Redemption
Bonus
Deductible
Contribution
Malus

UnAttempted

CORRECT ANSWER:

Bonus

Explanation:

Bonus is usually a discount in the premium which is given on the

renewal of the policy if no claim is made in the previous year. This is
rate monitoring for existing customers.

Q While making underwriting decisions which among the

45. following factors need to be taken care of ? 1. The marketing
budget 2. The management and claim expense ratio 3. The
capability of the staff
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
 UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

Decisions based on the underwriting approaches of the company, an

insurer has to factor management expense ratio. The practice has to be
followed through underwriting manual & rating tables.

Q When extra hazardous risks are referred to the controlling

46. office, which details that are to be mentioned ? 1. The
Solvency ratio of the operating office 2. The risk inspection
report and additional questionnaires 3. The completed claim
form
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

There are certain risks which are considered ‘extra hazardous risks’.
These are generally declined, but in case they need to be covered, the
underwriting office has to refer these to the controlling office along with
risk inspection report, additional questionnaires and reasons that why
such proposals are to be accepted.
Q What type of corrective actions can be taken to reduce
47. losses ?
Cancel policies in case of material misrepresentation in the
proposal form
Have extremely technical policy wording which is difficult to
comprehend
Invest premium collected in high risk asset which will give better
returns to reduce the impact of losses
Issue policies for larger time span with auto renew features
Stimulate the economy to achieve growth

UnAttempted

CORRECT ANSWER:

Cancel policies in case of material misrepresentation in the

proposal form

Explanation:

There could be various corrective actions that can be taken to reduce

losses. One of them is to cancel policies in case of material
misrepresentation in the proposal form.

Q What are the pre-requisites for lodging a complaint with the

48. Ombudsman ?
The complaint should not have been lodged with the insurer
The policy has to be a general insurance policy
The complaint has to be related to a group policy
A representation must have been made to the Insurance
Company and either an Unsatisfactory reply should have been
received or the representation should stand as Un-replied for at
 least 1 month
The policy has to be in grace period

UnAttempted

CORRECT ANSWER:

A representation must have been made to the Insurance Company

and either an Unsatisfactory reply should have been received or the
representation should stand as Un-replied for at least 1 month

Explanation:

As a measure of grievance redressal, if an individual insured is

aggrieved by certain personal lines of insurance products/ services
including loss settlement delay or other issue, complaint can be lodged
with ‘Ombudsman’. However, a representation should be made to the
Insurance Company and either an Unsatisfactory reply should have
been received or the representation should stand as Un-replied for at
least 1 month, before filing the complaint.

Q A need for changes in product can be triggered by key

49. indicator like --
Increase in interest rates
Products offered by the competition
Loss Ratio
New and innovative product launches
Internal staff report

UnAttempted

CORRECT ANSWER:

Internal staff report

Explanation:
 The product innovation process involves collecting information from
internal & external environments. New products & services can be
undertaken based upon various researches including internal staff
reports.

Q In the process of shifting the emphasis of the insurance

50. industry from the worrying issue of ‘determining optimal
premium’ to the issue of ‘improving customer relationship’
what is the fourth step ?
Getting more premium by increasing customer base
Enhancing customer retention
Enhancing market share
Minimising premiums of low risk customers in order to win their
loyalty
Getting low risk customers

UnAttempted

CORRECT ANSWER:

Enhancing market share

Explanation:

The process of data mining has shifted the emphasis of the industry
from the problem of ‘determining optimal premium’ to the issue of
‘improving customer relationship’ by various methods including
increasing the market share.

Out of 50 questions 50 are un attempted.