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MODEL QUESTION PAPER

SUBJECT CODE : MF0018 SUBJECT : Insurance and Risk Management

SECTION A

1. Which of the following strategy reduces the chance of loss to zero? a. Risk reduction b. Risk retention c. Risk avoidance d. Risk transfer

2. _______________ arises when there is a possibility of an unintentional damage caused by a person to another person because of negligence. a. Dynamic risk b. Personal risk c. Liability risk d. Fundamental risk

3. _______________ is measured by the probability of adverse deviation. a. Degree of risk b. Chance of loss c. Severity of loss d. Probability of loss

4. Which one of the following is defined as the funding of losses either by using the internal reserves or by purchasing insurance? a. Risk management b. Risk retention c. Risk financing d. Risk transfer

The LIC (Amendment) bill d. ___________insurance is an optional insurance which is taken by an individual or a company by their own wish. a. Reading an option d. Stock option d. Agents d. Selling an option 7. Accounting Standard 13 . Insurance (Laws) Amendment Bill 9. Put option c. Loss adjusters b. _____________offers the rights to buy a specified asset like stocks at a particular price during a specified period. Insurance Regulatory and Development Authority c. The act of selling the option is known as_____________. a. General c. Brokers c. Malhotra committee b.5. Editing an option b. a. Underwriters 10. Currency option 6. Call option b. Which among the following are the insurance professionals have the right to accept or reject insurance applications based on some basic criteria of individual companies? a. Which among the following was formed in the year 1999 to control and enhance the insurance industry standards? a. Public sector b. Writing an option c. Which of the following Accounting Standard should the insurance company use to prepare its receipts and payment accounts according to IRDA regulations of 2000? a. Social 8. Voluntary d.

The IRDA under the IRDA Investment and Amendment Regulations issued detailed guidelines to _______________ for making investments. Assignment of a policy means the _______________ of the policy to a third party. Accounting Standard 3 c. Transfer d.b. Insured c. Notification b. Accounting Standard 4 d. 10 years 14. Coinsurer d. Authentication . a. a. Five d. Nomination c. General insurance business Act 12. 15 years d. a. Nine 15. Which of the following act was passed in 1999 to amend the Insurance Act of 1938? a. Three b. Insurers b. Two c. 30 years b. Life insurance Act c. Minimum age for money back policy is ____ years. Reinsurer 13. a. IRDA Act b. A person can apply for a surrender amount only if the premium has been paid for minimum of _______ years. Accounting Standard 17 11. Companies Act d. 20 years c.

Motor vehicle insurance d. Medical payment coverage c. a. National policy . windstorms or floods? a. Which one of the following automobile insurance covers the damage caused from missiles or any falling object. Aqua culture insurance d. Inland marine insurance d. Integrated program b. _______________covers the construction risk. Marine cargo insurance b. Horticulture insurance c. Unvalued c. Farmers' insurance 17. Fidelity insurance c. Workmen's compensation insurance 21. ______________for older persons is a plan that offers fiscal assistance to develop old age homes. when the vessel is under construction. Specific 18. Marine hull insurance c. earthquakes. day care centres. Comprehensive coverage d. Inland fish insurance 19. a.the insurer accepts to compensate the insured such as the employers against the losses suffered due to the employees. In ______________policy. Inland fish insurance b. thefts. In ______________. a. and Medicare centres that offer non-institutional services to elderly persons. a. Average d.16. assets are insured for a certain sum irrespective of its value. Valued b. Credit insurance b. _______________ is given for a period of four and half months. Liability coverage b. Collision coverage 20. a.

c. Business analysis c. Insurance premium c. Low cost family health insurance plan 22. Rate setting and testing . Product release b. ______________ is the product of rate and the number of units of protection purchased. New product development b. Life Insurance Agents Federation of India (LIAFI) d. Insurance Brokers Association of India (IBAI) c.I. Insurance Regulatory and Development Association (IRDA) 25. Concept testing d. a. Insurance face value b. Which one of the following is the third stage in product development process? a. National mental health program d. Actuaries Management Forum 23. Agents Consultative Forum d. Business analysis 26. Which among the following involves creation of drafts for policy documents? a. Customer requirement analysis d. management are discussed. a. Prototype development c. Which among the following institutions was formed in the year 1944? a. Insurance exposures d. Which one of the following is an important stage while designing a product? a. Analysis of market b. Institute of Actuaries of India (IAI) b. LIAFI has an ______________ meeting every six months where the issues of L. Agency Management Forum b. Actuaries Consultative Forum c. Commercialisation 27.C. Insurance loading 24.

all the decisions and confirmations of the claims settlement should not exceed _____________ from the receipt of proposal by the insurer. The premiums fixed for the policies should also support the ______________ model of insurers. Two weeks c. Claims management b. Claims processing c. Consumers b. where the laid down principles and measuring methods are utilised to settle the claims. a. a. Customer flow c.c. a. Social risk 31. Insurers 30. Drafting a pricing strategy 28. According to the guidelines set by IRDA. Company risk d. a. a. Claims reserving 32. Investment flow 29. Commercial risk b. Profit flow b. 15 days . Cash flow d. Financial risk c. 20 days d. Claims handling d. Agents c. _____________ is a method. One month b. ____________ are the concluding authorities who buy the insurance product. Analysis of data d. A great deal of negotiation over price takes place between the line underwriter and the agent concerning the proper pricing of a _____________. Underwriters d.

a. Treaty reinsurance b. Financial institution and bank bonds d. a. Block line advertisement 35. Public sector undertaking bonds b. Emerging markets bonds 37. AAA c. Facultative reinsurance c. +A d. Capital markets b. BBB 36. Which of the following decides the objective of insurance pricing? a. Insurer . a. Policyholder 34. Proportional reinsurance d. Securitisation of risk means that an insurable risk is transferred to the __________________ by creating some financial instruments. Vendors b.33. Online advertisement d. Which one of the following bonds are suitable for large scale investments and constitute more than 80 percent of the total bonds in the Indian insurance market? a. Marketing manager d. Excess-of-Loss reinsurance 38. industry publications and periodicals. All the debt assets issued by All India financial institutions are given ___________ rating. Corporate bonds c. AA b. Class rating b. End-users c. ______________ is a marketing tool used in trade journals. Mark-up pricing c. Which one of the following reinsurances is a part of a single policy or the entire policy after negotiating the terms and conditions? a.

Liberalisation and _________________ started allowing international players in the insurance sector. 1T. a. Industrialisation c. 1T. a. organising. Combining. Avoiding. Database management system b. Underlying price is the contracted price that is exchanged when the buyer exercises the option. Identify if the following statements are true or false. Decision support system c. Reducing 42. and sorting information in computer-based databases. Combining d. Reinsurer d. 2F . Data warehouse d. 2. a. 2T b. ______________ is the group of computer software programs used for generating. 1F. a. 2T c. Transferring c. Hedging. retrieving.c. Financing the risk method provides the financing needed for the losses either by _____________ the risk or _____________ the risk. Globalisation b. 1F. Marketisation d. The stock price is the main aspect that determines the option pricing. Group support system 40. Sharing b. analysing. 1. Co-insurer 39. 2F d. Privatisation SECTION B 41. Retaining.

Universal life insurance addresses the apparent disadvantages of whole life . a. Premium 2. LIC (Amendment) Bill d. 2. 1T. 2F c. 1 & 3 47. LIC (Amendment) Bill c. Protecting customers interest includes keeping prices affordable. 2F d. 1 & 4 d. 1F. 2. having some mandatory products and standardisation of services.namely that _________and ___________ are fixed . 1F. a. Involuntary insurance comes under private sector. Identify true and false statements. General Insurance Business (Nationalisation) Amendment Bill.43. 2T 46. _____________and _____________were the two bills introduced as a part of economic reforms in 2008. Insurance Regulatory and Development Authority Bill. Insurance (Laws) Amendment Bill. Only 3% of India’s population is covered under voluntary health insurance. 2 & 3 c. 2T b. a. Renewal amount a. 1T. 2F d. 1. Identify true and false statements. 1T. Insurance Regulatory and Development Authority Bill. 2T b. 2 & 4 b. 1F. 1T. Initial affordability 3. 1F. Which of the following are the elements of Life Insurance? 1. 1. General Insurance Business (Nationalisation) Amendment Bill 45. 2F c. Surrender value 4. It is important for the regulatory authority to make sure that the insured pays the insurer. 2T 44. LIC (Amendment) Bill b.

Desk underwriters. Claims. Actuary d. Underwriting managers. Paid-up value. ____________and ____________ are covered on payment of extra premium in inland fish insurance. The _____________ write the underwriting policy and the ________________ applies these terms and conditions to the applications and chooses the best policies. Death benefit b. Develop the life insurance sector c. Liabilities 48. Underwriting officers. Conduct research in life insurance b. Pollution. Grace period d. Which among the following is the function of IAI? a. 2F . Underwriting officers. Identify true and false statements. Allied risks 49. Credit importing. 1. Accident. Credit marketing d. Credit control 50. Actuary 51. Desk underwriter c. 1T.a. Premiums. Competition–based pricing is useful while pricing insurance products. Flood. Pricing new products is an important phase in product development process. Accident. 2T b. Disease c. Train and educate brokers 52. Malicious act d. Credit control c. Credit control b. Provide guidance for actuarial exams d. a. 2. Credit insurance by New India Assurance Company Limited offers two fold credit administration supports namely____________ and ________________. 1T. Local agent b. a. Credit marketing. Malicious act b. Credit supervising. a. Penalties c. a. Profits. Credit exporting.

Claims preparation. 2T 53. Block line . Block line . Evaluating claim cost. 1 & 3 55. 150 c. a. Television. 2F d. Easy d. a. Cost-saving. Five. Information collected by inspection 4. Supervising claim payment c. 1F. Online c. Claims processing b. a. Time-consuming. The _____________ and _______________ advertisements are very expensive forms of insurance marketing. enhancing efficiency of claims settlement d. 2 & 4 b. Television. Verification of claim. 1F. The apprentice system of underwriting is both _________ and _______. Costly b. The medical report 3. Reliable 56. The GIC together with its _____________ subsidiaries has developed ___________ new products. a. 2 & 3 c. Time-saving. Time-saving. _______________and _______________are parts of claim processing. Policy writing a. Verification of claim. Six. Application containing the insurer’s declarations 2. Four 160 d. Four. 150 54. 150 b. Inexpensive c.c. Print b. 1 & 4 d. Reviewing claim application 57. Which of the following are the sources of underwriting information? 1.

World Wide Web. When the risk is being borne by another party other than the one who is primarily exposed to risk. a. BBB b. AA.d. B. 1990s c. A large number of people are involved and hence each bears only a portion of risk that the enterprise faces. 1980s d. Agent analysis. then the investment of the asset is approved for _____________ rating. The developing areas of Information technology applications in the insurance sector are ____________and _____________. a. Match the following: First set: A. Market research. 1990s b. 1960s 60. AAA d. Reinsurance contracts. AA. Online. Reinsurance contracts. C. BBB. All the assets for investment have an investment grade __________ but if the investment committee is fully satisfied. Reinsurance contracts. +A c. new risk transfer instruments have emerged since the early ____________. a. Print 58. Insurance contracts. +A 59. Actuarial investigation. . Agent analysis b. As an alternative to the traditional ______________. Agent analysis c. Market research d. +A. Future contracts are bought and sold to balance the risk of changing prices in the cash market. CRM SECTION C 61.

Second set: 1. B-3. Recommendations of Malhotra committee B. A-3. D-4 d. B-1. Amendments to the General Insurance Business (Nationalisation) Act 1972 C. A-1. C-4.D. B-3. Amendment to the Insurance Regulatory and Development Act 1999 D. Match the following: First set: A. D-3 c. A-2. 2. It is useful for risk management and regulatory purpose. A-4. C-1. . D-1 63. A-1. C-4. Risk hedging 2. C-3. In order to minimise the overall risk. C-2. B-2. B-3. The Parliamentary Committee on Public Undertakings suggested to merge the GIC subsidiaries into a single company. B-4. Assumption of Black and Scholes pricing model B. D-1 b. D-4 c. The LIC (Amendment) bill 2009 Second set 1. VaR approach a. Risk financing 3. Second set: 1. It provides the techniques for funding of losses after their occurrence. Match the following: First set A. B-1. Insurance 4. D-2 62. Risk combination 4. It is a contractual transfer for risks C. A-1. A-2. Risk transfer 3. C-2. A-2. D-4 d. B-3. C-2. Stock trading is continuous. C-3. D-4 b. D. Risk sharing a. one risk is added to another existing risk.

1T. 4. A-4. B-1. Basically a whole life policy with a maturity or endowment date which occurs after a certain number of years or at a certain age. Variable life D. 3F. B-3. 2.2. C-2. D-1 b. 1. A-3. Money back insurance policy B. 1T. Identify true or false statements. 2T. D-4 d. 2T. 4T 65. 2T. D-2 c. Level term Second set: 1. 1T. . 3. B-1. C-1. A-4. C-4. 3T. 2. Private companies who have initial capital of Rs 1 billion must be permitted to work in the insurance industry. both the premium and the amount of coverage are expected to stay the same for a specified number of years. 4T c. D-3 64. With this kind of policy. Match the following sets: First set: A. 1F. The insurers keep the huge funds in their custody and invest them to produce more returns. Insurance regulation has to make sure that the claims made are settled quickly without unnecessary litigation. B-3. a. 4F d. C-2. Most of the premium amount is invested in one or more investment accounts 3. Endowment insurance C. 3F. a. 3F. Provide sovereign guarantee selectively on the amount of the policy and the gratuity from the present 100% government guarantee. 2T. Insurance regulation helps in protecting the policyholders from losses when the insurance company undergoes insolvency. This amendment proposed to increase the participation of foreign equity from 26 percent to 49 percent. 3. 4T b. A-2. IRDA introduced a number of regulations over the last decade they were rejected. 4.

Provides periodic payments of partial survival benefits during the period of the policy. Re-instatement policy C. C-1. NRI accident insurance 2. C. Police records 4. The property is replaced in totality instead of paying compensation for the goods lost by fire. B-1. A-2. D-4 d. Personal Accident insurance 3. D-3 c. C-1. C-2. Stock declaration policy B. A type of fire insurance policy which insures many properties under collective terms and conditions 2. A-2. B-3. B-1. D. One of the essential documents necessary for claiming accident insurance Second set: 1. A-4. B-3. a. Accident and health insurance . C-2. D-2 d. C-2. A-3. B-1. B-4. Schedule policy D. a. A-4. Issued for the stock of merchandise whose value is unpredictable? 3. medical procedures etc. D-2 67. A-3. Covers physician’s visits. D-3 66. C-4. medical expenses etc. Match the following: First set A. B-4. B-1. permanent disablement due to accident. 4. D-1 b. C-4. D-3 c.4. Match the following: First set: A. A-4. C-2. as long as the policy holder is alive. A comprehensive insurance that covers accidental loss. D-1 b. Excess policy Second set 1. Protects individuals or groups against personal accident or illness B. A-3. The highest liability of insurance company is specified in the policy.

B-4. 2F. D-1 68. 2F. Identify the correct sequence of steps involved in underwriting process 1. C-1. Confirmation . Apart from the rate balancing. 3. a. Identify true or false statements. D-2 c. 3T. C-1. The underwriters should ensure that there is a balance in rates between the aboveaverage applicants and below-average average applicants. 2F. Screening ideas Second set: 1. Taking and underwriting decisions. C-1. D-3 b. 1F. B-4. 4T 69. 2T. Requires a formal market research a. the underwriter should make sure that one set of policy holders should subsidise some other set. A-2. A-4. D-3 d. B-4. 4. A-2. A-2. C-4. New products that arise from technological innovations B. B-3.D-2 c. Underwriting differs for life and property insurance. New versions of the existing products 2. A-2. New products that arise from marketing oriented modifications D. 2. D-3 b. 3F. A-4. 1T.a. A-2. The underwriters should consider only those applicants whose actual loss rating is less than the expected loss rating. 4F b. 1T. 3. A-2. Analyses need for the new product 4. Match the following: First set: A. C-4. 1. 2. 3T. C-3. 3T. Execution of field underwriting. 4F c. B-4. B-1. Generating ideas C. B-3. D-1 70. D-3 d. 1F. 4F d. C-3. Have new functional value. C-1. B-1.

Claims philosophy D. C-2. A-3. C-1. 1. A-1. the risks are classified based on some important characteristics. 2. This process is used for reporting the damages with documentary proof of the assessment of loss and details of the loss. 4. 4 & 3 b. Merit rating C. for the insurer and insured to pursue. if required. Claims settlement B. a. a. 3. C-2. This plan modifies the class rate based on the claim experience of a particular coverage. Experience rating Second set 1. 2. Match the following: First set: A. 4. Renewing the application in the office a. 3 & 4 71. 2. Schedule rating B. Gathering additional information. A-2. 2. 3 & 2 c. It has two procedures. B-1. D-3 c. B-4. D-4 . B-3. 4. Match the following: First set A. Class rating D. 4. In this plan. 4. It alters the class rate of a particular class insured based on individual loss experience. 1 & 2 d. This is a process of negotiation between the insured person and insurance provider. A-4. In this method.3. B-1. C-4. 3. C-1. Claims processing Second set 1. It contains the guidelines required to prepare the receipt of claims from the insurers. D-2 72. A-2. all insurance coverage is rated separately. 1. D-4 b. A-3. C-2. 1. D-4 d. B-3. Claims preparation C. 3. B-3. D-1 b.

2. B-2. 4T c. 4T b. B-1. C-3. 1T. 4. C-2. D-3 d. A-1. Risks involved in corporate bonds depend upon the marketing conditions and investment rates. 2F. D-3 73. 1T. Solvency is defined as the capability to meet the financial requirements arising out of obligations. B-3. 2F. D-2 c. The loss and premium are shared among the primary insurer and the reinsurer in the same proportion. B-4. 3. C-1. A-2. Match the following: First set A. D-3 b. 3F. Data warehouse . 1. C-1. 4F 74. Surplus–share treaty C. Reinsurance pool Second set: 1. 2F. It is largely designed for providing protection against the catastrophic losses. A-4. 4F d. Excess–of–loss treaty D. B-4. Identify true and false statements. The investor can sell the government bonds in a secondary market only if the bond maturity date is reached. C-3. 1F. A-2. A-2. incomes and losses in the same proportion. Quota–share treaty B. 3F. C-4. B-4. It is an organisation of insurers that underwrites insurance on a joint basis. a. 3T. 4. 3.c. 2. a. It divides the expenses. The financial goals of insurers are to maximise profits and maintain solvency. Imaging and work-flow technologies B. 2T. 3T. A-4. 1F. D-1 d. Match the following: First set: A. D-1 75.

D-1 d. 3. D-3 . a. This makes it easier for companies to analyse. 4. A-4. C-2. C-3. B-4. A-2. This uses CRM packages to integrate different functional processes of the insurance company. Consumer service D. 2. A-1. A-1. Front end operations Second set 1. C-1. C-2. B-2. D-4 b. D-4 c. This includes products customisation. These give financial service organisations a distinct platform for managing customer transactions across multiple products. B-3.C. B-3. and store information.