PRE-CONTRACT FOR INSURANCE

AGENTS EXAMINATION AND

INVESTMENT-LINKED LIFE INSURANCE
(PCIL)

Sample Question 5

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 1. To contest the validity of a life insurance contract, an insurer must proof that there is a _____.
(PCEIA C11)
a) false information
b) inaccurate underwriting information
c) erroneous statement of facts
d) concealment of material facts

2. The law states that “where a contract of life insurance has been in effect for a period of more than
two (2) years during the lifetime of the insured, such a contract shall not be avoided by the life
insurer on the ground that a statement made or omitted to be made in the proposal for insurance or in
a report of a doctor, referee or any other person or in a document leading to the issue of the life policy
was inaccurate or false or misleading unless the insurer shows that the statement was on a material
matter or suppressed a material fact and that it was fraudulently made or omitted to be made by the
policy owner or the insured”. This statement refers to _____. (PCEIA C11)
a) The proviso.
b) suicide clause.
c) operative clause.
d) non-contestability clause.

3. Which of the following is NOT a method of distributing divisible surplus? (PCEIA C12)
a) Non-par maturity claim
b) Cash bonus
c) Guarantee bonus
d) Interim bonus

4. When the assets of the insurance fund exceed the liabilities, there is ______. (PCEIA C12)
a) Liability
b) Surplus
c) Assets
d) The market value

5. Where a contract of life insurance has been in effect for a period of more than two years during the
lifetime of the insured, such a contract shall not avoided by life insurer on the following grounds
EXCEPT for ______. (PCEIA C11)
a) a statemen relating to a pre-existing health condition not disclosed
b) a statement omitted in the medical report submitted with the proposal form, leading to an
inaccuracy in the policy issued
c) a careless misrepresentation regarding age made in the proposal form
d) a statement omitted in the proposal form leading to an inaccuracy on the policy issued.

6. A life policy shall remain in force for the full sum insured in the event of an election for conversion to
paid up life policy until _____. (PCEIA C11)
a) the date on which the policy owner surrenders his policy.
b) the date on which the next premium on the new policy is due.
c) the date on which the next premium on the original policy is due.
d) the date on which the policy owner retires.

7. What do policyholders stand to lose if they surrender a life policy? (PCEIA C11)
a) only the death benefit cover.
b) three quarters of all accumulated savings and earnings.
c) half the cash value after deduction for surcharge.
d) all benefits including life insurance protection.

8. The life insurer will refund the over payment to the insured ______. (PCEIA C11)
a) if the insurer makes more profit more than expected.
b) if the insured can prove that the insurer is making more profit than declared.
c) if the real age of insured is less than that stated in the policy.
d) if the insured can prove that he is healthier now than before.

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 9. With additional premium, a hospital and surgical insurance (HSI) policy can also be extended to the
following benefits, EXCEPT ______. (PCEIA C6)
a) organ transplant.
b) accidental death benefit.
c) cosmetic surgery.
d) insured child’s daily guardian allowance.

10. In relation to hospital and surgical insurance policies which will not be renewed, or for which the
renewal is to be deferred, notify the policy owner of its decision to decline or defer renewal, together
with reasons where appropriate, ______. (PCEIA C6)
a) At least 60 days after the policy anniversary date.
b) At least 30 day before expiry of the policy.
c) At least 60 days upon expiry of the policy.
d) At least 30 days before the policy anniversary date.

11. Which of the following is not a benefit limitations to medical and health insurance coverage? (PCEIA C6)
a) Reduction of the amount of benefit payable.
b) Shortening of the payment period of disability income.
c) Imposition of a larger deductible on medical expenses.
d) Option to reduce coverage at the time of a claim.

12. If the group policy owner has no insurable interest in the persons insured, the insurer is required to
provide details of such coverage, rights and obligations to each of the persons insured. (PCEIA C6)
a) utmost good faith.
b) insurable interest
c) contractual capacity
d) personal interest

13. Medical and health insurance (MHI) in Malaysia is written by both life and general insurance companies,
as a _______. (PCEIA C6)
a) stand-alone policy
b) rider attached to a life policy
c) supplementary cover
d) health benefit package

14. Which of the following is an important underwriting factor in deciding whether to accept a medical and
health insurance proposal? (PCEIA C6)
a) Age
b) Hobbies
c) Marital status
d) Education level

15. ______ mainly cater for healthcare benefits provided by employers, which comprise an essential
component of an employee’s remuneration package. (PCEIA C6)
a) group personal accidental insurance policy.
b) group term life insurance policy.
c) group savings scheme for retirement.
d) group medical and health insurance policy.

16. One of remedies to the principal if an agent fails in his duties in misappropriation of monies received,
the principal may rescind any contract made through the agent and ________ commission (PCEIA C5)
a) Refuse
b) increase
c) pay
d) reduce

17. An agent must carry out all lawful instructions. Where an insurance instructions intermediary has no
instructions on a particular point, he may follow ______ where such practice is clear. (PCEIA C5)
a) market usage
b) legal usage
c) customary practice
d) market agreement

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 18. _______ comprising the list Business of prohibited business conduct would apply equally to insurers and
insurance intermediaries including agents. (PCEIA C5)
a) Schedule 10 of the Financial Service Act 2013
b) Schedule 11 of the Financial Services Act 2013
c) Schedule 7 of the Financial Services Act 2013
d) Schedule 8 of the Financial Services Act 2013

19. Policy terms and conditions exist so that ______. (PCEIA C4)
a) the insured to buy back excluded perils by way of endorsement
b) the parties to the contract understand their respective duties, rights and obligations.
c) the insured understands the nature of the policy cover and its limitations
d) To exclude fundamental risks such as war and terrorism

20. ______ for insurance makes an offer by submitting a completed and signed proposal form directly to an
insurer or through an insurance agent. (PCEIA C4)
a) agent
b) finance company
c) proposer
d) broker

21. An insurance contract would be deemed _______ if no ‘consensus ad idem’ or there was a fundamental
mistake or disagreement from the start. (PCEIA C4)
a) unenforceable
b) void
c) voidable
d) ineffective

22. Which of the following is not an essential factors for the formation of a valid contract? (PCEIA C4)
a) Nomination of intermediary
b) Consideration
c) Offer and Acceptance
d) Capacity to Contract

23. According to Customer Due Diligence under the Anti Money Laundering and Counter Financing of
Terrorist compliance guideline, insurance companies must ______ (PCEIA C3)
a) verify and be satisfied until the identity of the customer or beneficial owner through reliable
documentation when establishing business relationships.
b) implement risk management commensurate with the level of money laundering and terrorism
financing risks.
c) report all cash transactions exceeding RM50,000 to Bank Negara Malaysia.
d) submit a report on any suspicious transaction to Bank Negara Malaysia.

24. Select one which is NOT covered by the provisions of Pentadbiran Insurance Deposit Malaysia (PIDM).
(PCEIA C3)
a) Islamic banks
b) Commercial banks
c) Reinsurance companies
d) Takaful companies

25. Which of the following provides for the regulation and supervision of financial institutions? (PCEIA C3)
a) Central Bank of Malaysia Act 2009
b) Companies Act 1965
c) Malaysia Deposit Insurance Corporation Act 2005
d) Financial Services Act 2013

26. The objective of Takaful and Insurance Benefits Protection System (TIPS) is _______. (PCEIA C3)
a) to protect takaful operations and insurance companies from bankruptcy.
b) to protect policy owners against unscrupulous insurance agents and intermediaries.
c) to protect policy owners from loss of their eligible benefits in the event that an insurer member fails
to pay insurance benefits.
d) to protect policy owners from the effects of an economic slump and recession.

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 27. Select the underlying concepts that drive the acceptance of the takaful system in Malaysia. (PCEIA C1)
I. Piety
II. Tabarru’
III. Protect
IV. Mutual assistance
a) I, II and III
b) I, II, and IV
c) I, III, and IV
d) II, III and IV

28. When a loss is covered by two or more policies by the same insured, the principle of contribution allows
an insurer who has indemnified an insured to call upon other insurers liable for the same loss to ______.
(PCEIA C2)
a) an equal proportion of the loss irrespective of the sums insured.
b) contribute proportionately to the cost of the indemnity payment.
c) an equal proportion of the loss in accordance with the respective sum insured.
d) the ratable proportion of the loss in accordance with the respective sum insured.

29. Which of the following is not a contract of indemnity? (PCEIA C2)

a) Fire insurance
b) Aviation insurance
c) All risks insurance
d) Life insurance

30. Proximate cause is concerned with how the loss or damage actually occurred and whether it is a direct
result of _______. (PCEIA C2)
a) an excluded peril
b) an insured peril
c) an exceptional peril
d) an uninsured peril

31. A breach of good faith on the part of the insured can result in _________ (PCEIA C2)
a) a void contract
b) a voidable contract
c) an unenforceable contract
d) an illegal contract

32. A ______________ policy is not a contract of indemnity. (PCEIA C9)

a) liability
b) medical and health
c) fire
d) personal accident

33. “The active efficient cause that sets in motion a chain of events which brings about a result, without the
intervention of any force started and working actively from a new independent source”. This is refer to
______. (PCEIA C2)
a) remote cause
b) independent cause
c) single cause
d) proximate cause

34. In insurance, the transfer of rights and liabilities of the insured to a new insured is referred to as
________. (PCEIA C2)
a) an assignment of policy.
b) a transfer of interest
c) a transfer of policy
d) an assignment of policy proceeds.

35. Select one which is best described the cost stabilization benefit of insurance. (PCEIA C1)
a) It identifies and controls all risks faced by enterprises.
b) It meets the financial consequences of certain risks.
c) It reduces the frequency and severity of loss.
d) It releases funds for investment in the productive side of enterprises.

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 36. Tabarru’ means ______. (PCEIA C1)
a) the agreement by the participant to hand over as donation, a certain proportion of the takaful
contribution, enabling him to fulfil his obligation of mutual help.
b) the sincere intention of the group member to help and support the needy.
c) an agreement to jointly indemnify the loss or damage that may inflict upon any of the contributors.
d) the agreement between the participant and the takaful operator for the purpose of business
venture and both parties agree on profit-sharing agreement.

37. Insurance is concerned mainly with pure risks and not speculative risks which have an element of
financial gain. Which of the following is NOT a pure risk but is insurable? (PCEIA C1)
a) Nuclear testing
b) Effects of inflation on the economy
c) Typhoon and hurricane
d) War and military action.

38. Insurance intermediaries refers to ______. (PCEIA C1)

a) real estate agents and property developers.
b) trustees and financial institutions
c) motor franchise holders and stock brokers.
d) insurance brokers, agents and financial advisers.

39. What happens if a policy owner lapses a policy and purchases a new one? (PCEIA C4)
a) The new policy may be rejected because the old policy is still active.
b) The proposer may opt to transfer the old premium to the new policy.
c) The suicidal and incontestability clause will not ne disrupted as the proposer is the same person.
d) The suicide clause and incontestable clause begin anew in a new policy.

40. Choose the correct statement of an intermediary in soliciting business from a prospective policy owner.
(PCEIA C16)
a) if there is a conflict of interest between the insurer and the prospect, the intermediary should
protect the insurer.
b) If it is the duty of the intermediary to always protect the insurer by all means even though it will
bring no benefit to the insured.
c) An intermediary obligated to conduct business at all times with utmost good faith and integrity.
d) It is an important obligation of the intermediary to always protect his own interest first before
protecting the interest of the prospect.

41. Choose the correct statement. (PCEIA C15)

a) The insurer shall not collect any claim processing fees from the policy owner or the beneficiary.
b) The insurer shall allow the agent to collect claim processing fees from the policy owner or the
beneficiary.
c) The insurer shall not stop the agent from collecting claim processing fees from the policy owner or
the beneficiary.
d) The insurer may impose a claim processing fee on the policy owner or the beneficiary.

42. An Insurer is expected ______. (PCEIA C16)

a) not reject a claim under any circumstances
b) delay the claim payment for as long as they wish.
c) not unreasonably reject a claim
d) not to unreasonably reject a claim

43. Disclosure of Underwriting Information The agent shall ______. (PCEIA C10)
a) encourage the prospect to hide any information that may result in the application being rejected.
b) allow the prospect to find a clinic that will not reveal any health problems the medical check-up may
reveal.
c) always influence the proposer that the answers or statements must be aligned with the company’s
requirement.
d) avoid influencing the proposer and make it clear that as the answers or statements are the proposer’s
own responsibility.

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 44. Policy delivery will strengthen the customer relationship and it helps to _______. (IL C9)
a) sell another policy.
b) prevent the client from making a complaint.
c) save the client’s money.
d) encourage persistency.

45. The second step is the selling process is _________ (IL C9)
a) locating the prospective customer.
b) the sales presentation
c) conducting the sale interviews
d) handling objections.

46. In the Code of Ethics, an insurance agent should practise the following _______. (PCEIA C16)
I. To avoid conflict of interest.
II. To avoid misuse of position.
III. To ensure completeness and accuracy of relevant records.
IV. To prevent misuse of information.
a) I, II, and III
b) I, II and IV
c) II, III and IV
d) I, II, III and IV

47. Agents selling investment-linked products should conduct reviews on their client’s investment profile
and investment progress periodically – ideally ______. (IL C9)
a) once a year
b) once a week
c) once every six months
d) once a month

48. Which stage in the consumer buying process states that the consumer becomes aware of the threat of
risks or a potential opportunity and feels the need for the product to protect him from financial
difficulties or to satisfy his needs? (IL C9)
a) information search
b) evaluation of alternative policies
c) problem recognition
d) purchase

49. Guidelines on Investment-linked Business state that the initial offer period (of a new fund) shall not
______. (IL C8)
a) be less than one month
b) exceed one month
c) exceed two months
d) be less than two months.

50. Select true statement about equities. (IL C7)

a) Return potentials for equities can be significantly lower, especially during periods of market
buoyancy.
b) Equity prices can rise against the mainstream when the stock market faces a downtown over an
extended period.
c) Equity process can be very steady when the stock market faces a downturn over an extended period.
d) Return potentials for equities can be significantly higher, especially during periods of market
buoyancy.

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

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