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IN IC 14 – REGULATION OF INSURANCE BUSINESS

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MOST IMPORTANT
‘LAST DAY REVISION’ TEST 1

WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

MOST IMPORTANT ‘LAST DAY REVISION’ TEST 1

Question1 In Regular Premium (RP) contracts, the minimum health cover for age at entry of 45 years
or above is _________ .
(a) 2 times Annualized Premium (AP) or Rs 75000 whichever is higher
(b) 5 times Annualized Premium (AP) or Rs 75000 whichever is higher
(c) 2.5 times Annualized Premium (AP) or Rs 100000 whichever is lower
(d) 2.5 times Annualized Premium (AP) or Rs 150000 whichever is lower
(e) 7.5 times Annualized Premium (AP) or Rs 25000 whichever is higher

Correct Answer 5 times Annualized Premium (AP) or Rs 75000 whichever is higher

Answer Explanation If age of entry is 45 years or above its 5 X AP or Rs 75000 whichever is higher
If age of entry is below 45 years its 5 X AP or Rs 100000 whichever is higher

Question2 The full form of KYC is _______ .

(a) Know Your Client
(b) Know Your Customer
(c) Know Your Captain
(d) Keep Your Client
(e) Keep Your cash

Correct Answer Know Your Customer

Answer Explanation

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MOST IMPORTANT
‘LAST DAY REVISION’ TEST 1

WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question3 In Regular Premium (RP) contracts, what is the minimum annual health cover for age at
entry below 45 years ?
(a) 5 times the annualised premium (AP) or Rs 1,00,000 pa whichever is higher
(b) 7 times the annualised premium (AP) or Rs 50,000 pa whichever is higher
(c) 1.5 times the annualised premium (AP) or Rs 1,00,000 pa whichever is higher
(d) 0.5 times the annualised premium (AP) or Rs 75,000 pa whichever is higher
(e) None of the above

Correct Answer 5 times the annualised premium (AP) or Rs 1,00,000 pa whichever is higher
Answer Explanation In Regular Premium (RP) contracts, the minimum annual health cover for age at entry
BELOW 45 years is 5 times the annualised premium (AP) or Rs 1,00,000 pa whichever is
higher.

Question4 'IAT' stands for ________ .

(a) Intelligent Agent Technology
(b) Investment Analysis Team
(c) Indian Actuaries Tribunal
(d) Insurance Appellate Tribunal
(e) Internal and Applied Taxes

Correct Answer Insurance Appellate Tribunal

Answer Explanation

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MOST IMPORTANT
‘LAST DAY REVISION’ TEST 1

WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question5 “Incontestable Clauses” is employed as a clause in insurance in which country ?

(a) Switzerland
(b) Australia
(c) France
(d) UK
(e) USA

Correct Answer USA

Answer Explanation

Question6 With respect to life insurance business, single premium policies should not exceed ____ %
of the sum assured.
(a) 20
(b) 25
(c) 30
(d) 35
(e) 50

Correct Answer 20
Answer Explanation IRDA issued new tax rules in 2012 for single premium policies according to which the
criteria for eligibility of tax benefit is that the premium shall not be more than 20% of the
sum assured.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question7 Why have the transaction records to be retained for 10 years ?

(a) To answer any queries from policy holders
(b) To achieve 100% compliance
(c) To create data warehousing reports
(d) To enable best practices study
(e) To establish fairness of the insurer

Correct Answer To achieve 100% compliance

Answer Explanation Under record keeping requirements, records of customer identification data have to be
retained for 10 years after the relationship with the customer has ended.

Question8 As for _______, the assignment / transfer is not operative.

(a) Agents
(b) Brokers
(c) Insurers
(d) Non life Insurers
(e) Transferor

Correct Answer Insurers

Answer Explanation The transfer or assignment shall be complete upon the execution of such endorsement but
except where the transfer or assignment is in favour of the insurer shall not be operative as
against an insurer and shall not confer upon the transferee or assignee.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question9 Past performance of ULIPs in advertisement can only contain _____ .

(a) Results of investments and projected figures
(b) Results of allocation and past figures
(c) Results of funds and supporting figures
(d) Results of units and interest rates
(e) Results of investments and premium

Correct Answer Results of funds and supporting figures

Answer Explanation ULIP advertisements should only contain the results of the funds duly supported by the
related figures.

Question10 On which matter can the Executive Committee of Life Insurance Council can advise the
IRDAI?
(a) On the matters of staff selected by insurance companies
(b) On the matters of losses incurred by Life Insurance Companies
(c) On the matters of property acquired by Life Insurance Companies
(d) On the matters of taxes paid by Life Insurance Companies
(e) On the matters of expenses incurred by Life Insurance Companies

Correct Answer On the matters of expenses incurred by Life Insurance Companies

Answer Explanation One of the functions of Executive Committee of Life Insurance Council is to render advise to
the IRDA in the matter of controlling the expenses of insurers in respect of their life
insurance business in India.

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Question11 P&GS means ____________ .

(a) Punjab & Gurudaspura Services
(b) Post & Govt. schemes
(c) Promised & Guarantee schemes
(d) Pension & Group schemes
(e) Private & Govt. Suppliers

Correct Answer Pension & Group schemes

Answer Explanation

Question12 As per Section 45 of Insurance Act, no policy of life insurance effected before the
commencement of this Act shall after the expiry of _______ years from the date of
commencement of this Act.
(a) 1
(b) 2
(c) 3
(d) 4
(e) 5

Correct Answer 2
Answer Explanation As per Sec 45 of Insurance Act, a life insurance policy commenced before the Act was
regulated, shall automatically expire after two years from the date of its commencement.

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Question13 'CBEC' means ________ .

(a) Central bureau of excise and customs
(b) Company board of excise and customs
(c) Central board of excise companies
(d) Central bureau of excise commission
(e) Central board of excise and customs

Correct Answer Central board of excise and customs

Answer Explanation

Question14 'SHG' stands for __________ .

(a) Sovereign Health Grade
(b) Society of home guards
(c) Self Help Groups
(d) Security Home Group
(e) None of the above

Correct Answer Self Help Groups

Answer Explanation IRDA Micro Insurance regulations allow three types of entities - Non-Govt. Organisations
(NGOs), Self Help Groups (SHGs) and Micro Finance Institutions (MFIs) to act as Micro
Insurance agents.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question15 What is the minimum term of cover in Life Micro Insurance for a term insurance plan
without return of premiums ?
(a) 1 year
(b) 3 years
(c) 5 years
(d) 7.5 years
(e) 10 years

Correct Answer 5 years

Answer Explanation The minimum term of cover is 5 years and the maximum term of cover is 15 years in Life
Macro insurance - term insurance policy.

Question16 When did IRDAI notify the Micro Insurance regulations?

(a) 10th Nov 2001
(b) 10th Nov 2002
(c) 10th Nov 2003
(d) 10th Nov 2004
(e) 10th Nov 2005

Correct Answer 10th Nov 2005

Answer Explanation After considering the Govt. of India recommendation on micro insurance, IRDA notified the
Micro Insurance regulations on 10th November 2005.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question17 Insurance is __________ to ML/TF ( Money Laundering/Terror Financing) when compared

to other financial instruments.
(a) Less vulnerable
(b) Equally vulnerable
(c) More vulnerable
(d) Not at all vulnerable
(e) None of the above

Correct Answer Less vulnerable

Answer Explanation Insurance business is not completely immune to the threat of becoming a channel
to Money Laundering / Terror Financing, though the vulnerability is relatively less when
compared to other participants of the financial sector like banks etc.

Question18 What is the minimum term of cover in health insurance ?

(a) 1 year
(b) 2 years
(c) 3 years
(d) 5 years
(e) 7 years

Correct Answer 1 year

Answer Explanation

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question19 How has the Consumer protection (Amendment) Act defined the policy holder / a nominee
/ a beneficiary and an assignee under the MWP Act.
(a) Relatives
(b) Buyers
(c) Sellers
(d) Consumers
(e) Investors

Correct Answer Consumers

Answer Explanation Under the MWP Act (Married Women Property Act) the policyholder, nominee, assignee
beneficiary of an insurance policy are considered as consumers.

Question20 _______ is not associated with the Insurance Association of India.

(a) All the insurers that are incorporated or domiciled in India
(b) All the insurers that are incorporated or domiciled outside India
(c) Life Insurance council
(d) General Insurance council
(e) Insurance consumer forums

Correct Answer Insurance consumer forums

Answer Explanation As per Sec 64A of the Insurance Act, all insurers carrying on insurance business in India will
constitute a body corporate known as 'Insurance Association of India' and it will consist of :
1. Members - All the insurers that are incorporated or domiciled in India
2. Associate Members - All the insurers that are incorporated or domiciled outside India
3. The Life Insurance council
4. The General Insurance council

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question21 Which forum consist of President - Judge of Supreme Court, members not less than four -
one lady member ?
(a) National Commission
(b) State Commission
(c) District Forum
(d) Distum
(e) MWP Forum

Correct Answer National Commission

Answer Explanation Under the structure of Consumer Protection Act, there are District Forum, State
Commission and National Commission.
The composition of National Commission: President - Supreme Court judge, Members not
less than 4 - 1 lady member.

Question22 What is the objective of uniformity in Unit pricing ?

(a) To make adjustments for lock in period
(b) To take advantage of Dollar-Rupee fluctuations
(c) To follow IRDAI regulations
(d) To maximize returns on investments
(e) To protect the interest of policy holders

Correct Answer To protect the interest of policy holders

Answer Explanation The objective of bringing uniformity in unit pricing is to protect the interests of the
policyholders. This implies that the NAV of the unit should not be affected negatively by
virtue of the outflows from the fund.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question23 What is the maximum reduction in yield ie. difference between Gross & Net yield (%pa) if
the number of years elapsed since inception is 11 and 12 years ?
(a) 4.00%
(b) 3.30%
(c) 3.00%
(d) 2.75%
(e) 2.25%

Correct Answer 2.75%

Answer Explanation This is as per the table provided for years elapsed from 5 to 15 and thereafter.

Question24 What do the financial institutions issue regarding ML/TF ? (as per PML rules)
(a) Economy specific guidance
(b) Sector specific guidance
(c) Subject and source guidance
(d) Surcharge and source guidance
(e) Source and sourcing guidance

Correct Answer Sector specific guidance

Answer Explanation The Prevention of Money Laundering Act (PMLA) rules empower finance industry
regulators like RBI, SEBI, IRDA etc. to issue sector specific guidance on Anti Money
Laundering (AML) and Countering Financing of Terrorism (CFT).

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question25 Micro insurance schemes are most popular in ________ from where the maximum business
is generated.
(a) 4 Northern states
(b) 7 North Eastern states
(c) 5 Western states
(d) 3 Eastern states
(e) 4 Southern states

Correct Answer 4 Southern states

Answer Explanation Most Micro Insurance schemes (74%) operate in the 4 southern states of India.

Question26 The 'Prudential Investment Norms ‘Compliance Report' is to be submitted ________ .

(a) within 30 days from the date of Board approval of audited accounts
(b) within 15 days from the date of Board approval of audited accounts
(c) within 21 days from the date of Board approval of audited accounts
(d) within 30 after the end of each quarter
(e) within 15 after the end of each quarter

Correct Answer within 30 days from the date of Board approval of audited accounts
Answer Explanation

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Question27 _______ will be deemed to be the absolute assignee or transferee respectively.

(a) Nominee
(b) Assignor
(c) Assignee
(d) Transferee
(e) Assignee & Transferee

Correct Answer Assignee & Transferee

Answer Explanation As per Section 38(7) of the Insurance Act - Every assignment or transfer will be deemed to
be an absolute assignment or transfer, and the assignee or transferee as the case may be,
will be deemed to be absolute assignee or transferee respectively.

Question28 Which is the way in which physical hazard is assessed?

(a) On the basis of risks
(b) On the basis of information given in the form
(c) On the basis of nature of product
(d) On the basis of damages caused
(e) On the basis of contract

Correct Answer On the basis of nature of product

Answer Explanation Physical hazards consist of those physical attributes or physical conditions that affect the
risk.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question29 If a person does not follow the order of consumer forum, the maximum term of
imprisonment is ____ years.
(a) 1
(b) 2
(c) 3
(d) 4
(e) 5

Correct Answer 3
Answer Explanation When a person fails to comply with the order of a consumer forum, such a person may be
imprisoned for a term minimum one month to maximum three years or with a fine
minimum Rs 2000 to maximum Rs 10000 or both.

Question30 The policy money will have to be paid to the _____ .

(a) Surveyor
(b) Assignee
(c) Assignor
(d) Legal heir
(e) Broker

Correct Answer Legal heir

Answer Explanation Payment of the policy- when all the formalities are completed the insurance co issues a
discharge form for completion which is to be signed by the person entitled to receive policy
money. Such person can be:
The nominee –if nomination was made under the policy
The assignee – if the policy was assigned
The legal representative or successor
In the above question it is not mentioned that the policy has been assigned so legal heir
will receive the policy money.

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question31 ______ can approach the GRA ?

(a) Surveyor
(b) Policy holder
(c) Insured
(d) Collector
(e) Claimant

Correct Answer Claimant

Answer Explanation It will be open to the claimant to approach the GRA within a period of 60 days from the
date of receipt of the decision of the inhouse mechanism of the insurer.

Question32 When insurance companies give advertisement for ULIP, it can contain past performance
figures with respect to _______ .
(a) results of investments and also the projected figures
(b) result of allocation and also the past figures
(c) results of funds and supporting figures
(d) results of investments and premium received
(e) results of investments and effect of interest rate fluctuations

Correct Answer results of funds and supporting figures

Answer Explanation As per IRDA (Insurance Advertisements and Disclosures) Regulations 2000: The life
insurance companies must take care while reporting the past performance of funds in
advertisements etc. It should only contain the results of funds duly supported by the
related figures.

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Question33 To whom is the premium paid ?

(a) Agent
(b) Banker
(c) Company
(d) Insurer
(e) Policy holder

Correct Answer Insurer

Answer Explanation

Question34 A micro insurance agent shall -

(a) Not work for more than one insurer carrying on life insurance business
(b) Not work for more than one insurer carrying on general insurance business
(c) Not distribute any product other than a micro insurance product
(d) Be appointed by an insurer by entering into an appropriate deed of agreement
(e) All of the above

Correct Answer All of the above

Answer Explanation All the above conditions are applicable to micro insurance agents.

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Question35 Appeal in Supreme court can be made subject to deposit of ______ of the amount awarded
or _____ whichever is less.
(a) 10% , Rs 50000
(b) 20% , Rs 50000
(c) 30% , Rs 50000
(d) 40% , Rs 50000
(e) 50% , Rs 50000

Correct Answer 50% , Rs 50000

Answer Explanation

Question36 To whom will the appeal against the orders of GRA be automatically transferred to ?
(a) The High Court
(b) The District Court
(c) Consumer council
(d) Consumer group
(e) Insurance Appellate Tribunal

Correct Answer Insurance Appellate Tribunal

Answer Explanation An appeal will lie from the decision of the GRA to an Insurance Appellate Tribunal (IAT).

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Question37 The full form of LI Council is _______ .

(a) Lead Insurer Council
(b) Legal Insurance Council
(c) Loan Insurance Council
(d) Loss Insurance Council
(e) Life Insurance Council

Correct Answer Life Insurance Council

Answer Explanation IRDA Act has the provision under Section 64C for establishing of independent Life
Insurance Council and General Insurance Council.

Question38 When the shippers use better methods of packing, the rates charged for marine insurance
will be _______ .
(a) Top end rates
(b) Somewhat higher rates
(c) Medium rates
(d) Specific rates
(e) Lower rates

Correct Answer Lower rates

Answer Explanation Packing is an important factor in almost all preventable cargo losses. Insufficient,
inadequate improper and defective packing is a source of much concern to an underwriter
because it can turn what might have been a small loss into a large one.
Better the packing, lower the probability of losses, so lower the rates of insurance.

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MOST IMPORTANT
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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question39 What will a life insurance policy state ?

(a) The policy term
(b) The policy premium amount payable
(c) The age and occupation of the insured
(d) The documents required to be submitted in support of a claim
(e) All of the above

Correct Answer All of the above

Answer Explanation

Question40 If the premiums have been paid for 11 and 12 years since inception, the maximum
reduction in yield (difference between Gross and Net yield % pa ) is ____ %.
(a) 4.00
(b) 3.75
(c) 2.75
(d) 2.25
(e) 1

Correct Answer 2.75

Answer Explanation

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WWW.TOP4SURE.IN IC 14 – REGULATION OF INSURANCE BUSINESS

Question41 What does claims refer to ?

(a) Claim refers to damages incurred by policy holder
(b) Claim refers to damages incurred by insurance company
(c) Claim refers an amount paid by policy holder
(d) Claim refers to a fixed amount paid to the nominees
(e) Claim refers to damages incurred by the insurer

Correct Answer Claim refers to damages incurred by policy holder

Answer Explanation Losses suffered by policyholders if covered by the policy become claims.

Question42 Who has the choice to opt for mediation / conciliation so as to encourage Alternate
Dispute Resolution (ADR) ?
(a) Investigating officers
(b) Brokers
(c) Claimant
(d) Supervisor
(e) Chairman

Correct Answer Claimant

Answer Explanation As per the 'Law Commission', with a view to encourage ADR, a claimant may have the
choice to opt for mediation or conciliation.

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Question43 In which cases will the GRA have no jurisdiction ?

(a) In cases relating to original party
(b) In cases relating to first party
(c) In cases relating to second party
(d) In cases relating to third party
(e) In cases relating to forth party

Correct Answer In cases relating to third party

Answer Explanation The GRA (Grievance Redressal Authorities) shall have no jurisdiction in cases related to
third party motor vehicle insurance and marine insurance.

Question44 A Micro Insurance agent shall _______ .

(a) also distribute other insurance products apart from micro insurance products
(b) not be under the preview of IRDA rules and regulations
(c) employ specified persons with prior approval of the insurer
(d) work for more than one insurer carrying on life insurance business
(e) All of the above

Correct Answer employ specified persons with prior approval of the insurer
Answer Explanation A micro insurance agent has to take prior approval from the insurer before employing
specified persons.

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Question45 __________ accounts are used to transfer funds in the second stage of money laundering.
(a) Saving Accounts and Current Accounts
(b) CC Accounts and OD Accounts
(c) Home Accounts and Remote Accounts
(d) Investment Accounts and Expense Accounts
(e) Capital Accounts and Revenue Accounts

Correct Answer Home Accounts and Remote Accounts

Answer Explanation The second stage of money laundering is Layering. In this a client places the dirty money in
a foreign country and then applies for a loan at his home’s jurisdiction bank.

Question46 The full form of GRA is __________ .

(a) Government Rationing Association
(b) Group Reinsurance Act
(c) Grievances Redressal Authority
(d) Graduate Research Assistant
(e) Government Reservation Area

Correct Answer Grievances Redressal Authority

Answer Explanation

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Question47 The net reduction in yield for policies with term less than or equal to 10 years should not
be __________ .
(a) more than 3% on maturity
(b) more than 2.75% on maturity
(c) more than 2.25% on maturity
(d) less than 2.25% on maturity
(e) less than 2.75% on maturity

Correct Answer more than 3% on maturity

Answer Explanation The net reduction in yield for policies with term less than or equal to 10 years should not
be more than 3% at maturity and for policies with term above 10 years, the net reduction
in yield at maturity shall not be more than 2.25%.

Question48 When a license issued to a corporate agent is lost or destroyed, IRDAI charges _____ for a
duplicate license.
(a) Rs. 50
(b) Rs. 100
(c) Rs. 500
(d) Rs. 1000
(e) Rs. 2500

Correct Answer Rs. 50

Answer Explanation Renewal of Licence - The authority may on payment of a fee of Rs.50 issue a duplicate
licence to replace a licence, which is lost, destroyed or mutilated.

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Question49 In France, the duration of Unit Linked Policy must be at least ____ years to qualify for tax
relief.
(a) 3
(b) 5
(c) 8
(d) 10
(e) 12

Correct Answer 8
Answer Explanation

Question50 Which statement is true ?

(a) New policy letters are issued for SSS policies

(b) Renewal receipts are issued for SSS policies
(c) Cover letters are issued for SSS policies
(d) FPR’s are issued for SSS policies
(e) None of the above

Correct Answer FPR’s are issued for SSS policies

Answer Explanation For Small Saving Schemes, when the premium is received by cheque through employer
demand draft or bankers cheque it is adjusted immediately and the First Premium Receipt
(FPR) is issued subject to clearance.

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