Chapter 1

1. Insurance premium rates are varied according to the -------------------------------.

A. expectation of profit

B. likelihood and potential size of loss

C. expansion of profit

D. none of the above

2. In case of Motor Vehicle insurance, an insurance company may refuse coverage to -------------------.

A. young drivers

B. old models of vehicles

C. vehicle fitted with anti-theft devices

D. drivers with a history of accidents

3. Underwriting is a key differentiator enabling the insurer to stay competitive, and at the same time, be

---------------------.

A. flexible and profitable

B. solvent and profitable

C. successful and profitable

D. adequate and profitable

Chapter 2 - Methodology And Procedures Of Underwriting

4. The insurer may arrange for a pre-acceptance survey of the risk depending on ------------------.

A. the nature of the risk

B. the value of the risk

C. location of the risk

D. the nature and value of the risk

5. If the proposed risk is large or involves complicated features, acceptance is decided on the basis of ----

-----------------------.

A. a controlling officer

B. a surveyor

C. an underwriter

D. an inspection report
 Chapter 3

Principles of Rate Making

6. In calculating the rates, by ensuring that all the relevant rating factors are taken into consideration, it

can be ensured that

A. the rates are sufficient enough to make good profits for the company.

B. the rates are not inadequate, excessive, or unfairly discriminatory between risks of similar type and
quality.

C. the rates are different between risks of similar type and quality.

D. the rates are the same for different types and quality of risk.

7. If a Pure Premium is calculated and collected:

A. It will constitute a fund which will be sufficient to pay for losses and expenses

B. It will constitute a fund which will be sufficient only to pay for losses

C. It will constitute a fund which will be sufficient to pay for losses and for profit of the insurer

D. It will constitute a fund which will be sufficient only to pay for the losses and for profits of the insurer

8. ------------------------------ is a tool to rate large complex risks and where detailed inspection and audit
are carried out.

A. Individual risk rating

B. Experience rating

C. Composite rating

D. Loading factors

Chapter 4

Rating Approaches in Pricing

9. In the insurance business, rate adequacy measurement is quite complicated because the insurer

cannot foresee the ------------------ at the time of selling policy.

A. actual cost

B. management cost

C. administrative cost

D. procurement cost
10. Under which rating approach, the premium rate, terms, and conditions are determined depending

on the actual past experience of the insurance company relating to claims.

A. Exposure rated products

B. Individual experience rated products

C. Class rated products

D. Packaged or customized products

11. Which rating method is applied, when factors that might cause losses can be easily identified and

quantified, and when statistics on these factors is available and is accurate?

A. Class rating method

B. Individual rating method

C. Experience rating method

D. Schedule rating method

Chapter 5

File and Use Regulations

12. ----------------------- is the process by which insurance companies develop their insurance policies as

per requirements of the policyholders.

A. Product design

B. Pricing

C. Rate

D. Definition of product

13. ---------------------------------------- mean that the insurer should only offer insurance of risks that are

quantifiable and manageable and where the premium can be properly assessed.

A. Justification of price

B. Prudent underwriting

C. Rate making

D. Pricing
 Chapter 6

Applications of File and Use Regulations

14. Insurance business is the primary function of an insurance company and it is essential for it to

have its underwriting policy approved by --------------------.

A. Regulator

B. Appointed Actuary

C. Board of Director

D. Advocate

15. The insurer needs to demonstrate to the ------------------------ that the rates and terms in any

particular cases are determined in conformity with the guidelines and underwriting philosophy.

A. regulator

B. insured

C. agent

D. board of director

Chapter 7

Tools of Underwriting

16. --------------------------- in underwriting decisions will lead to improvement of underwriting decision-

making processes and produce better underwriting results.

A. Flexible

B. Reasonable

C. Consistency

D. Accuracy

17. A statement of the insurer’s willingness and capacity to accept risk is the ------------------------- of

the insurer as to what, what not, and how much to accept.

A. underwriting philosophy

B. underwriting policy

C. underwriting guideline

D. underwriting procedure
18. ------------------- are the specific requirements imposed under contract, the violation of which can

lead to adverse effect on the policy liability for a loss.

A. Exceptions

B. Conditions

C. Exclusions

D. Retention limits

Chapter 8

Types of Policies

19. Non-life Insurance (General Insurance) business is classified into three categories as below:

A. Fire Insurance, Marine Insurance and Miscellaneous Insurance

B. Marine Insurance, Motor Insurance and Property Insurance

C. Miscellaneous Insurance, Motor Insurance and Engineering Insurance

D. Marine Insurance, Motor Insurance and Miscellaneous insurance

20. A policy which combines two or more types of insurance covers into one policy is called -----------

------------------.

A. name peril policy

B. package policy

C. all risks policy

D. customised policy

21. In motor insurance, which policy can be issued on vintage cars which are over a specified age and

certified to be in good working condition by an Automobile Engineer/Inspector.

A. Package policy

B. Agreed value policy

C. Floating policy

D. Open policy

Chapter 9

Underwriting Profitability And Reunderwriting Strategies

22. ----------------------------- can be reduced by looking at the outflow of expenses, whether they are

creating necessary value and whether any of the costs incurred are due to historical needs not
relevant now and so on.

A. Loss ratio

B. Expense ratio

C. Combined ratio

D. Reserve ratio

23. ------------------------------ is the process by which the profitability of a portfolio is managed and the

claims that take place are duly examined for identifying the loss exposures and taking necessary

correction for implementation.

A. Underwriting restrictions

B. Increasing premium

C. Claim processing

D. Reunderwriting

24. The purpose of ------------------------------------ is to give feedback to the underwriter and to the

management on the appropriateness of implementation of underwriting policy and interpretation

and use of the underwriting/rate manuals.

A. underwriting restrictions

B. underwriting audit

C. modification of underwriting guidelines

D. reunderwriting

Chapter 10

Protection of Policy Holders’ Interest

25. An insurer or its agent or other intermediary shall provide all material information in respect of a

proposed cover to the ---------------------- to enable him/her to decide on the best cover that would

be in his or her interest.

A. proposer

B. insured

C. prospect

D. public
26. The regulations stipulate that every insurer shall have in place proper procedures and effective

mechanism to address complaints and grievances of --------------------------------.

A. proposer

B. prospect

C. policyholder

D. public

27. On receipt of a claim communication, a general insurer shall respond immediately and give clear

indication to the --------------------------- on procedures that he should follow.

A. proposer

B. insured

C. prospect

D. public

Chapter 11

Research and Development in Underwriting, Rating and Product Innovation – Challenges Ahead

28. ------------------------------ is the method of choice to monitor effectiveness of these goals as well as

performance of various rules developed for setting insurance premium.

A. De-tariffing

B. Re-tariffing

C. Data mining

D. Rate monitoring

29. The --------------------------------- is the system of penalizing or rewarding of customers based on

their yearly accident claims.

A. bonus system

B. market research system

C. portfolio system

D. bonus malus system

30. Which of the following cannot be a reason for creating underwriting errors during the process?

A. Faulty information collection

B. Exposure measurement
C. Surveyors’ report

D. Coverage structuring

Chapter 12

I.T Applications in Underwriting

31. In --------------------------------------, the purpose is to identify group of prospects that are most likely

to be interested in a particular product.

A. cross-selling

B. target marketing

C. rate making

D. data mining

32. -------------------------------------------------- focuses on the life-time-value of a customer and address

various issues such as customer acquisition, retention, loyalty, cross selling etc.

A. Commercial rating mechanism

B. Critical response mechanism

C. Catastrophe research management

D. Customer relationship management

33. Which of the following component is not included in critical components of underwriting?

A. Predictive modelling

B. Risk segmentation

C. Product management

D. Predictive data mining

MI132 Life Insurance Underwriting

Chapter 13

Life Underwriting - Principles and Concepts (Part - 1)

34. In life insurance underwriting, an assumption is made towards the ---------------- of an individual,

while excluding unexpected factors such as accidents.

A. Death rate

B. mortality

C. morbidity
D. birth rate

35. If an individual is suffering from some existing medical condition and the risk is high but can be

accepted by the insurance company, then insurance cover can be provided to the individual with

appropriate -------------------------.

A. standard rates

B. normal rates

C. loading

D. premium

36. The underwriter can take a decision to -------------------------- the proposal for a certain period if he

feels that the risk associated with the individual will diminish after a certain period and the

individual will become insurable.

A. reject

B. accept

C. be unaccepted

D. postpone

Chapter 14

Life Underwriting – Principles & Concepts (Part 2)

37. The biggest advantage of -------------------------- method is that it ensures consistency in risk

classification by achieving a consistent basic mortality assessment by treating all similar lives in a

similar manner.

A. Judgement

B. mortality

C. numerical rating

D. morbidity

38. An underwriter can choose to accept ------------------------------- by charging extra premium, which

can be charged either for the entire policy term or for a limited period, depending upon the

adverse factors.

A. sub-standard risk

B. standard risk
C. highly sub-standard risk

D. moderate sub-standard risk

39. -------------------- are optional additional coverages & benefits that are offered along with basic life

insurance policies to enhance the benefits that will be payable to the policyholders.

A. Extra covers

B. Additional covers

C. Riders

D. Add on

Chapter 15

Underwriting – Process and Structure

40. --------------------------- can be general or comprehensive, based on the health conditions of the

prospect and the insurance cover to be provided to the insured.

A. Non-medical underwriting

B. Medical underwriting

C. Individual underwriting

D. Group underwriting

41. ---------------------------- is used for proposals that involve huge sums assured or proposals from high

net worth individuals (HNI) clients.

A. Green channel underwriting method

B. Jet unit underwriting method

C. Black-box underwriting method

D. Judgement method

42. ---------------------------- in an insurance company is generally a doctor with long standing experience

in the field of general medicine & cardiology, and who brings along a wide range of experience in

practicing medicine.

A. Medical team

B. Core underwriting team

C. Underwriting support team

D. Chief medical officer

 Chapter 16

Financial Underwriting

42. ---------------------------- is the process of determining the amount of insurance cover that is justified

for a person with regards to his/her income and his needs.

A. Core underwriting

B. Financial underwriting

C. General underwriting

D. Monetary underwriting

43. Good financial underwriting accomplishes which of the following objectives?

A. Minimizes fraudulent claims

B. Ensures insurable interest

C. Reduces anti-selection at issuance and on renewal

D. All the above

44. ---------------------------- is the measure of financial loss and obligations created by the insured’s

death and it determines the maximum amount of the death benefit which can be acceptable.

A. Insurable interest

B. Personal value

C. Financial value

D. Insurable value

Chapter 17

OCCUPATIONAL, AVOCATIONAL AND RESIDENTIAL RISKS

45. Occupations where the risk of mortality and morbidity is -------------------------- are categorized as

high-risk occupation in life insurance underwriting.

A. Very high

B. high

C. low

D. very low

46. ---------------------- refers to an activity that is undertaken by an individual as a hobby, in addition to

their work.
A. Avocation

B. Occupation

C. Activities performed

D. None of the above

47. ---------------------- refers to risks which an individual is exposed to during his/her stay in a certain

country.

A. Avocation

B. Occupation

C. Residential risks

D. None of the above

Chapter 18

REINSURANCE

48. In ------------------------------- method, the reinsurer independently underwrites the risk and can

propose a different underwriting decision.

A. facultative

B. treaty

C. proportional treaty

D. quota share treaty

49. In ------------------------------- method, the reinsurer has to accept liability all risks and has no option

to decline the risk accepted by the direct company as per reinsurance treaty terms and conditions.

A. facultative

B. treaty

C. proportional treaty

D. quota share treaty

50. ------------------------------- reinsurance generally does not cover mortality risks due to wars or

natural disasters like tsunamis, earthquakes, volcanoes etc.

A. facultative

B. treaty

C. catastrophes
D. quota share treaty

“Essay Question”

1. In the realm of general insurance, it is imperative for an insurer to ensure the accurate execution of

the underwriting process. Please elucidate the importance factors that must be taken into

consideration by an insurer in the general insurance underwriting process. Please provide examples

or relevant experience to support your answer.

(20 marks)

Your essay should be a minimum of 800 words and a maximum of 1000 words.

2. In general insurance business, the skills of the underwriter play a vital role. Please discuss about

underwriting skills and how can the underwriter acquire these underwriting skills? Please

incorporate examples or relevant experience in your response.

(20 marks)

Your essay should be a minimum of 800 words and a maximum of 1000 words.

“Essay Question”

1. Discuss the primary role of the Life insurance underwriter, which is to assess and evaluate the

proposed risks and make decisions. What types of decisions can be made by insurance

underwriters, and what are the potential outcomes of the life underwriting process? Please

provide examples or relevant experience to support your answer.

(20 marks)

Your essay should be a minimum of 800 words and a maximum of 1000 words.

2. With respect to extra mortality rates in Life insurance underwriting, the underwriter determines

the terms of application acceptance only after a meticulous analysis of the requisite documents.

What decisions can the underwriter make regarding risk, and how are these underwriting

decisions justified? Please incorporate examples or relevant experience in your response.

(20 marks)

Your essay should be a minimum of 800 words and a maximum of 1000 words