Question 1

Political upheaval or government suddenly losing voting of confidence will be

classified as which type of risk?
A Dynamic risk
B Static risk
C Particular risk
D Financial risk

Question 2
How are risks measured?
A. The cost of actual loss
B. The cost of consequential loss
C. The likely loss that may occur if a peril strikes
D. The likehood for a peril striking

How did risk management formally evolve?

A. As a function of business enterprise
B. As a function of debt collectors
C. As a function of financial lending
D. As a function of investment organisation

The total of the actual loss and the consequential loss is known as the
______________.
A. Maximum Probable Loss
B. Probable Maximum Loss
C. Maximum Possible Loss
D. Minimum Possible Loss

Separation and duplication are examples of ____________

A. Consequential losses
B. Hedging
C. Loss reduction techniques
D. Financial risks

Probable Maximum Loss or PML is determined using the Maximum Possible

Loss (MPL) and which other factor?
A. The probability of the peril striking
B. The cost of implementing loss reduction techniques
C. The cost of the actual loss
D. The cost of consequential losses

If the cost of damage is being met using internal resources / funds, how is the risk
being managed?
A. Avoidance / prevention
B. Transfer
C. Reduction
D. Retaining

Spreading risk across areas which may not be affected equally or at the same
time is called __________
A. Diversification
B. Separation
C. Duplication
D. Transfer
 Chapter 2

The proposer pays a consideration to the insurance company for bearing the risk
on his behalf. What is this consideration known as?
A. Enrollment fee
B. Premium
C. Installment
D. Bonus

How much is the maximum Foreign Direct Investment (FDI) allowed in

insurance in India?
A. 26%
B. 49%
C. 74%
D. 100%

Question 3
There are 700 car owners in a city. On an average it is expected that 2% of the
cars or 14 cars are likely to meet with an accident. It is expected the loss suffered
by each of the 14 car owners will be Rs. 15000. How much will be the premium
required to be contributed by each of the car owners to cover the losses?
A Rs. 100
B Rs. 200
C Rs. 300
D Rs. 400

Life insurance companies cover which types of risk?

A Risk of unexpected early death
B Risk of living too long
C Both of the above A and B
D None of the above

Importers and exporters facing risks related to foreign trade are covered by
whom?
A Insurance Regulatory Development Authority (IRDA)
B Deposit Insurance and Credit Guarantee Corporation (DICGC)
C Export Credit and Guarantee Corporation (ECGC)
D Life Insurance Corporation (LIC)

Which of the below is a reinsurance company?

A. General Insurance Corporation (GIC)
B. Life Insurance Corporation (LIC)
C. Oriental Insurance Company Limited
D. United India Insurance Company Limited

Which was the first company to conduct life insurance business in India?
A. Madras Equitable
B. Bombay Mutual
C. Oriental Life Insurance Company
D. Bharat Insurance Company
There are 100 people in a village. On an average every year 4 people die. The
economic value of each person is Rs. 25000. How much will be the premium
required to be contributed by each person to settle the losses of the families of
persons who die?
A Rs. 500
B Rs, 1000
C Rs. 1500
D Rs. 2000

ECGC is owned by _____________.

A GIC
B All private and public life insurers
C Government
D All private and public general insurers

The Life Insurance Corporation (LIC) was formed on _________.

A 1st January 1956
 Chapter - 3 THE BUSINESS OF INSURANCE

The process of finding others who are exposed to a similar risk and are willing to
share the risk is:
A. Reduction
B. Avoidance / prevention
C. Transfer
D. Retention

In the case of micro-insurance, up to what amount can an insurer issue a policy?

A. Rs.500,000
B. Rs.100,000
C. Rs.50,000
D. Rs.75,000

What is the treatment to be given to the difference between revenue and

expenses?
A It is included as profit
B It is paid to shareholders in the form of dividends
C It is held in reserve to cover claim costs
D It is returned to policyholders

In reinsurance terms a treaty condition stating that the insurer’s loss must exceed
a certain limit for the reinsurer to get involved is called ________________.
A Excess of loss
B Quota share
C Ceding
D Pool arrangement

Where would an insurance company find guidelines on investing funds?

A There are no guidelines
B IRDA Regulations
C Company guidelines
D The Insurance Act

Insurance manages risk in which of the following ways?

A. Transfer
B. Retention ffff
C. Reduction
D. Avoidance / prevention

Which of the following entities was nominated as the national reinsurer?

A. LIC
B. Oriental Insurance
C. General Insurance Corporation of India
D. New India Assurance

What are agreements between insurers and reinsurers known as?

A. Quota shares
B. Treaties
C. Excess of loss
D. Pool arrangements

The purpose of insurance is to _________

A. Bring people who are exposed to similar risks together
B. Pay claims
C. Collect premium
D. All of the above

Insurers protect the funds of the group by:

A. Not paying for losses which are not accidental
B. Making premiums excessive
C. Paying all claims
D. Paying exaggerated claims
 THE INSURANCE MARKET

How much is the minimum prescribed capital for a composite broker?

A. Rs. 50 lakhs
B. Rs.100 lakhs
C. Rs. 200 lakhs
D. Rs. 250 lakhs

In which year was the IRDA was set up?

A. 1998
B. 1999
C. 2000
D. 2001

How much is the Foreign Direct Investment (FDI) allowed in insurance in India?
A. 26%
B. 49%
C. 51%
D. 74%

As per the Insurance Act, for non-life insurance, how much is the claim value
exceeding which a report has to be obtained from a licenced surveyor?
A Rs. 10,000
B Rs. 15000
C Rs. 20,000
D The Insurance Act does not specify any amount for which a report has to be
obtained from a licenced surveyor.

In the case of individual agents, for how many years is the licence issued by
IRDA valid?
A For lifetime
B 1 year
C 2 years
D 3 years

How much is the minimum share capital requirement for a TPA?

A 1 crore
B 10 crores
C 50 lakhs to 250 lakhs
D There is no minimum capital requirement
CHAPTER 5
INSURANCE CUSTOMERS

A customer is a person who ___________

A. Refuses to purchase goods or services
B. Buys goods or services a business has to offer
C. Produces goods or service for sale
D. Receives monetary benefits from the sale of goods

Maintaining customer satisfaction while policies are in force is called

______________.
A. Servicing activities
B. Customer orientation
C. Customer satisfaction
D. Customer identification

What are accountability and corporate governance together called?

A Ethics in Business
B Freedom of Information
C Public Interest Litigation
D Good governance

What is the term used to describe the work output of one department being an
input for the work of another department in the same organisation and the
interrelationship of the departments?
A. External customer
B. Peers
C. Policyholder
D. Internal customer

In which regulations are the code of ethics directed towards ethical behaviour
spelt out?
A. Government
B. IRDA
C. Insurance Advisory Committee
D. Insurance Institute of India

What is the foundation of good governance?

A. Ethical behaviour
B. Having little concern for others
C. Being honest
D. A high concern for self

What must businesses keep in mind about their customers in order to be

successful?
A. How much they can pay
B. How they will use the goods or services
C. Their needs, interests and concerns
D. Whether they can recommend them to other people
What makes customers happy?
A. When they feel cared for
B. When someone tells them what they want
C. When their views and feelings are ignored
D. Not attending them

CHAPTER 6
THE INSURANCE CONTRACT

Which of the following events will be covered by an insurance company?

A. Death due to suicide in the first year of the policy
B. Disability due to self-inflicted injuries
C. Fines payable for traffic offences
D. Smuggled goods
E. None of the above

Sanjay has given a loan of Rs. 15,000 to Mohit for 5 years. At the end of 4 years,
the outstanding balance of the loan due is Rs. 2500. According to the principle of
insurable interest, how much is the insurable interest of Sanjay on the life of
Mohit?
A. The full loan amount of Rs. 15,000
B. The amount already paid of Rs. 12,500
C. The outstanding loan balance of Rs. 2,500
D. None. Sanjay cannot take insurance on Mohit’s life as the two don’t have any
legal relationship

Ajay has taken a life insurance policy worth Rs. 2,00,000 from insurance
company ABC and another worth Rs. 2,00,000 from insurance company XYZ. In
the event of Ajay’s death, what will be the amount of compensation received by
Ajay’s nominee?
A. Rs. 200,000 from company ABC because Ajay took life insurance first from
that company.
B. Company ABC and company XYZ will share the losses in proportion and
pay Ajay’s nominee a total of Rs. 2,00,000 as per the principle of
contribution.
C. Rs. 2,00,000 will be paid by company XYZ because it was the last company
to issue a policy to Ajay.
D. Total Rs. 4,00,000 will be received, which includes Rs. 2,00,000 from
company ABC and company XYZ each, as the principle of indemnity does
not apply to life insurance.

According to Section 45 of the Insurance Act, on finding out about nondisclosure

of material facts, in how many years can the insurance company
declare the contract as null and void?
A. Only at the time of accepting the proposal
B. Only during the first year of the policy
C. During the first two years of the policy
D. Never. Once the insurance company issues the policy it cannot declare the
policy void due to non-disclosure of material facts.
A house was burnt and weakened by fire. After many days, there was a storm and
it brought down the house completely. In this case, what will be considered the
proximate cause?
A. Fire
B. Storm
C. Both of the above
D. None of the above

Feroz has taken a fire insurance policy from Company ABC for Rs. 1,00,000 and
another fire insurance policy from Company XYZ for Rs. 50,000. There is a fire
in the house and the loss is Rs. 75,000. How much will be the claim paid by each
company?
A. Company ABC will pay the full amount of Rs. 75,000 as Feroz first took the
policy from Company ABC and the policy coverage amount is Rs. 1,00,000,
which is enough to cover the full loss amount.
B. Company ABC and Company XYZ will share the losses equally and pay Rs.
37,500 each.
C. Company ABC and Company XYZ will share the losses proportionately.
Company ABC will pay Rs. 50,000 and Company XYZ will pay Rs. 25,000.
D. Company XYZ will pay the full policy amount of Rs. 50,000 as it was the
last company to insure the house. The remaining loss of Rs.25,000 will be
paid by Company ABC.

Ramesh had taken a life insurance policy of Rs. 1,00,000 from Company ABC
and another life insurance policy of Rs. 50,000 from Company XYZ. On
Ramesh’s death, his nominee makes a claim. How much is the claim amount that
he will receive?
A. Nominee will receive only Rs. 1,00,000 from Company ABC as it was the
first company to offer insurance cover to Ramesh.
B. Nominee will receive total Rs. 75,000 out of which Rs. 50,000 will be paid
by Company ABC and Rs. 25,000 will be paid by Company XYZ.
C. Nominee will receive only Rs. 50,000 from Company XYZ as it was the last
company to offer insurance cover to Ramesh.
D. Nominee will receive total Rs. 1,50,000 out of which full benefit amount of
Rs. 1,00,000 will be paid by Company ABC and full benefit amount of Rs.
50,000 will be paid by Company XYZ.

For which of the family members mentioned below can Karan take health
insurance?
A Parents
B Brothers
C Sisters
D All of the above
E None of the above

Mahesh has finalised a resale property which he plans to purchase 3 months later.
The current owner has not taken property insurance and Mahesh is worried that
the property may be destroyed or damaged due to some peril. What can Mahesh
do?
A Mahesh can take property insurance for the property right away as he has the
right to protect the property that he is going to own in future.
B Mahesh can take insurance for the property only after he becomes the legal
owner of the property.
C Mahesh can exercise any of the above options.
D Mahesh can’t take insurance for that property as property insurance can be
taken only by the first owner of the property.

David and Anthony are brothers going for a picnic on their bikes with their
spouses. Both have taken insurance for their bikes. Due to Anthony’s negligent
driving, both the brothers bang into each other and David’s bike is damaged.
How will the insurance claim be settled?
A David’s insurance company will settle the claim and Anthony will get away
with his negligent driving as he is David’s brother.
B David’s insurance company will settle the claim and recover the money from
Anthony as he was responsible for the accident due to his negligent driving.
C The insurance company will not interfere as it is a family matter between the
two brothers and the insurance company has got no role to play as insurance
companies don’t interfere in family matters.
D Anthony will take the money from his insurance company and pay for the
repairs of his brother’s bike.

CHAPTER 7
INSURANCE TERMINOLOGY

The process of applying for insurance is called _____________.

A. Application
B. Consideration
C. Endorsement
D. Proposal

A policyholder transfers their rights under a policy to another person. This

process is called _____________.
A. Nomination
B. Assignment
C. Surrender
D. Deferment

The amount an insured must bear in any claim / contribute to a claim before an
insurer pays the remaining amount is called _________.
A Deduction
B Franchise
C Excess
D Malus

IBNR claims are _________

A. Involved but not responsible
B. Incurred but not reported
C. Investigated but not reported
D. Incurred but not responsible
he ratio that reflects the overall profitability of an insurance company is
_______
A. Expense ratio
B. Operating ratio
C. Loss ratio
D. Combined ratio

The person who assesses the risk associated with a proposal is ___________
A. Actuary
B. Underwriter
C. Arbitrator
D. Assessor

In life insurance, the difference between the date a policy commences and the
date the risk cover starts is called _________
A. Deferment period
B. Revival period
C. Default period
D. Nomination period

Amendments to standard policy conditions are called ________

A. Exclusions
B. Conditions
C. Endorsements
D. Warranties

CHAPTER 8
LIFE INSURANCE PRODUCTS
Rajesh has taken an insurance plan for a sum assured of Rs. 20 lakhs for a tenure
of 20 years. The plan specifies that the sum assured will be paid only if Rajesh
does not die during the policy tenure of 20 years. Which type of plan has Rajesh
opted for?
A. Term Assurance Plan
B. Pure Endowment Plan
C. Double Endowment Plan
D. Endowment Assurance Plan

In the case of a ULIP which fund invests a major portion of its funds in
Government bonds and securities?
A. Balanced Fund
B. Money Market Fund
C. Debt Fund
D. Equity Fund

In which type of contract, the annuitant makes a lump sum payment to the
insurance company and the insurance company starts paying annuities (periodic
payments) soon after the policy commences?
A Immediate Annuity
B Deferred Annuity
C Lumpsum Annuity
D Any of the above
Raj has taken a life insurance policy for a sum assured of Rs. 25 lakhs for 25
years. The policy terms specify that the policy amount will be paid only if Raj
does not survive the tenure of the policy. Which type of policy has Raj taken?
A. Pure Endowment Policy
B. Term Assurance Policy
C. Endowment Assurance Policy
D. None of the above

In an insurance policy ‘Maturity Benefit’ is also known as __________

A. Death Benefit
B. Survival Benefit
C. Death Cover
D. None of the above

Rajesh has bought a money back policy with a sum assured of Rs. 2,00,000 for a
tenure of 20 years. The policy specifies a payment of 20% of the sum assured
every 5 years and 40% on the maturity of the policy. If Rajesh dies anytime
during the policy term then the insurance company, along with the payments
made till that date, will pay the sum assured of Rs. 2,00,000 and the policy will
be closed.
The money back policy bought by Rajesh is a combination of which of the below
plans?
A 4 pure endowment plans of 5, 10, 15 and 20 years and 1 term assurance plan
of 20 years
B 4 endowment assurance plans for 5,10, 15 and 20 years and 1 term assurance
plan of 20 years
C 4 term assurance plans of 5,10, 15 and 20 years and 1 pure endowment plan
of 20 years
D 4 endowment assurance plans for 5,10, 15 and 20 years and 1 pure
endowment plan of 20 years

With respect to life cover of some life insurance plans offered by insurance
companies, which of the below is possible as an option?
A The life cover always remains constant throughout the policy and cannot be
stepped up or stepped down during the tenure of the policy.
B The life cover can only be stepped up or kept constant but cannot be stepped
down during the tenure of the policy.
C The life cover can only be stepped down or kept constant but cannot be
stepped up during the tenure of the policy.
D The life cover can be kept constant or stepped up or stepped down during the
tenure of the policy.

CHAPTER 9
GENERAL INSURANCE PRODUCTS
Motor insurance covers which of the following?
A Damage to car only
B Damage to individual
C Damage to property belonging to third parties
D All of the above
E None of the above
Arjun has taken a common health insurance policy for himself and his spouse.
Which type of policy is this?
A Joint Policy
B Family Floater Policy
C Group Policy
D Any of the above
E None of the above

A person would like to cover his stocks which he fears may be stolen. Which
policy should he take?
A Fire Policy
B Liability Policy
C Burglary Policy
D Fidelity Guarantee Policy

A Person would like to buy a car. Which is the insurance he should compulsorily
take before bringing the car to the road?
A Personal Accident cover
B Third Party Motor Liability Insurance
C Burglary Insurance
D Motor Own Damage cover only