INSURANCE : Multiple choice questions - 1

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R N malhotra

1. Which of the following is NOT an operating goal of an insurer?

1) Comply with legal requirements. 2) Concentrate risk. 3) Meet customer needs. 4) Earn a profit. 5) Fulfill its duty to society.

2. What are the three core functions that exist within a typical insurer?

1) Accounting, actuarial, and underwriting. 2) Actuarial, claims, and underwriting. 3) Accounting, marketing and distribution, and sales. 4) Claims, marketing and distribution, and underwriting. 5) Actuarial, marketing and distribution, and sales.

3. Which of the following errors is the most significant problem in measuring insurer profitability?

1) Errors in setting adequate rates. 2) Errors in estimating future investment returns. 3) Errors in estimating loss reserves. 4) Errors in estimating sales growth. 5) Errors in classification of loss exposure units.

4. Which of the following is NOT a reason insurers are subject to governmental regulation?

1) Protect consumers against fraud. 2) Guarantee insurer profit. 3) Maintain insurer solvency. 4) Prevent unfair discrimination. 5) Protect consumers against unethical marketing behavior.

5. Which of the following is the primary reason insurer solvency is monitored by regulators?

1) Insurers hold large sums of money for the benefit of consumers. 2) Insurers are inherently financially unstable 3) The cost of insurer insolvencies is shifted to taxpayers. 4) Solvency of insurers is easily measured without much cost. 5) The claims-paying ability of insurers can be analyzed by most consumers and businesses.

6. Which of the following are the three major goals of insurance rate regulation?

1) Ensure that rates are adequate, are not excessive, and are unfairly discriminatory. 2) Ensure that rates guarantee insurance company solvency, are affordable, and are not overly complex. 3) Ensure that rates do not allow insurers excessive or unreasonable profits, are high enough to pay all claims and expenses, and result in fair, consistent, and equitable charges among all insured groups. 4) Ensure that rates are not affected by competition, are not excessive, and are not discriminatory. 5) Ensure that rates are actuarially sound, are affordable to all, and are equitable.

7. Which of the following types of insurance customer is most likely to have the broadest choice of risk financing alternatives?

1) Individual. 2) Professional partnership. 3) Small business. 4) Middle market account. 5) National account.

8. Which of the following are advantages of allowing qualified producers to handle certain types of claims?

I. Lower loss adjustment expenses.

II. Larger payments to claimants.

III. Quicker service to policyholders.

1) I only. 2) I and II only. 3) I and III only. 4) II and III only. 5) I, II, and III.

9. Which of the following is the principal method of determining a prospect’s insurance needs?

1) Having a conversation to determine what insurance coverage the prospect wants to purchase. 2) Performing a thorough risk management review of the prospect’s loss exposures. 3) Selling the prospect as much coverage as it can afford, given its insurance purchasing budget. 4) Determining if the prospect’s insurance needs can be placed in the standard market or placed in the residual market. 5) Determining which insurer offers the most attractive contingent commission arrangement for the prospect’s desired coverage.

10. Which of the following does NOT determine the underwriting capacity of an insurer?

1) The volume of premiums written relative to the insurer’s policyholders’ surplus. 2) Availability and cost of adequate reinsurance. 3) Regulatory guidelines. 4) Ability to generate an acceptable return on equity. 5) Standardized methods used to organize underwriting activities.

11. Which first bank in India to fully own an insurance business ?

1) HDFC Bank 2) Kotak Mahindra Bank 3) ICICI Bank 4) IDBI Bank

12. Aam Admi Bima Yojana provide insurance of ………. on natural death–

1) Rs. 75000 2) Rs. 30000 3) Rs. 50000 4) Rs. 10000

13.The Central Government rolled out a new Crop Insurance Scheme through which it will bring down the rate of premium to be paid by farmers to a maximum of 2.5 per cent of the sum insured, Currently, farmers have to pay premium ranging from __________ per cent to insure crops.

11) 3 to 12 2) 5 to 15 3) 4 to 15 4) 2 to 10 5) None of these

14. Which of the following is the first mortgage guarantee company in India?

1) Unit Trust of India 2) Life Insurance Corporation 3) General Insurance Corporation 4) National Housing Bank 5) None of the above

15. _________ insurance is general insurance that covers common property under the management of a _______ title or body corporate entity.

1) Residential, strata 2) Commercial, strata 3) Agriculture, crop 4) Medical indemnity, health 5) None of these

16. A __________ is a life insurance policy which provides a combination of risk cover and investment. The dynamics of the capital market have a direct bearing on the performance of the __________.

1) ULIP 2) Bancassurance 3) Term Insurance 4) Whole Life Insurance 5) None of these

17. Aam Admi Bima Yojana is an insurance scheme for rural landless households introduced by–

1) LIC 2) UTI 3) ICICI 4) None of these

18. Government has issued an ordinance announcing ULIP as 'Insurance Product'. Who is now the regulator of ULIPs?

1) SEBI 2) IRDAI 3) Both 'a' and 'b' 4) Government of India

19.Which among the following committee recommended the establishment of IRDA?

1) P.N. Mehrotra Committee 2) R.N. Malhotra Committee 3) D.R. Gadgil Committee 4) Rajmannr Committee 5) None of these

20. Who among the following is the current chairman of Insurance Regulatory & Development Authority of India?

1) J. Harinarayan 2) Rana Pratap 3) T.S. Vijayan 4) K.T.S. Tulsi 5) None of these

21. The entire general insurance business in India which was nationalised by General Insurance Business (Nationalisation) Act, _________ (GIBNA).

1) 1973 2) 1963 3) 1972 4) 1962 5) None of these