8

Q 1. Which of the following is unlikely to be a rating or underwriting factor in

fire insurance ?
Fire Extinguishers
Building security
Construction
Deductible

UnAttempted

CORRECT ANSWER:

Building security

Explanation:

Building security like watchmen, camera's etc. are not underwriting factors in fire
insurance.

Q 2. In target marketing, the purpose is to identify group of prospectus that

are most likely to be interested in a particular product. A common
approach uses so called ______ .
Underwriter techniques
Predictive Data mining
Customer Relationship Management
Rate making

UnAttempted

CORRECT ANSWER:
 Predictive Data mining

Q 3. _______ means sharing of the same risk by multiple insurers or sharing

of some portion of the risk by the insured ?
Portfolio management
Renewal notice
Co-insurance
Deductible

UnAttempted

CORRECT ANSWER:

Co-insurance

Q 4. Which type of premium rating method is used in Group Mediclaim and

Group Personal accident policies ?
Exposure rating method
Retrospective rating method
Prospective experience rating method
Schedule rating method

UnAttempted

CORRECT ANSWER:

Retrospective rating method

2
Q 5. Which ratio is also called as 'age to age development' factor ?
Link Ratio
Loss ratio method
Pure ratio
Individual risk rating

UnAttempted

CORRECT ANSWER:

Link Ratio

Explanation:

Age-to-age factors, also called loss development factors (LDFs) or link ratios,
represent the ratio of loss amounts from one valuation date to another, and they
are intended to capture growth patterns of losses over time. These factors are
used to project where the ultimate amount losses will settle.

Q 6. Which of the following factors is considered as decision based on the

underwriting approaches of the company?
Management expense ratio
Lines of business to be written
Competitiveness of the rating
All of the above

UnAttempted

CORRECT ANSWER:

All of the above

 4

Q 7. For certain reasons, the regulator can withdraw products - which of the
following reasons is NOT a valid reason?
It has unsatisfactory documentation
It is not available in regional language
The product is not appropriate for any reasons
The product does not carry rates, terms and conditions that are fair
between the parties

UnAttempted

CORRECT ANSWER:

It is not available in regional language

Q 8. Insurance companies are subject to laws and regulations. The principal

areas regulated include all the following EXCEPT -
Formulation and licensing of insurers
The number of policies sold
Rate regulation
Sales practices and consumer protection

UnAttempted

CORRECT ANSWER:

The number of policies sold

Q 9. Which of the following comes under Property and Casualty underwriter?

Life and Health underwriters
 Liability underwriters
Fire underwriters
Group underwriters

UnAttempted

CORRECT ANSWER:

Fire underwriters

Q Why underwriting is important for insurers?

10.
It helps to match the needs of customers with the standards set by
insurers
It helps to stay competitive, solvent and profitable
It helps to know how much he has to pay for insurance, the terms of
coverage, discounts etc.
It helps to improve the standards of safety and care and achievement of
the economic goals of the country

UnAttempted

CORRECT ANSWER:

It helps to stay competitive, solvent and profitable

Q Which of the following is true for Combined Ratio ?

11.
Its a combination of expense ratio and profit ratio
Its a combination of expense ratio and miscellaneous ratio
Its a combination of profit ratio and miscellaneous ratio
Its a combination of loss ratio and miscellaneous ratio
 Its a combination of loss ratio and expense ratio

UnAttempted

CORRECT ANSWER:

Its a combination of loss ratio and expense ratio

Q Which of the following are the goals of market conduct supervision for
12. insurance business? 1. To ascertain that insurers adhere to approved
rates, advantages, terms and conditions of insurance products that they
offer to the general public 2. To gather information by undertaking
inspection and conducting enquiries and investigations 3. To ensure
that members of professional organisations connected with insurance
and reinsurance are duly qualified
Both 2 and 3
Both 1 and 2
Both 1 and 3
Only 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

All 1, 2 and 3

Explanation:

All given statements are the goals of market conduct supervision for insurance
business.

5
Q Named peril policy providing coverage for direct loss can be either a
13. ______ or a ______ .
Single peril policy, Multi peril policy
Basic policy, Special policy
Package policy , Special policy
Basic policy, Cover policy
None of the above

UnAttempted

CORRECT ANSWER:

Single peril policy, Multi peril policy

Explanation:

A named perils policy can cover either one or more than one specified perils.

Q Any delay in discharging the claim once the offer of settlement has been
14. accepted by the insured, shall attract interest at a rate which is ____
above the prevailing bank rate.
1%
1.5%
2%
3%
5%

UnAttempted

CORRECT ANSWER:

2%
 3

Q ____ the cover is an option that helps to secure a negotiated balance

15. between need for the widest cover desired by customer and obtaining a
fair price for the cover.
Organising
Configuring
Structuring
Constructing
None of the above

UnAttempted

CORRECT ANSWER:

Structuring

Q The insurance companies are subject to many laws and regulations. The
16. principal areas regulated include all the following except :
Rate regulation
Formation and licensing insurers
The number of policies sold
Sales practices and consumer protection
All of the above

UnAttempted

CORRECT ANSWER:

The number of policies sold

 Explanation:

The number of policies sold is not regulated.

Q Giving insurers the freedom to decide pricing of their products is known

17. as _____ .
Re-tariffing
De-tariffing
Algo-tariffing
Free-tariffing
Market-tariffing

UnAttempted

CORRECT ANSWER:

De-tariffing

Explanation:

Giving insurers the freedom to decide pricing of their products is known as De-
tariffing.

Q Which of these strategies or technologies will automate and manage

18. underwriting in a better way ?
There should be an digital work space for sales staff and underwriters to
work jointly on
The underwriting decisions should be based on judgment
Approval should be sought for all underwriting changes before
implementation
 All of the above
Both 1 and 3

UnAttempted

CORRECT ANSWER:

There should be an digital work space for sales staff and underwriters to work
jointly on

Explanation:

Supporting underwriting optimization to improve underwriting profitability the

insures require amongst other essentials, an electronic workspace for sales staff
and underwriters to work jointly.

Q What is are desirable while collecting data for a rating system?

19.
The premium needs to be kept the same for any increased limits
When experience extends several years the past premiums must be kept
at the same level
Most old experience period must be used
Wherever there are basic limits, the premium needs to be adjusted for the
increased limits
Difference in coverage should be grouped together

UnAttempted

CORRECT ANSWER:

Wherever there are basic limits, the premium needs to be adjusted for the
increased limits

Explanation:
 While collecting data for a rating system, wherever there are basic limits, the
premium needs to be adjusted for the increased limits, if any based on the
changed factors.

Q ________ sections are to be provided in an insurance policy. 1. Past

20. loss experience details 2. Insuring agreements 3. Insurance conditions
Only 1
Only 2
Only 3
Both 1 and 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 3

Explanation:

The only section describing the policy conditions is provided in the insurance
policy. Past loss experience is an underwriting features & insuring agreements
has no bearing on the policy issuance.

Q With regards to floating policies which of the given options is true?

21.
When a jewellery has to be insured, it would be advisable that the sum
insured is fixed after valuation of the property by a professional jeweler
No depreciation is deducted for property claims and these are settled on
 the basis of market value of property
In case of jewellery insurance, the sum insured is fixed based on
declaration by the insured
Floating Policies are valid for 5 years and than renewable for another 5
years on expiry
When there is a loss, the sum insured is automatically paid

UnAttempted

CORRECT ANSWER:

When a jewellery has to be insured, it would be advisable that the sum

insured is fixed after valuation of the property by a professional jeweler

Explanation:

It is an underwriting safeguard that in case of jewellery, a valuation takes into an

account of wear & tears for the usage up to the point of valuation. Thereafter a
floating policy can be issued for jewellery.

Q Select which of the given options is one of the four basic functions in
22. the process of underwriting -
Client loyalty
Business development
Customer care
Selection of risks
Claims management

UnAttempted

CORRECT ANSWER:

Selection of risks
 Explanation:

The process of underwriting involves four basic functions. One of such functions
is ‘Selection of risks’. Others being Classification & rating, Policy forms and
Retention & Reinsurance.

Q ______ is a necessary attribute of a risk to be insurance worthy. 1.

23. Manageable 2. Speculative 3. Vague
Only 1
Only 2
Only 3
Both 1 and 3
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

A necessary attribute of a risk to be insurance worthy is that it should be

manageable. Speculative or vague risks are not to be insured at all. They are not a
subject matter of insurance at any cost.

Q Which features have to be present in the technology which is selected

24. for automation of the insurance business process ?
 Economical
Reduced ROI
Service oriented architecture
Conformance to proprietary standards
Single user systems

UnAttempted

CORRECT ANSWER:

Service oriented architecture

Explanation:

The technology selected for automation of the insurance business process should
be state of art and next generation and should also have the feature of Service
Oriented Architecture among others.

Q In order to be covered under the 'All Risk policy', the loss has to be
25. _______ .
Significant
Fortuitous
Deliberate
Designed
Planned

UnAttempted

CORRECT ANSWER:

Fortuitous
 Explanation:

Insurance is relevant only when there is chance of a loss i.e. it may or may not
happen (fortuitous) or it must have happened accidently. All other options do not
have an element of chance.

Q In accordance to the regulations stated by IRDAI which the below

26. mentioned points need to be clearly stated in a General Insurance policy
? 1. Any record of claims made by the insured 2. There should be a
provision for cancellation of the policy on ground of fraud, non-
disclosure of material facts, non-cooperation of the insured etc. 3.
Details of previous policies bought
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

As per IRDAI regulations certain points need to be clearly stated in a

general insurance policy. One of them is the provision for cancellation of the
policy on ground of mis- representation, fraud, non-disclosure of material facts or
non-cooperation of the insured.
 2

Q Identify the strategies to automate and manage underwriting better - 1.

27. Analytical methods to be used to reduce underwriting risk 2. Seek
approval for the underwriting changes before they are implemented 3.
The underwriting decisions have to be based on judgment
Only 1
Only 2
Only 3
Only 1 and 2
Only 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

For supporting underwriting optimization to improve underwriting profitability, the

insurers require amongst other essentials, an analytical methods to reduce
underwriting risk. This strategy or technology would automate and manage
underwriting in a better way.

Q What happens during periods of rapid growth ?

28.
The competition will be low
The customer satisfaction will be high
The earned premium will be low
The earned premium will be high
The customer satisfaction will be low

UnAttempted
 CORRECT ANSWER:

The earned premium will be low

Explanation:

A written premium is an accounting term in the insurance industry used to

describe the total amount customers are required to pay for insurance coverage
on policies issued by a company during a specific period of time.

Written premiums are different from premium earned, which is the amount of
premiums that a company books as earnings for providing insurance against
various risks during the year.

In period of rapid growth the earned premium will be low. In times of poor or no
growth, the earned premium in comparison with written premium will be high.

Q Which rating factor is associated with Personal automobile insurance ?

29.
Class of the driver
Accident history
Occupation class code
Limit of liability
Specialty territory

UnAttempted

CORRECT ANSWER:

Accident history

Explanation:

Features such as accident history or behavior are categorised together into one
rating group to arrive at a rating factor under personal automobile insurance.
 2

Q Based on the IRDAI 'File and Use' guidelines, all general insurance
30. products are classified into ____ major categories based on the rating
plan that is used.
1
2
3
4
6

UnAttempted

CORRECT ANSWER:

Explanation:

These 4 categories are: 1. Insurance of property, 2. Loss of profit, 3. Personal

insurance & 4. Liability insurance.

Q Of the given options the only expense which can be classified as a

31. “underwriting expense” is -
Advertising expenses
Staff salaries
Investment department expenses
CSR expenses
Acquisition expenses
 UnAttempted

CORRECT ANSWER:

Staff salaries

Explanation:

The pure premium is to be loaded by underwriting expenses, management

expenses (staff salaries), margin for heavy losses & profit for the insurers, to
arrive at the final premium. None other than staff salaries are underwriting
expenses.

Q _______ are examples of Internal tariff rated products.

32.
Mega risk insurance
Individual rated products
Liability rated products
Class rated products
Exposure rated products

UnAttempted

CORRECT ANSWER:

Class rated products

Explanation:

Class rated products are standard products that can be sold by any office of the
insurer with the rates, T & C of cover are set out in an internal guide tariff designed
by the insurance company like motor insurance, personal accident insurance
(other than fleet & groups).
 4

Q The third step in selection and implementation of a software solution is

33. ______ .
Rating of vendors
Evaluating vendor competence
Evaluating the ease of implementations
Evaluating available solutions
Doing cost benefit analysis

UnAttempted

CORRECT ANSWER:

Doing cost benefit analysis

Explanation:

The insurers have to search various architecture & or software solutions before
selecting any of them. The process involve that the insurers must evaluate
available solution amongst others. The third step in selection and implementation
of a software solution is to do cost benefit analysis.

Q The risk of ' Fireworks factories and premises ' is classified under which
34. class of insurance ?
Miscellaneous
Hazard
Personal
Fire
Liability
 UnAttempted

CORRECT ANSWER:

Fire

Explanation:

Fireworks factories and premises are categorized under Fire insurance which
covers building & contents.

Q _______ is the term denoted to Extra hazardous risks that are normally
35. not accepted by the insurer.
Turned off
Rejected
Accepted
Declined
Barred

UnAttempted

CORRECT ANSWER:

Declined

Explanation:

Extra hazardous risks are generally those risks where both - the frequency &
severity of losses are high. These risks are non-insurable & are placed under the
declined risk of an insurer.
 4

Q As per Exposure rating system, what will be the technical premium for
36. the following data : Total insured – 100000, Heart attack cases – 250,
Fracture cases – 40, Blindness cases 30, Kidney transplant cases – 60,
Marketing expenses are 30%, Margin for profit is at 15% , Administration
& overheads @ 15%. So for a sum insured of Rs 100000, the technical
premium is Rs _______.
Rs 578
Rs 596
Rs 633
Rs 687
Rs 720

UnAttempted

CORRECT ANSWER:

Rs 633

Explanation:

Total claims are 250+40+30+60 = 380. Expenses etc. are 30+15+15 = 60%

Total claims reported per 100000 is 380 i.e. 0.0038 (380/100000). Expenses are 60%.
Therefore technical claim incidence rate would be: 0.0038/0.60 = 0.00633.

Hence the technical premium for sum insured of Rs. 100000 would be Rs.633
(0.00633x100000).

Q What is the correct plan for underwriting profitability ?

37.
Have a good advertising budget
Provide for all type of risk covers
 The underwriting philosophy should be duly vetted by top management /
actuary.
Give good incentives to customers
They should charge heavy premiums for catastrophe insurance

UnAttempted

CORRECT ANSWER:

The underwriting philosophy should be duly vetted by top management /

actuary.

Explanation:

The profitability of an insurer depends upon application of sound underwriting

principles. The philosophy of u/w has to be adapted according to market
conditions & aspirations of a proposer. A conservative or liberal u/w may be fatal.
It is therefore imperative that the u/w philosophy must be vetted by top
management and actuary of the company.

Q None of the following is a rating factor in case of motor insurance

38. except -
Address
Lingual preference
Annual income
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Address
 Explanation:

Under class rating method, risks with similar characteristics can be placed in
same class & charged the same rate. For eg.- In Mumbai, all Honda City vehicles
will be assigned a single rate. Annual income or Lingual preference are thus not
the rating factors.

Q The person who sends the proposal form for taking insurance policy
39. and pays the premium is called __________.
Agent
Nominee
Insurer
Assignee
Proposer

UnAttempted

CORRECT ANSWER:

Proposer

Explanation:

Any individual or an organization that needs protection against the uncertain or

unplanned events is a proposer. Once their proposal is accepted & insurer issues
a policy, he becomes an insured or assured.

Q What is the benefit of reinsurance ?

40.
It reduces the claims
It reduces administrative costs
It increases the profitability
It increases the capacity
It eliminates business risk

UnAttempted

CORRECT ANSWER:

It increases the capacity

Explanation:

Reinsurance is insurance of insurance. It spreads risk of insurers to limit their

exposure. It enables to insurers to accept catastrophic & manage large losses &
unexpected liabilities. Thus the capacity of accepting risk is increased.

Q Illustrate the case under which the insurer need to file and get the rates
41. approved before they can be used.
Flexible approval laws
Use and File laws
Flex rating laws
Prior approval laws
Open competition laws

UnAttempted

CORRECT ANSWER:

Prior approval laws

 Explanation:

Under prior approval system, policy forms and the rates must be filed & approval
obtained by the state insurance dept. before they can be used in the market. It can
be returned for modification if not found satisfactory.

Q The only statement which is true with regards to Loss Ratio method is -
42. 1. It is based on premium 2. it gives indicated rates 3. It is based on
exposure
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Number of ratios can be used to measure the profitability of an insurer. One of

them is Loss Ratio method. It is calculated by dividing the incurred losses with the
earned premium. 50% loss ratio means for every Rs. 100 the insurer pays Rs. 50
towards loss.

Q Which are the contingencies under which a policy is customized ? 1.

43. Personal forms of customized policies like covering a footballer’s legs
2. When a customer is not able to pay premiums of existing policy 3.
when the risk is deemed uninsurable
 Only 1
Only 2
Only 3
Only 1 and 2
Only 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Contingencies under which a policy is customized, keeps changing & vary with
different professional & economic status of the policyholder. These contingencies
are not covered under standard policies. One of them is a personal form of
customized policies such as covering a footballer’s legs.

Q Which are the causes of adverse results for insurers?

44.
High exposure by the insurer
Competition
A very dynamic market
Churning of the portfolio
New line of business

UnAttempted

CORRECT ANSWER:

High exposure by the insurer

 Explanation:

Insurers having high exposures as high risk concentration or geographical areas,

can causes of adverse results for them.

Q The data mining softwares can be used on the data available on

45. customers for various business concerns which include - 1. Taxation 2.
Rate making 3. Changes in regulation
Only 1
Only 2
Only 3
Both 2 and 3
All 1,2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

Potentially vast collection of data on customers & prospects can be analyzed with
data mining software. It takes care of different business concerns including rate
making.

Q With whom does the overall responsibility of compliance rest with?

46.
Area manager
IRDAI & RBI
 Insurance Agent
Chief Executive Officer
Customer

UnAttempted

CORRECT ANSWER:

Chief Executive Officer

Explanation:

Responsibility of the overall compliance vests with the Chief Executive Officer. He
may be a designated senior officer for ensuring compliance of the F & U
requirements.

Q While issuing a policy on sub standard basis, what are the options
47. exercised by the insurer ?
Issue the policy with some exclusions
Issue all risk cover policy
Issue policy with the lower premium
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Issue the policy with some exclusions

Explanation:
 Sub-standard risk carries higher of risk than the normal ones. They fall within the
underwriting standards but with additional degree of care. It includes charging
higher premium or with certain exclusions.

Q The responsibilities of compliance officer includes - 1. Filing with IRDAI

48. a category wise list of new products 2. Underwriting 3. Marketing and
Distribution
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

While filing a product with the IRDA for approval under ‘F & U’ guidelines, different
persons like moderator, compliance officer, actuary and an advocate. The
compliance officer should not be an ‘Underwriter’ or in the ‘Distribution and
Marketing’ field of the company. He has to file with IRDA at the end of every
calendar quarter, a list of all new products category wise.

Q When can a policy be issued on a preferred basis ?

49.
When the proposal is from a respected member of the society
When the proposal falls normal lowest risk boundaries of underwriting on
 standard basis
When the proposal falls outside acceptable risk boundaries of
underwriting on standard basis
When the proposal falls outside normal risk boundaries but is not high risk
When the proposal falls within lowest risk boundaries of underwriting on
standard basis

UnAttempted

CORRECT ANSWER:

When the proposal falls within lowest risk boundaries of underwriting on

standard basis

Explanation:

A policy can be issued on a preferred basis where the proposal falls within lowest
risk boundaries of underwriting on standard basis.

Q How can the customer needs be identified ?

50.
By monitoring Tax Returns
By monitoring Internal staff reports
By monitoring Competition growth
By monitoring Regulatory changes
By monitoring Economic cycles

UnAttempted

CORRECT ANSWER:

By monitoring Internal staff reports

Explanation:
 The product innovation process involves collecting information from internal &
external enjoinments. New products & services can be undertaken based upon
various research including internal staff reports.

Out of 50 questions 50 are un attempted.

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