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Your Result for Mock Test 03
Result Fail
No of Questions 25
Question Attempted 25
Total Marks 25
Your Marks 9
Percentage Obtained 36%
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~ DETAILED RESULT ~
Q (1): Which of the following is not a type of risk?
1. Technical
2. Mechanical (This is the correct answer)
3. Social
4. Political (Your answer is incorrect)
5. Economic
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Q (2): In which insurance are the rights of subrogation commonly enforced ?
1. Erection all risk insurance
2. Burglary insurance
3. Marine cargo insurance (This is the correct answer)
Explanation : Although subrogation rights are enforced in each class of business, it is more relevant
under marine cargo insurance since losses could be attributed by various carriers of the goods being
transported who may be responsible for the loss.
4. Motor TP insurance (Your answer is incorrect)
5. Fire insurance
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Q (3): Deterioration of Stock (DOS) Policy covers the risks of _______________
1. Fire and Lightening
2. Subsidence or landslide
3. Extingushing of fire or subsequent dismantling
4. Deterioration or contamination of stock following breakdown of refrigeration plant (Your answer is
correct)
5. All of the A,B,C and D
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Q (4): Which of the following is not a concept in insurance market?
1. Transfer of Risk
2. Sharing of Risk (Your answer is incorrect)
3. Sharing of losses
4. Risk Elimination (This is the correct answer)
5. None of the above
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Q (5): The risk management technique of __________is an example of Self Insurance.
1. Indemnity
2. Avoidance
3. Acceptance
4. Non insurance transfer
5. Retention (Your answer is correct)
Explanation : Self-insurance is an example of retention of an eligible risk while designating an amount of
money to compensate for the future loss. It is one of the oldest alternative to insurance companies.
Retention means that rather than purchasing an insurance policy, a company will decide to retain an
eligible risk while designating an amount of money calculated to compensate for the potential future loss.
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Q (6): Which of the following might not be included in final rate of payment?
1. Loss payments
2. Loss Expenses
3. Survey expenses
4. Agency cost (Your answer is incorrect)
5. None of the above (This is the correct answer)
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Q (7): A company bought insurance for its machinery with a 7% deductible. Which type of TWO
risk management techniques did the management of the company use?
1. Risk avoidance and Risk retention
2. Risk avoidance and Risk mitigation
3. Risk transfer and Risk retention (Your answer is correct)
Explanation : After purchasing the machinery the company has transferred their risk to the insurance
company by taking insurance. At the same time they have opted for 7% deductible which means they are
willing to share the loss to the extent of 7%. Effectively it demonstrates that they are retaining 7% risk (or
loss) to be born from each of claim amount. This is risk transfer and risk retention.
4. Risk mitigation and Risk retention
5. Risk mitigation and Risk transfer
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Q (8): Likelihood of an event .
1. Is Zero (Your answer is incorrect)
2. Lies between 0 and 1 (This is the correct answer)
3. Can be negative
4. Both Option 2 and Option 3
5. None of the above
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Q (9): The sum of all probabilities should equal to _________________ .
1. One (This is the correct answer)
2. Zero
3. Greater than 0 (Your answer is incorrect)
4. All of the above
5. None of the above
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Q (10):Which of the following risks are generally insurable? 1 reputational risk 2 regulatory risk 3
trade secret risk 4 political risk 5 property risk
1. reputational risk
2. regulatory risk
3. trade secret risk
4. political risk
5. property risk (Your answer is correct)
Explanation : While some coverage is available, these five threats are considered mostly uninsurable:
reputational risk, regulatory risk, trade secret risk, political risk and pandemic risk.
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Q (11): Insurance companies have in the subject matters that they have insured so they can insure
these again with other insurance companies which forms the legal basis for reinsurance.
1. keen interest
2. insurable interest (Your answer is correct)
Explanation : Insurance companies have insurable interest in the subject matters that they have insured.
They can insure these again with other insurance companies which forms the legal basis for reinsurance.
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3. high stakes
4. goodwill
5. compassion
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Q (12): Which of the following might not be a part of motor vehicle?
1. Private Cars
2. Hull (Your answer is correct)
3. Two Wheelers
4. Commercial Vehicles
5. None of the above
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Q (13): Manish has an indemnity policy for a cover of Rs. 40,000 and has done hospitalization
expenses due to an accident of Rs 30,000. However, after a few days, he again meets with an
accident and this time the expenses were Rs 25000. How much has he paid from his pocket this
time?
1. Rs 10000
2. Rs 25000
3. Rs 15000 (Your answer is correct)
Explanation : Under the indemnity policy Mahesh has been reimbursed Rs. 30000 out of Rs. 40000
being the sum insured for the hospitalization following injury. The balance under his policy is now Rs.
10000. For the next hospitalization where he had to spend Rs. 25000, the policy would pay him the
remaining Rs. 10000 & the balance Rs. 15000 would have to be his paid from his own pocket
4. Rs 40000
5. Rs 30000
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Q (14): Mr. X's car was badly damaged in an accident. The insurance company compensated him
accordingly buy he argued that he was entitled to keep the damaged car also. What principle of
insurance will be breached if Mr. X is allowed to keep the damaged car?
1. Principle of Insurable interest
2. Principle of Proximate cause
3. Principle of Utmost good faith (Your answer is incorrect)
4. Principle of Indemnity (This is the correct answer)
Explanation : Insurance contracts are contracts of Indemnity, that is to say, the insured is placed after
the loss, as far as possible, in the SAME POSITION as he was immediately before the loss. This principle
ensures that the insured does not make a profit out of his loss. After being compensated for the loss
suffered to the vehicle, if the owner is also allowed to keep the damaged car, it would breach the principle
of indemnity.
5. Principle of Subrogation
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Q (15): Which of the following law provides a good basis for forecasting future events?
1. Law of Large Numbers
2. Law of indemnity (Your answer is incorrect)
3. Law of averages
4. Both (i) and (iii) (This is the correct answer)
5. None of the above
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Q (16): The underwriting members of Corporation of Lloyd’s, through their underwriting agents,
form groups which are called _________
1. Cartels
2. Brokers
3. Insurers (Your answer is incorrect)
4. International Maritime Bureau
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5. Syndicates (This is the correct answer)
Explanation : The underwriting members of Corporation of Lloyd’s through their underwriting agents,
form groups called Syndicates. Each Syndicate will have an appointed underwriter to accept business on
behalf of the members. They do not take active part in day-to-day running of Syndicate.
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Q (17): Which of the following might not be included in final rate of payment?
1. Survey Fees
2. Procuration Cost
3. Profit for Margin (Your answer is incorrect)
4. Contingency Reserve
5. None of the above (This is the correct answer)
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Q (18): A factory uses non-flammable liquid in place of an inflammable liquid in the process of
manufacturing. This is an example of ________
1. Damage Reduction
2. Risk Avoidance (This is the correct answer)
Explanation : Using non-flammable liquid in place of an inflammable liquid are aimed at avoiding the
risk. Thus it’s an example of Risk Avoidance.
3. Risk Reduction (Your answer is incorrect)
4. Loss Reduction
5. Risk Transfer
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Q (19): Motor Third Party Premium rates are charged as per _____________ .
1. Market
2. Demand
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3. Tariff (Your answer is correct)
4. All of the above
5. None of the above
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Q (20): To which type of insurance does the principle of indemnity does NOT apply to?
1. Life insurance (This is the correct answer)
Explanation : The Principle of Indemnity is one of the basic tenets of insurance and states that the
insured should not profit from a loss or damage but should be returned (as near as possible) to the same
financial position that existed before the loss or damage occurred. Most general insurance contracts work
on the principle of indemnity, but life insurance is an exception to this rule. The principle of indemnity does
not apply to life insurance. Life insurance contracts are value contracts. There is no need to assess the
extent of the loss. In life insurance policies, in the case of death, the full sum assured is paid.
2. Fire insurance (Your answer is incorrect)
3. Marine insurance
4. Miscellaneous
5. None of the above
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Q (21): Which of the following risks is not covered in Institute Cargo Clause (ICC)-C?
1. Washing Overboard (This is the correct answer)
2. General Average Sacrifice
3. Jettison (Your answer is incorrect)
4. Discharge of cargo at port of distress
5. Collision or contact of vessel
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Q (22): Miss Mona wants to know on the point / time when insurable interest has to be present in
case of property insurance. Tell her ...
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1. Only at the time of taking Flat
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2. At the time of taking a policy and at the time of making a claim (This is the correct answer)
3. In case of property insurance, no insurable interest is required (Your answer is incorrect)
4. Only at the time of making a claim
5. None of the above
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Q (23): Which of these is a type of reinsurance contract? 1. Facilitative reinsurance 2. Facultative
reinsurance 3. Entreaty reinsurance
1. Only 1
2. Only 2 (This is the correct answer)
Explanation : There are only two ways a reinsurance contract can be arranged. It can be either: a) One-
off for a single policy: Facultative reinsurance b) Automatic for a defined group of policies: Treaty
reinsurance
3. All 1,2 and 3
4. 1 and 3 (Your answer is incorrect)
5. 2 and 3
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Q (24): One of the commonly quoted definition of Risk Management is - The protection of assets,
earnings, liabilities and people of an enterprise with _______efficiency and at a_______cost.
1. Maximum, Maximum
2. Minimum, Minimum
3. Maximum, Minimum (Your answer is correct)
Explanation : Risk management is defined as the protection of assets, earnings, liabilities and people of
an enterprise with maximum efficiency and at a minimum cost.
4. Minimum, Maximum
5. Lowest, Highest
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Q (25): The owner of a motor vehicle by virtue of his title and possession has an insurable interest
_____________
1. At the time of claim
2. At the time of taking insurance (Your answer is incorrect)
3. At the time of renewal of policy
4. All of the above (This is the correct answer)
Explanation : The owner of a motor vehicle by virtue of his title and possession has an insurable interest
at the time of taking insurance, during the currency of the period of insurance, at the time of claim and at
the time of renewal of the policy.
5. None of the above
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