8

Q 1. Which rate will be rated as per an internal manual or guidelines

prepared by the insurer for risks of the same class or category?
Pure Rating
Loss method rating
Generic Rating
Individual Rating

UnAttempted

CORRECT ANSWER:

Generic Rating

Q 2. Insurance packages like Home owners comprehensive or Shopkeepers

comprehensive or Bankers blanket insurance comes under which rated
products ?
Insurance of large risks
Individual experience rated products
Exposure rated products
Class rated products
None of the above

UnAttempted

CORRECT ANSWER:

Class rated products

4
Q 3. Why underwriting is important for insured ?
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 know how much he has to pay for insurance, the terms of
coverage, discounts etc.

Q 4. At the time of writing a proposal, the underwriter has to estimate the

probability of operation of peril to be insured in relation to ______ .
Severity of loss
Frequency of loss
Both 1 and 2
None of the above

UnAttempted

CORRECT ANSWER:

Both 1 and 2

Q 5. Which policy combines two or more types of insurance covers into one
policy?
Named peril policy
 Special cover policy
All risks policy
Packaged policy

UnAttempted

CORRECT ANSWER:

Packaged policy

Q 6. Whenever the target claims ratio exceeds ___ there is need to examine
the risk at a budgeted level of underwriting loss and satisfy the
regulator on sustainability of the underwriting model adopted by the
insurer.
70%
75%
80%
85%

UnAttempted

CORRECT ANSWER:

80%

Q 7. Ratemaking involves providing sufficient income to pay for certain

aspects. Which of the following is NOT on of these ?
Margin for a reasonable return on the capital employed
Investment income
Selling and Admin expenses
Projected claims
 None of the above

UnAttempted

CORRECT ANSWER:

Investment income

Q 8. The decision to issue a policy on a _____ occurs when a risk is not

deemed to be outside underwriting standards but is considered to be of
high risk within those standards.
On a sub standard basis
On a preferred basis
Proposal to be declined
On a standard basis

UnAttempted

CORRECT ANSWER:

On a sub standard basis

Q 9. In the triangle of Loss Development method, the vertical line represents

_____ .
change in exposure level
the evaluation data
the claim development over time
None of the above

UnAttempted

CORRECT ANSWER:
 change in exposure level

Q Where the variations in rates compared to the manual/tariff is more than

10. _____ , the justification will need to be evaluated critically.
10%
20%
25%
30%

UnAttempted

CORRECT ANSWER:

20%

Q The estimation of underwriting profitability of an account begins by

11. determination of the _____ .
Written premium
Earned premium
Both 1 and 2 are the same
Special premium
None of the above

UnAttempted

CORRECT ANSWER:

Earned premium
 Explanation:

The estimation of underwriting profitability of an account begins by determination

of the earned premium.

Q In the Indian context, the insurance market is in the _____ stage.

12.
Maturity
Growth
Emerging
Developing
Advanced

UnAttempted

CORRECT ANSWER:

Emerging

Explanation:

In the Indian context, the insurance market is in an emerging (nascent) stage.

Q Which of the following is rule based underwriting of products?

13.
Exposure rated products
Packaged products
Individual experience rated products
Internal tariff rated products
None of the above
 UnAttempted

CORRECT ANSWER:

Internal tariff rated products

Explanation:

All rule based underwriting products fall into the category of internal tariff
products.

Q Changes in the state of the subject matter that are accepted and
14. incorporated by the insurer in his book are called ____ under the policy.
Amendments
Variations
Modifications
Endorsements
Classification

UnAttempted

CORRECT ANSWER:

Endorsements

Explanation:

Changes in the state of the subject matter that are accepted and incorporated by
the insurer in his book are called endorsements under the policy.

4
Q Which of the following is the correct way of revising policy wording?
15.
Only by revising the entire policy wording
Only by way of endorsements in the policy
Only by a special attachement
Either 1 or 2
None of the above

UnAttempted

CORRECT ANSWER:

Either 1 or 2

Explanation:

Policy wording can be revised by way of endorsements in the policy or by revsing

the entire policy wording.

Q The policy that covers any risk which the contract does not specifically
16. exclude is called _______ .
All purpose cover
All peril policy
All Risks insurance cover
All Term policy
All Cover policy

UnAttempted

CORRECT ANSWER:

All Risks insurance cover

 3

Q The documentation for insurance also includes ____ . 1. Statement of

17. vision of the insurer 2. Code of conduct for agents 3. The Reinsurance
slip
Only 1
Only 2
Only 3
Both 1 and 3
All 1,2 and 3

UnAttempted

CORRECT ANSWER:

Only 3

Explanation:

Agents codes of conduct & insurer’s vision statement have nothing to do with
insurance documents; hence the only correct option is ‘Reinsurance slip’.
Proposal form gives the details of the risk & the reinsurance slip is prepared for
obtaining the reinsurance support for sharing the risk.

Q The pertinent elements that are used to add up the rates make the rating
18. plan and the various specific elements in it are known as ________ .
Relevant factors
Premium factors
Rating factors
Considerate factors
Deterministic factors

UnAttempted
 CORRECT ANSWER:

Rating factors

Explanation:

Rates are based on various risk exposures faced by the subject matter of
insurance. However the pertinent elements that are used to add up the rates make
the rating plan and the various specific elements in it are known as rating factors.

Q What can be the result of poor underwriting - 1. Poor underwriting can

19. result in reduced profitability 2. Poor underwriting can result in
increased marketing spend 3. Poor underwriting can result in reduction
in volume
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Both 1 and 3

Q The process of underwriting is - 1. To classify the subject matter

20. according to their degree of insurability 2. To evaluate the risks to which
they are exposed 3. To finalise their acceptance along with the terms
and charge appropriate rates of premium
Only 1
 Only 2
Only 3
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

All 1, 2 and 3

Explanation:

Underwriting is the process of; “Classifying the subject matter according to their
degree of insurability, Evaluation of risks to which they are exposed and to decide
on their acceptance along with the terms and conditions and charge appropriate
rates of premium”. The underwriter has to ensure that the risk is assessed
correctly & the premium is charged accordingly.

Q What corrective actions can be taken by an insurance company to

21. reduce losses?
Have a difficult to understand policy wordings
Sell policies for bigger time spans with auto renew features
Modify underwriting guidelines
Revitalise the economy to achieve growth
Invest the premiums collected in high risk assets like equities which can
give better returns to mitigate the losses

UnAttempted

CORRECT ANSWER:

Modify underwriting guidelines

 Explanation:

A measure which can be adapted to reduce the losses is by modifying the

underwriting guidelines. Without any changes in the premium rates, the policy can
be designed by reconfiguring the policy terms & conditions by reducing the
coverage’s. However they need approval from the regulators

Q The disadvantage of Package Policies include --

22.
Premium is lower when compared to the sum of individual policy
premiums
The Insured may have to pay premium for some covers which are not
required
Renewal for all the covers come up on the same day
Some extra cover may be available
One does not have to deal with different insurers

UnAttempted

CORRECT ANSWER:

The Insured may have to pay premium for some covers which are not
required

Explanation:

A policy which combines two or more types of insurance covers into one policy is
called packed policy. The policy may be customized according to the specific need
of the customer as per the risk profile. Package policies have their own
advantages and disadvantages. One of the disadvantages of package policies is
that the insured may have to pay premium for some covers which are not required.

2
Q Within how many days shall an insurer dispose of a claim after the
23. receipt of the survey report.
7 days
10 days
15 days
30 days
45 days

UnAttempted

CORRECT ANSWER:

30 days

Explanation:

As per Protection of Policyholder’s Interests Regulations issued by IRDA, an

insurer shall dispose of a claim within 30 days of receipt of the survey report.

Q Which is an exclusion under marine insurance for the proposal -

24. 'Sanitary ware' ? 1. Loss due to sunken cargo 2. Breakage and chipping
3. Damage due to water
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:
 Only 2

Explanation:

Certain risks are allowed to be accepted by the operating office provided certain
loss minimization measures are taken. Under marine insurance, acceptance of
proposal for ‘Sanitary ware’ is accepted by excluding ‘Breakage,denting
and chipping.

Q With respect to Motor Insurance, which of the following is a rating factor

25. ? 1. Lingual preference 2. Vehicle parking space 3. Annual income
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

New challenging areas are occurring constantly towards potential insurance

coverage. Actuaries & insurers have started constructing/ analyzing more complex
classes of risk by various other additional factors like use of garage or availability
of vehicle parking space. Such factors may obtain different rates.
 2

Q Appropriate data will have information on _____ . ( This is in reference

26. to insurance policies ) 1. The risks covered 2. The insurance regulator 3.
The insurance agent
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

The underwriter/ insurer have to identify & assess the level of risk, evaluate the
risk of loss including the frequency & severity of loss for the proposed risk &
determine the appropriate T & C and the specific policy wordings. For any data
mining task, the basic requirement is availability of appropriate & creditable data.
In context of insurance policies, the information is required on the risk to be
covered.

Q Select which of the given options form a part of an effective product

27. proposal - a. The Product issue list b. The expected results and
monitoring process c. The past claim experiences for other products
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
 UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

The product innovation process involves collecting information from internal &
external environments. New products & services can be undertaken based upon
various researches & preparing project proposals by including basic components
like expected results and monitoring process.

Q Under the regulations stated by the IRADI, ______ need to be clearly

28. stated in general insurance policy?
the record of various claims made by the insured
the details of the previous policies purchased by the insured
the sum insured
All of the above
None of the above

UnAttempted

CORRECT ANSWER:

the sum insured

Explanation:

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

general insurance policy. Besides the provision for cancellation of the policy on
ground of mis- representation, fraud, non-disclosure of material facts or Non-
cooperation of the insured, the policy must clearly mention the sums insured
 which is the limit of liability of the insurers.

Q The 'proposal form' will seek to have information ______ . 1. which is

29. relevant to the risk 2. which is not relevant to the risk 3. on the
proposer's personal life
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

The important factor affecting the risk is the information relevant to the risk. Other
factors are not at all going to effect the underwriting decision of accepting or
rejecting the proposal.

Q Select the system which is a compromise between the prior approval

30. system and the No –file system.
Flex Rating system
Use and File system
File and Use system
 All of the above
None of the above

UnAttempted

CORRECT ANSWER:

File and Use system

Explanation:

Under F & U system, it is required that the insurer has to file their rates with the
regulator before they go into effect. Here prior approval is not required. Regulator
however has the authority to comment on the rates before they are used. The
regulator can even disapprove the rates filed by the insurer.

Q The party who gets his life or property insured against risks is called
31. ______.
IRDAI
Insurer
Insured
Assurer
Agent

UnAttempted

CORRECT ANSWER:

Insured

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. The insured is the party who gets his
life or property insured against risks.

Q With regards to the Loss Ratio method, which of the below options
32. holds true - 1. It is based on exposure 2. It requires existing rates 3. It
gives indicated rates
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

The loss ratio method is used to indicate rate change rather than rate per se. It is
calculated by the formula; R =A X Ro – R – Indicated rate, A – Adjustment factor
which is equal to W/T and Ro – Current rate. W – Experience loss ratio and T –
Target loss ratio. However, the loss ratio method requires existing rates.

Q What are large risks ? (As per file and use guidelines)
33.
Large risks are those which cannot be managed
Large risks are those which cannot be predicted
Large risks are those which is Rs 100 crores or more per event for liability
insurance
 Large risks are those which cannot be quantified
Large risks are those which cannot be controlled

UnAttempted

CORRECT ANSWER:

Large risks are those which is Rs 100 crores or more per event for liability
insurance

Q Which of these statement(s) is INCORRECT ? 1. A Proposal Form is

34. compulsory in case of marine insurance 2. If a wrong answer is given in
a proposal form, it will give the right to insurers to avoid the contract 3.
The Schedule contains information applicable to a particular contract
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Proposal form is compulsory in all classes of insurance with the exception of

marine cargo insurance.
 1

Q An insurer should - - 1. Design the insurance products which have

35. equitable pricing 2. Do speculation to maximize the profits 3. Have
discriminating insurance policies
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

An insurer obviously cannot engage in speculation, it is beyond its operational

obligations. He must charge the same rate to every insured having the same or
similar characteristics. He cannot have discriminative policies which can’t stand
the scrutiny of the regulators. The insurer is expected to design products with
equitable pricing.

Q Documentation for insurance also includes ________ .

36.
Vision statement of the insurer
Code of conduct of the insurance agents
Policy documents and conditions / warranties
Both 1 and 2
Both 2 and 3

UnAttempted
 CORRECT ANSWER:

Policy documents and conditions / warranties

Explanation:

Agents code of conduct & insurer’s vision has nothing to do with the risk
assumed by the insurer based upon the proposal form & the premium collected
thereby. The insurance policy document contains the conditions & warranties.

Q Which of these is/are included in insurance documents ? 1.The

37. Proposal Form 2. The statement of vision of the insurer 3. The code of
conduct of insurance agents
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Agents code of conduct & insurer’s vision statement have nothing to do with
insurance documents, hence the only correct option is ‘Proposal Form’.

1
Q Consider a hypothetical scenario in which a city which has 1000 bikes
38. each valued at Rs 50,000, there are on an average 4 bikes stolen every
year. Calculate the pure premium.
Rs 500
Rs 400
Rs 300
Rs 200
Rs 100

UnAttempted

CORRECT ANSWER:

Rs 200

Explanation:

Pure premium refers to the premium which is sufficient to meet the losses.

Value of 4 stolen bikes @ Rs. 50000 per bike is Rs. 200000 when divided by 1000
insured bikes -

the premium comes to 200000/ 1000 = 200 i.e. each bike owner is required to
contribute Rs. 200 to cover the loss o Rs 200000 of the 4 bikes (200 x 1000 = i.e.
Rs. 200000)

Formula: L / V = Premium. L is losses; V is value of all the cars. Pure premium is

also known as ‘Burning Cost’.

Q What is the pre-requisites for lodging a complaint with the Ombudsman

39. ?
The policy should be in grace period
There should be no complaint lodged with the insurer
The Policy has to be a general insurance policy
The complaint has to be related to a group policy
 The person making the complaint must be by an individual on a ‘Personal
Lines’ insurance and as per the terms of reference of the Insurance
Ombudsman

UnAttempted

CORRECT ANSWER:

The person making the complaint must be by an individual on a ‘Personal

Lines’ insurance and as per the terms of reference of the Insurance
Ombudsman

Explanation:

An aggrieved individual who has taken an insurance policy on a personal line of

insurance, can complaint to an Insurance Ombudsman within the terms of
reference.

Q A fast business cycle means ________ in untested areas for risk

40. management.
More insurance requirements
Limited insurance requirements
More claims
Limited claims
More settlements

UnAttempted

CORRECT ANSWER:

More insurance requirements

Explanation:
 A fast business cycle means more insurance requirements in untested areas for
risk management.

Q What can 'product changes' include ? 1. Eliminating the ambiguity in

41. exclusion and coverage 2. Changes in the wordings of the policy 3.
Offering endorsements to extend coverage
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

All 1, 2 and 3

Explanation:

The insurer addresses various problem areas by making suitable corrective

changes in respect of ‘Changes in policy wordings, Eliminating ambiguity in
coverage and exclusion and Offering endorsements to extend coverage’.

Q Which of the below listed duties fall under an underwriter’s job profile?
42.
To take on board all those who are interested in getting coverage under a
policy
To decide on special terms that can be offered for accepting the risk
 Give updated training to insurance agents
Give best customer care services
To generate new business

UnAttempted

CORRECT ANSWER:

To decide on special terms that can be offered for accepting the risk

Explanation:

The insurer may lose business if underwriting is conservative or may have to pay
excessive claims if liberal. He is to decide special terms and conditions that can
be offered for accepting the risk.

Q What are the listed requirements of IRDAI relating to design and rating
43. of insurance products? 1. Convoluted / complex policy wordings 2. Real
risk transfer 3. Fixing Arbitrary premiums
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:
 As per the requirements of IRDAI relating to design and rating of insurance
products, the product should be genuine insurance product offering a real risk
transfer. The product should not have neither arbitrary premiums nor should have
convoluted (extremely complex and difficult to follow) policy wordings.

Q _______ is a part of the 'Policy Document' . 1. Surrender Form 2. Claim

44. Form 3. The terms and conditions
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 3

Explanation:

Claim form & Surrender forms are issued subsequent to the issue of the policy.
They do not form the policy documents.

Q What is planned underwriting loss ?

45.
Loss as a result of reduction in customers
Loss as a result of regulatory burdens
Loss as a result of stiff competition
Loss as a result of current expenses exceeding built in margins
 Loss as a result of margins exceeding expenses

UnAttempted

CORRECT ANSWER:

Loss as a result of stiff competition

Explanation:

When the premium is reduced due to stiff competition the underwriting losses are
bound to be there. It is referred as planned underwriting loss.

Q Why should the insurance companies do regular product innovation ? 1.

46. Taxation 2. Expectations of customers 3. Regulations
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

The product innovation process involves collecting information from internal &
external environments. New products & services can be undertaken based upon
various researches & preparing project proposals accordingly. Customer
expectations have to be taken into account for the proposed product innovation.
 2

Q If the rates proposed are based on reinsurance market level of rates,

47. determine which of those listed would be an appropriate justification of
price ?
Defend the logic underlying the establishment of estimated claim cost
from which the rates are taken
Adequate statistical information on claims experience at current schedule
of rates
Comparison with rates based on statistics for a risk comparable hazard
Demonstrate the reasonableness of variation from the current prevailing
level of rates
Demonstrate that the rates of the reinsurance markets have been properly
ascertained

UnAttempted

CORRECT ANSWER:

Demonstrate that the rates of the reinsurance markets have been properly
ascertained

Explanation:

The insurer has to justify that the pricing is based on appropriate data & with
technical justification. If the rates proposed are based on reinsurance market level
of rates, the insurer has to demonstrate that the rates of the reinsurance markets
have been properly ascertained & represent that the rates are quoted by
reinsurance of repute.

Q The problems in underwriting for a portfolio can be due to - 1.

48. Competitors actions in the market place 2. Paucity of awareness 3. The
mindset of the consumer with regards to insurance
Only 1
 Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Underwriting of an insurer is under intense pressure due to industry competition

in the market. Consequent upon this pressure, the underwriting problem of a
portfolio may occur.

Q Which of these is / are contained in the Proposal Form ?

49.
Surety bond
Details of the physical features both favourable and adverse
Bank guarantee
Both 1 and 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

Details of the physical features both favourable and adverse

Explanation:
 Proposal form has to be scrutinized to ascertain details of the physical features
both favourable and adverse. Bank guarantee or Surety bond has no relevance in
accepting or rejecting the proposal.

Q An insurer should - 1. Design the insurance products which have fair

50. terms and conditions 2. Do speculation to maximize the profits 3. Have
discriminating insurance policies
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Under IRDA rules & regulations, no insurance is allowed to have discriminating

policies or can enter in to speculation. The insurers have to design products with
fair terms and conditions.

Out of 50 questions 50 are un attempted.

50 10/12/2021 2:13:4 60

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