Q 1.
Why does a pricing divergence (from what is required)
happen ? 1. When the product is new 2. When there are
technological changes in the market 3. Due to execution errors
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Both 1 and 2
Explanation:
New challenges in the field of underwriting emerge due to technological
changes and whenever the product is new, unforeseen catastrophic and
new losses may occur.
Q 2. The exposure rating aims at a premium rate or price based on
______ .
Past loss experience
Present loss experience
Portfolio analysis
Future loss estimate
Rating manual
UnAttempted
CORRECT ANSWER:
Future loss estimate
Explanation:
Overall, exposure rating aims at a premium rate or price based on future
loss estimates on mathematical basis using probabilities of loss
occurrence & expected values of loss amounts.
Q 3. Identify the correct statement with respect to customized
insurance policies -
These are class rated product
Registered insurance agents can also provide customized
policies
The policy design for customized insurance policy is mostly
reserved for the insurer’s senior underwriters
Available on a group basis only
A customized insurance policy is an All Risk Policy
UnAttempted
CORRECT ANSWER:
The policy design for customized insurance policy is mostly
reserved for the insurer’s senior underwriters
Explanation:
The customized insurance policy requires high level of experience &
knowledge. Therefore its design is reserved for the senior underwriters
of an insurer.
Q 4. Which one of the below options is an Express Warranty in case
of Marine insurance?
The ship should take lawful goods and commodities
There should be no deviation of the ship from its normal course
The ship must be sea worthy at the beginning of the voyage
The sailing time of the ship should be strictly followed
The voyage should be a legal one
UnAttempted
CORRECT ANSWER:
The sailing time of the ship should be strictly followed
Explanation:
Warranties are of two type’s i.e. express warranties and implied
warranties. Express warranty denotes to those undertakings which are
explicitly expressed on the face of the insurance policy. Implied
warranty denotes a type of warranty which is not explicitly expressed in
the policy but is understood by the implication of the law. Option 2 to 3
falls under implied warranties.
Q 5. The amount calculated by using actuarial techniques with the
aim that the Insurer earns profit even after payment of all
claims is called __________ .
Profits
Surplus
Premium
Loading
Reserve
UnAttempted
CORRECT ANSWER:
Premium
Q 6. The correct abbreviation for CRM is _______ .
Class and country mechanism
Class rating mechanism
Country rate management
Customer rate master
Customer relationship management
UnAttempted
CORRECT ANSWER:
Customer relationship management
Q 7. Why do the rating pattern for general insurance products differ
across products or portfolios ? 1. Due to Renewability 2. Due
to availability of historical data for premium and claims
statistics 3. Due to the term
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
The rating pattern for general insurance products can vary across
products or portfolios for insurance companies due to availability of
historical data concerning premium and claims statistics.
Q 8. The re-insurance slip is prepared by _______ .
The Insurance Agent
The Insurer
The Re-insurer
The insured
The Re-insurance broker
UnAttempted
CORRECT ANSWER:
The Re-insurance broker
Explanation:
Re-insurance slip is a very important document essential for the risks
which are reinsured on facultative basis. This slip is prepared by re-
insurance broker.
Q 9. Which two sides of the risk will be looked into by the rating
plan while assessing the risk?
Frequency and the Location
Frequency and the Severity
Frequency and the Probability
Severity and the Timing
Severity and the Probability
UnAttempted
CORRECT ANSWER:
Frequency and the Severity
Explanation:
The loss potential of a risk can be determined by methodological
approach of determining its frequency & severity. It denotes how
frequent & how severe the risk would happen over a period of time.
Q Which is a good method for monitoring compliance with
10. respect to underwriting policies ?
Brainstorming
Internal audit
Group discussions
Fish bone analysis
SWOT analysis
UnAttempted
CORRECT ANSWER:
Internal audit
Explanation:
The risk management framework typically consists of various elements
such as willingness & capacity to accept risk. It also calls for
monitoring compliance with respect to underwriting policies and
procedure such as internal audit.
Q _______ refers to Package policy.
11. Policies which are subsidized
A Policy which has more than one benefit
Policies that cover more than 1 subject matter of insurance
A Policy which combines two or more types of insurance covers
Policies that cover more than 1 risk
UnAttempted
CORRECT ANSWER:
A Policy which combines two or more types of insurance covers
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.
Q Select which of those listed is the rating factor in case of
12. motor insurance - 1. Claims history 2. Annual Income 3.
Lingual preference
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 1
Explanation:
There are various rating factors in case of motor insurance. The risk
factors for the customer sharing the same risk are categorised under
one group & then based upon their accident behavior, they are
separated & rated accordingly.
Q _____ factor(s) is taken into account in case of EXPERIENCE
13. RATING. 1. Pool Size 2. Claim Frequency 3. Claim size
Only 1
Only 2
Only 3
Both 2 and 3
All 1, 2 and 3
UnAttempted
CORRECT ANSWER:
Both 2 and 3
Explanation:
Experience rating is a type of merit rating method where class rate or
schedule rates are further adjusted upwards or downwards depending
upon both past Claim frequency and Claim size.
Q The contents of the Proposal Form and personal statement
14. contain information which is relevant to determine ______ . 1.
The personal ambitions 2. The behavioral tendencies 3. The
Moral hazards
Only 1
Only 2
Only 3
Both 2 and 3
Both 1 and 2
UnAttempted
CORRECT ANSWER:
Only 3
Explanation:
Proposal form is a very important document & based on the details
mentioned therein, the risk is accepted by an insurer of the principle of
utmost good faith. Any misstatement or incorrect information is
construed as the violation of the principle of utmost good faith. It
depicts the moral hazard of the proposer.
Q Which among the following is a result of failure to consider
15. adverse features of a risk? 1. Moral hazard 2. Premiums that
are low 3. Adverse selection
Only 1
Only 2
Only 3
Both 2 and 3
All 1, 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
If an insurer charges too little premium, it could become insolvent when
large claim on account of frequency or severity of claim are filed.
Q What are the major sources of challenges faced by an
16. underwriter ?
Servicing the policies
Sales
New and upcoming profile of losses
Society
Training
UnAttempted
CORRECT ANSWER:
New and upcoming profile of losses
Explanation:
The non-life insurance is a challenging field where dynamic changes are
occurring in the risks being offered for insurance. Proper underwriting
& rating is essential for survival. The more challenging area in this
regard is newer & ever emerging profile of losses.
Q Which of the below is / are good strategies to reduce
17. underwriting costs ? 1. Using class rating for all types of
scenarios 2. Integration of systems with the sales force and
sales force automation tools 3. There should be good
underwriting manuals
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
There are certain emerging technologies/ strategies which can help the
insurers to reduce underwriting costs include integration of systems
with the sales force and sales force automation tools.
Q In order to sell any general insurance product in the Indian
18. market , it is essential to comply with the requirements of
________ , which provide leverage to the Regulator to review
the policy forms,wordings and rates.
IRDA
Special contingencies
Prior approval
File and use
Use and file
UnAttempted
CORRECT ANSWER:
File and use
Explanation:
Under F&U system, the insurers are required to file their rates with the
regulator before affecting them. Prior approval is not necessary but the
regulator has authority to comment or disapprove rates.
Q Name the process in which the profitability of a portfolio is
19. controlled and the claims are examined for identifying the loss
exposures and taking necessary correction for
implementation.
Exposure management
Underwriting
Re-underwriting
Retrocession
Supercession
UnAttempted
CORRECT ANSWER:
Re-underwriting
Explanation:
Re-underwriting is the process by which the profitability of a portfolio is
controlled and the claims are duly examined for identifying the loss
exposures and taking necessary correction for implementation.
Q Which of these is an example of Internal Tariff Rated
20. Products ?
Fire insurance up to a specific sum insured
Bankers blanket insurance
Homeowner’s comprehensive insurance
Shopkeeper’s comprehensive insurance
Public liability insurance
UnAttempted
CORRECT ANSWER:
Fire insurance up to a specific sum insured
Explanation:
Any general insurance product which can be sold by an insurance
company with rates, terms and conditions as per internal tariff
guidelines of the insurance company, is known as Internal Tariff Rated
Products. Fire insurance up to a certain sum insured can be sold
accordingly. Rests of the products are customized products which are
specifically designed to suit the requirements of an individual
customer.
Q Name the clause in an insurance policy which describes the
21. condition or type of loss which is not covered by the policy ?
Express warranty
Implied warranty
Guarantee
Inclusion
Exclusion
UnAttempted
CORRECT ANSWER:
Exclusion
Explanation:
Exclusion is a clause contained in an insurance policy which describes
the condition or type of loss that is not covered by the policy.
Q The formula for calculating Pure Premium is ________ .
22. (Actual Loss * Loss adjustment expenses) / (Number of
exposure units)
(Actual Loss + Loss adjustment expenses) / (Number of
exposure units)
(Actual Loss - Loss adjustment expenses) X (Number of
exposure units)
(Actual Loss + Loss adjustment expenses) - (Number of
exposure units)
(Actual Loss * Loss adjustment expenses) +(Number of
exposure units)
UnAttempted
CORRECT ANSWER:
(Actual Loss + Loss adjustment expenses) / (Number of exposure
units)
Explanation:
Pure premium is the product of frequency severity of the claim.
Therefore the pure premium is calculated by the formula i.e. Actual Loss
+ Loss adjustment expenses) / Number of exposure units.
Q The second step in experience rating is _______ .
23. Apply loss development
Adjust subject premium to future level
Estimate future possibilities
Trend and laver losses
Assemble rating
UnAttempted
CORRECT ANSWER:
Assemble rating
Explanation:
The first step in experience rating was to assemble all the data’s
available for the proposed risk of the particular client. The next logical
step would be to assemble all rating factors to arrive at the final
premium to be charged.
Q Identify which of the listed functions is that of an advocate ?
24. To file a complete list of all products falling under categories as
defined in the ‘F&U’ guidelines
Make sure that the proposal form has information on all matters
that are material to the contract
To file with IRDAI a list of all new products category wise
To file a list of risks underwritten
To monitor the business activities of the insurer and to make
sure that products sold are in compliance with board approved
underwriting policy
UnAttempted
CORRECT ANSWER:
Make sure that the proposal form has information on all matters that
are material to the contract
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 advocate also has an important role to play. He
has to certify the proposal form & has to ensure that the proposal form
secures information on all matters that are material to the contract.
Q In case the Rates and Terms are in the Form of an Internal
25. Tariff for Class Rated Risks which of the given statements hold
true?
In case some rating factors are to be cancelled, the rates should
sufficiently reward favourable hazard features
The arbitrary rate changes need not be justified
No new rating factors can be introduced
The existing rating factors cannot be dropped
The rates can be compared with products in different categories
UnAttempted
CORRECT ANSWER:
In case some rating factors are to be cancelled, the rates should
sufficiently reward favourable hazard features
Explanation:
When the Rates and Terms are in the Form of an Internal Tariff for Class
Rated Risks are to be dropped, the rates should sufficiently reward
favourable hazard features. Even when new rating factors are to be
introduced, their relevance should be demonstrated.
Q An Indian insurer cannot offer any insurance product for sale
26. until - 1. The IRDAI confirms in writing that it has no further
queries in respect of that product 2. All the queries relating to
the product have been satisfactorily resolved after filing 3.
Similar products are available in global markets for
comparison
Only 1
Only 2
Only 3
Only 1 and 2
Only 2 and 3
UnAttempted
CORRECT ANSWER:
Only 1 and 2
Explanation:
The insurer is not permitted to offer any product for sale until all queries
pertaining to the product have been satisfactorily resolved after filing &
IRDAI confirms in writing that it has no further queries in respect of that
product.
Q Which of those listed below focuses on the ‘life-time-value’ of
27. a customer and addresses various subjects like customer
acquisition, loyalty, cross-selling etc.
CRM
SWOT
Cross selling
Target marketing
Soft selling
UnAttempted
CORRECT ANSWER:
CRM
Explanation:
CRM or Customer relationship management focuses on the ‘life-time-
value’ of a customer and addresses various topics such as customer
acquisition, loyalty, cross-selling etc.
Q While filing a class rated product with IRDAI which documents
28. need to be attached? 1. The Prospectus 2. Profit & Loss
statement of the last 3 years 3. The history of planned
underwriting losses
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 1
Explanation:
Various documents and certificates are required to be filed or attached
for filing a product with the IRDA consists of prospectus along other
documents like proposal form, claim form etc.
Q Within how many days should the communication related to
29. financial interest of a bank be responded ?
5 days
10 days
20 days
15 days
30 days
UnAttempted
CORRECT ANSWER:
10 days
Explanation:
The insurance regulator has prescribed various requirements relating to
policyholders servicing & the insurer has to respond within the
prescribed time frame. Any communication related to financial interest
of a bank should be responded within 10 days of its receipt.
Q Which is the 1st step in the selection of risks process? 1.
30. Classification of the risk 2. Getting factual information from the
proposer via the proposal form 3. Calculation of a price to
cover the risk
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
The process of underwriting involves selection of risk, classification &
rating, policy form & retention & reinsurance. However the 1st step in
the selection of risks process is securing factual information from the
proposer via the proposal form.
Q From the listed duties the only function of an Appointed
31. Actuary is -
To file a list of the various risks underwritten
To check the activities of the insurer and to make sure that the
products are sold as per the approved underwritten policy
Decide the requirements for compilation and analysis of data
To file with insurance regulator IRDAI at the end of every
calendar quarter a list of all new products
To file a list of all products under categories as defined in the F
and U guidelines
UnAttempted
CORRECT ANSWER:
Decide the requirements for compilation and analysis of data
Explanation:
The skills & expertise of an actuary are utilized by the insurers by using
the data’s compiled by them. It is then used to validate the rates to
suggest the optimum rating practices.
Q Of those listed below which of the following category of risks
32. can be the subject matter of General Insurance ? 1. Volatility in
the Stock Markets 2. Property Risks 3. Life
Only 1
Only 2
Only 3
Both 2 and 3
All 1, 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
As per IRDA, insurance other than life insurance falls under the
category of general insurance. General insurance covers property risks
against fire, theft etc. besides other consequential losses associated
with property. Life & stock market volatility is not a subject matter of
general insurance.
Q _______ is an evidence of an insurance contract.
33. Proposal
Premium payment
Acceptance of proposal
Cover note
Promissory note
UnAttempted
CORRECT ANSWER:
Cover note
Explanation:
Cover note is an evidence of an insurance contract. It’s a temporary
document which is usually issued for a period of 30 days.
Q As per IRDA regulations, _________ need to be clearly
34. mentioned in a general insurance policy. 1. All previous
policies purchased by the insured 2. The franchise or
deductible applicable 3. All the records of the claims made by
the insured
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
Franchise or deductible limits the liability of insurers. The insured
would not get the full amount of loss/ claim due to its application. The
insured therefore must know the limitations of his policy at the time of
taking the policy & hence it should be clearly mentioned on the policy
itself.
Q In order to account for any risk the company can encounter,
35. the amount of retention maintained depends on factors like --
1. The Class of business 2. The Paid up capital and free
reserve of the company 3. Expected gross premium
Only 1
Only 2
Only 3
Both 2 and 3
All 1, 2 and 3
UnAttempted
CORRECT ANSWER:
All 1, 2 and 3
Explanation:
The primary insurer requires transferring a part of the risk assumed &
wishes to retain the residual risk (retention). The amount of retention
depends upon various factors including ‘Paid up capital and free
reserve’, ‘Expected gross premium’ and ‘Class of businesses’
Q How is LOSS RATIO calculated ?
36. Incurred losses + Earned premium
Incurred losses / Earned premium
(Incurred losses / Earned premium) * 100
Incurred losses – Earned premium
(Incurred losses * Earned premium) * 100
UnAttempted
CORRECT ANSWER:
(Incurred losses / Earned premium) * 100
Explanation:
The ratio is indicated by incurred losses divided with earned premium
for the desired period.
Q List the main benefits that computers provide to an
37. underwriter to underwrite more properly and accurately - 1. It
reduces the cost of insurance 2. It reduces all possible risks 3.
One can adjust the premium rate according to the risk
Only 1
Only 2
Only 3
Both 1 and 3
Both 1 and 3
UnAttempted
CORRECT ANSWER:
Only 3
Explanation:
The computer enables the underwriter to manage the risk more
efficiently and accurately by various systems including adjusting the
premium rate in accordance with the risk.
Q Insurance can be classified as a form of ______.
38. Risk supervision
Risk reduction
Risk avoidance
Risk transfer
Risk elimination
UnAttempted
CORRECT ANSWER:
Risk transfer
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. It refers to risk transfer cum-sharing
mechanism where the risk of an individual is transferred to another by
way of pooling of risk to other individuals exposed to similar risks.
Q With respect to Policy Prospectus, which of the following
39. statements is TRUE ? 1. The Prospectus shall show the profit
margin for the insurer 2. The Prospectus will explain
warranties and conditions associated with the policy 3. The
Prospectus shall clearly specify who can avail of the policy
Only 1
Only 2
Only 3
Both 1 and 3
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 2
Explanation:
Policy prospectus shall explain warranties and conditions associated
with the policy. Other two points are not required in the prospectus.
Q Which of the rating factor(s) associated with Homeowners
40. insurance ? 1. Type of construction 2. Occupational class code
3. Accident history
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
UnAttempted
CORRECT ANSWER:
Only 1
Explanation:
All risks are not equal and the underwriting process requires classifying
the risk based upon the risk characteristics. Under homeowners
insurance, wooden structures are at greater risk of burning than stone
structure & thus higher premium is required to cover the risk.
Q With regards to 'Named Peril' policies which of the listed
41. statements hold true ?
The Policy should covers all risks possible
The burden of proof always is on the insurer
The policy provides coverage for all direct loss caused by
specific perils mentioned in the policy
It is not compulsory to name the insured perils in the policy
There policies are expensive than All Risk policies
UnAttempted
CORRECT ANSWER:
The policy provides coverage for all direct loss caused by specific
perils mentioned in the policy
Explanation:
Named peril policy provides coverage for all direct loss or damage
caused by specific perils mentioned in the policy. It can be either a
single peril or a multi-peril policy.
Q Which party agrees to compensate the other person against
42. possible losses?
IRDA
The Assurer
The Insurer
The Insured
The Agent
UnAttempted
CORRECT ANSWER:
The Insurer
Explanation:
Insurers refers to a company which promises to pay, compensate or
provides a defined service against the coverage of possible fortuitous
losses.
Q The formula for Pure premium method is : R = (P+F) / (I – V –
43. Q) . In this what does 'V' stand for ?
Value of sum insured
Variable expense factor
Pure premium
Rate per unit exposure
Profit and contingencies factor
UnAttempted
CORRECT ANSWER:
Variable expense factor
Q Which important factor has to be used for getting the Target
44. Loss Ratio in case of Loss Ratio method ?
Balance of P/L account
Previous years claims
Profit and contingencies factor
Projected claims
Pool size
UnAttempted
CORRECT ANSWER:
Previous years claims
Explanation:
Under loss ratio method, target loss ratio can be obtained on the basis
of actual loss experience (previous year’s claims) of the insurance
company.
Q In cases where the tariff is used only as a guide & the
45. underwriter has authority to depart from such tariff,
_________ .
the authority to change the rates should be with persons who
are responsible for underwriting and not with persons who are
responsible for business development
its not possible to introduce new rating factors
the arbitrary changes in rates need not be justified
its not possible to drop existing rating factors
the rates can be compared with those products in different
categories
UnAttempted
CORRECT ANSWER:
the authority to change the rates should be with persons who are
responsible for underwriting and not with persons who are
responsible for business development
Explanation:
Where the tariff is used only as a guide & the underwriter has authority
to depart from the tariff, the authority to vary the rates should rest with
persons responsible for underwriting and not with persons responsible
for business development.
Q The process of classifying subject matter according to their
46. degree of insurability is known as _______ .
Forecasting
Rating
Regulating
Underwriting
Seeding
UnAttempted
CORRECT ANSWER:
Underwriting
Explanation:
Underwriting is the process of classifying subject matter according to
their degree of insurability. The premium charged must be sufficient to
cover losses & generate adequate profit to the insurers within the
boundaries of the necessary regulations. Each risk is classified
according to their degree of insurability.
Q In case of BURGLARY INSURANCE policy on a first loss basis,
47. which is/are the prime underwriting safeguards ?
Policy can be issued for as low as 10% of total value
Damage to premises by burglars is excluded
Policy is also available for small sum insured
Cover is available to all locations where the goods are stored
Property damage is also covered
UnAttempted
CORRECT ANSWER:
Damage to premises by burglars is excluded
Explanation:
There are various underwriting safeguards in case of burglary
insurance policy on a first loss basis. One of them is damage to
premises by burglars is excluded.
Q As per IRDA, which of the following can be classified as a large
48. risk ?
The total sum insured is of Rs 1000 crore or more at one
location for material damage, property insurance and business
interruption together combined
The total sum insured is of Rs 300 crore or more at one location
for material damage, property insurance and business interruption
together combined
The total sum insured is of Rs 3000 crore or more at one
location for material damage, property insurance and business
interruption together combined
The total sum insured is of Rs 200 crore or more at one location
for material damage, property insurance and business interruption
together combined
The total sum insured is of Rs 2500 crore or more at one
location for material damage, property insurance and business
interruption together combined
UnAttempted
CORRECT ANSWER:
The total sum insured is of Rs 2500 crore or more at one location
for material damage, property insurance and business interruption
together combined
Q Why do underwriting errors generally occur ?
49. Due to regulatory changes
Due to lack of reinsurance
Due to legal changes
Due to faulty information collection
Due to stiff competition
UnAttempted
CORRECT ANSWER:
Due to faulty information collection
Explanation:
Underwriting activity faces intense pressure in a deregulated market for
various reasons. Due to various pressures and variety of other reason
including collection of faulty information, there could be underwriting
errors committed by an underwriter.
Q Select which of the below listed statements is/are TRUE : 1.
50. Rate making is prospective 2. Rate making is retrospective 3.
Balance should be attained at the aggregate and individual
level
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3
UnAttempted
CORRECT ANSWER:
Both 1 and 2
Explanation:
Rate making can either be Prospective or Retrospective. Prospective
system analysis the past experience whereas Retrospective system
does it by actual experience to determine the cost of coverage.
Out of 50 questions 50 are un attempted.
