Q 1.

______ includes non-life products that are specially designed

to suit the specific needs of clients.
Exposure Rated Products
Customised Products
Class Rated Products
Insurance of Large Risks

UnAttempted

CORRECT ANSWER:

Customised Products

Q 2. Under which rate regulatory system, it allows the insurance

company to change rates immediately but must file the new
rate with the insurance department within a specific time?
Use and File laws
File and Use laws
Flex Ratings laws
Prior Approval laws

UnAttempted

CORRECT ANSWER:

Use and File laws

Q 3. ________ is the method for projecting unpaid and unreported

losses to their ultimate settlement values ?
Loss Development method
Pure Premium method
 Loss Ratio method
Reported Loss method
None of the above

UnAttempted

CORRECT ANSWER:

Loss Development method

Q 4. According to _______ , if the risk of loss can be spread over a

large enough group, the financial loss resulting from the loss
to the members can be paid from the premium collected in the
pool, if the premium so collected reflected the risk affecting
the group.
Risk sharing
Risk transfer
Law of large numbers
Pooling of risks

UnAttempted

CORRECT ANSWER:

Law of large numbers

Q 5. Under which process of underwriting, the underwriter should

be able to modify form with warranties, clauses and special
conditions?
Retention and reinsurance
Policy forms
Classification and rating
Selection of risks
 UnAttempted

CORRECT ANSWER:

Policy forms

Q 6. Which of the following is true with regards to Underwriting

Philosophy of an insurance company?
Underwriting looks at all risks involved till policy issuance
Underwriting looks at all risks involved till point of sale
Underwriting looks at all risks involved till receiving the
application from the proposer
Underwriting looks at all risks involved till policy issuance and
beyond ie. through out the terms of the policy

UnAttempted

CORRECT ANSWER:

Underwriting looks at all risks involved till policy issuance and

beyond ie. through out the terms of the policy

Q 7. Which are the specific requirements imposed under the

contract, the violation of which can lead to adverse effect on
the policy liability for a loss?
Exclusions
Policy document
Warranties
Conditions

UnAttempted

CORRECT ANSWER:
 Conditions

Q 8. The estimation of underwriting profitability of an account

begins by determination of the ______ .
Written Premium
Earned Premium
Saved Premium
Both 1 and 2
None of the above

UnAttempted

CORRECT ANSWER:

Earned Premium

Q 9. _______ is/are example(s) of Internal Tariff Rated products.

Life Insurance
Motor Insurance
Health Insurance
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Both 2 and 3

Q In which of the following is the regulator NOT concerned when

10. considering products evaluation ?
 Design of the product
Definition of the product
Resourcing of underwriting personal
Pricing

UnAttempted

CORRECT ANSWER:

Resourcing of underwriting personal

Q Which of the following systems represents a compromise

11. between the prior approval system and the no-file system?
Use and File system
Flex rating regulations
File and Use laws
All of the above
None of the above

UnAttempted

CORRECT ANSWER:

File and Use laws

Explanation:

File and Use laws represents a compromise between the prior approval
system and the no-file system.

Q The underwriting philosophy developed by senior underwriter

12. needs approval from which of the following?
Top management, Actuary and Board of the company
 Top management and Board of the company
Top management of the company
Only Actuary of the company
None of the above

UnAttempted

CORRECT ANSWER:

Top management, Actuary and Board of the company

Explanation:

The underwriting philosophy developed by senior underwriter needs

approval from Top management of the company, the Actuary and the
Board.

Q Which of the following products is also described as 'Special

13. Contingency Policies' ?
Individual experience rated products
Packaged/customised products
Exposure rated products
Internal tariff rated products
None of the above

UnAttempted

CORRECT ANSWER:

Packaged/customised products

Q The premium level at which an insurance company would not

14. generate a profit, but ideally would not lose any money either
 is known as _____ .
Pure Premium
Break-even Premium
No Profit-No Loss Premium
Net Premium
Gross Premium

UnAttempted

CORRECT ANSWER:

Pure Premium

Explanation:

The premium level at which an insurance company would not generate

a profit, but ideally would not lose any money either is known as Pure
Premium.

Q Where a proposal form is not used, the insurer shall record the
15. information obtained orally or in writing and confirm it within a
period of ____ days thereof with the proposer and incorporate
this information in its cover note or policy.
3
7
15
30
45

UnAttempted

CORRECT ANSWER:

15
Q Warranties are special conditions based on the statements
16. made by the ______ .
Underwriter
Insurer
Insured
Broker
Agent

UnAttempted

CORRECT ANSWER:

Insured

Explanation:

Warranties are special conditions based on the statements made by the

insured.

Q In which of the following is the regulator NOT concerned when

17. considering product evaluation?
Pricing
Design of product
Definition of product
Resourcing of Underwriting Personnel
All of the above

UnAttempted

CORRECT ANSWER:

Resourcing of Underwriting Personnel

 Explanation:

The regulator is not concerned with resourcing issues.

Q Which of those listed below is an example of property risk ?

18. Continuity of Business after loss due to fire
Customer injury lawsuit
Defective product lawsuit
Slip and fall accident at ones own property
Damage to house due to fire

UnAttempted

CORRECT ANSWER:

Damage to house due to fire

Explanation:

Various covers are being offered by an insurer to the policyholders

according to classifications. Broadly, the policies are based upon
indemnity basis for property or benefit policies on human lives. House
damage as result of fire is an example of property risk & the rest are for
human’s lives.

Q With respect to insurance policies, what information is

19. included in 'appropriate data' ? 1. The insurance agent 2. All
the relevant factors 3. The regulator
Only 1
Only 2
Only 3
Both 1 and 2
All 1, 2 and 3
 UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

With reference to insurance policies, appropriate data includes

information on all relevant factors should be listed and no rating factor
may be discriminating in nature or impractical of implementation or
could lead to problems if used in underwriting.

Q Select the statement which is/are TRUE with regards to 'policy

20. prospectus' - 1. In case the proposal / other connected papers
are not filled by the prospect, a certificate of understanding
from the prospect can be incorporated at the end of the
Proposal form 2. The profit margin of the insurer is indicated in
the prospectus 3. The Prospectus will clearly mention who can
avail of the policy
Only 1
Only 2
Only 3
Both 1 and 3
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

Detailed proposal form gives a complete description of the risk

proposed for insurance. However, where, for any reason, the proposal
and other connected papers are not filled by the prospect, a certificate
 of understanding from the prospect may be incorporated at the end of
the proposal form.

Q The prime goal of of market conduct supervision of insurance

21. business is -
To stop insurers from investing in stocks
To see the insurers have increasing profitability
To see that there is severe competition in the insurance sector
To have a cap on the number of clients an insurer can service
To make certain that the members of professional organizations
linked with insurance / reinsurance business are qualified and
competent

UnAttempted

CORRECT ANSWER:

To make certain that the members of professional organizations

linked with insurance / reinsurance business are qualified and
competent

Explanation:

In order to ensure stability in the market performance, the regulator

conducts various supervisions. One of them is to ensure that members
of professional organizations connected with insurance and
reinsurance business are duly qualified and competent. They must
adhere to code of professional ethics & standards appropriately.

Q The type of insurance that does not indemnify the pure loss,
22. but ex ante agrees to make a payment upon the happening of a
triggering event is called ______ .
Term insurance
General insurance
Paramedic insurance
 Parametric insurance
Liability insurance

UnAttempted

CORRECT ANSWER:

Parametric insurance

Explanation:

Parametric insurance is a type of insurance that does not indemnify the

pure loss, but ex ante agrees to make a payment upon the occurrence
of a triggering event.

Q From the options below, which is/are the cause of underwriting

23. losses ? 1. Bad underwriting cycle with soft rates 2. High
inflation 3. Non availability of Re-insurance
Only 1
Only 2
Only 3
Both 1 and 3
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 1

Explanation:

There are number of reasons because of which an insurer cannot make

desired profit. The premium increase commiserating the loss needs to
be done. One of them is the underwriting cycle may be indicating very
 soft rates etc.

Q Identify the correct statement with respect to customized

24. insurance policies --
Registered insurance agents can also provide customized
policies
A customized insurance policy is an All Risk Policy
These are class rated product
Pricing of customized insurance policy is generally linked to
premium under a ready made similar risk
Available on a group basis only

UnAttempted

CORRECT ANSWER:

Pricing of customized insurance policy is generally linked to

premium under a ready made similar risk

Explanation:

The customer always looks for optimum insurance coverage according

to changing profession & economic status. Insurers therefore have to
design a policy as per their requirements. The customized insurance
policies offer to meet the aspirations of the insured.

Q Documentation for insurance also includes ______ .

25. Cover Note
Vision statement of the insurer
Code of conduct of the insurance agents
Both 1 and 2
All 1, 2 and 3
 UnAttempted

CORRECT ANSWER:

Cover Note

Explanation:

Agents code of conduct & insurer’s vision statement has nothing to do

with the risk assumed by the insurer based upon the proposal form &
the premium collected thereby. The cover note is issued with limited
validity usually 30 days. It is an evidence of risk cover.

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

26. true ?
In case of jewellery insurance, the sum insured is fixed based
on declaration by the insured
When there is a loss, the sum insured is automatically paid
Declaration and floating policies can be granted in burglary
insurance
No depreciation is deducted for property claims and these are
settled on the basis of market value of property
Floating Policies are valid for 5 years and than renewable for
another 5 years on expiry

UnAttempted

CORRECT ANSWER:

Declaration and floating policies can be granted in burglary

insurance

Explanation:

When an insured is unable to give separate value of stocks at various

locations but knows the total value of stocks under all the locations, a
 floater policy can be issued.

Q In which type of case(s) the Experience Rating method can be

27. applied ? 1. Specialty and liability products 2. Casualty
insurance 3. New line of business
Only 1
Only 2
Only 3
Both 1 and 2
Both 1 and 3

UnAttempted

CORRECT ANSWER:

Only 2

Explanation:

Experience rating method can be applied in case of causality insurance

which has classification that is somewhat non-homogeneous, atypical
risk within the classification & merits experience rating.

Q _____ are two basic risk elements in rate making.

28. Parameter risk, Process risk
Premium risk, legal risk
Regulatory risk, Moral risk
Catastrophic risk, General risk
Management risk, Regulatory risk
 UnAttempted

CORRECT ANSWER:

Parameter risk, Process risk

Explanation:

There are two basic risk elements in ratemaking known as Parameter

risk, Process risk. Parameter risk is associated with selection of
parameters underlying the applicable model of the process, whereas
process risk is associated with projection of future variable
contingencies.

Q An new insurance company, to capture more market share,

29. decided to accept the risk at lower premium rates as against
the prevailing market rates. What could be the fallout of such
strategy ?
Good profits
Good income
Regulatory issues
Insolvency
Low business / sales

UnAttempted

CORRECT ANSWER:

Insolvency

Explanation:

If a new entrant as a marketing strategy, decides to accept the risk at

lower premium rates as against the prevailing market rates, it could
become insolvent when large claims whether by frequency or severity
are filed.
Q If a policy is starting on 1st January for a period of 1 year and
30. expiring on 31st December, will have earned premium as
______ of written premium on 1st July.
25%
40%
50%
13.33%
62.5%

UnAttempted

CORRECT ANSWER:

50%

Explanation:

Earned premium is that part of premium in a policy which is being

earned as the risk period progresses & therefore can be measured on
any given date within the policy period in peroration to the total
premium of the policy. The earned premium under the question would
be 50%.

Q What will a comparison of the written premium and earned

31. premium indicate ?
Average product life
Product penetration
Dynamism of the insurer in premium growth
Regulatory hurdles
Customer patterns

UnAttempted
 CORRECT ANSWER:

Dynamism of the insurer in premium growth

Explanation:

A comparison of the written premium and earned premium can indicate

the dynamism of the insurer in premium growth.

Q The system of penalizing of rewarding of customers based on

32. their yearly accident claims is known as _______ .
Moral selection
Adverse selection
Anti-selection
Underwriting
Bonus/Malus

UnAttempted

CORRECT ANSWER:

Bonus/Malus

Explanation:

Bonus/Malus is the system of penalizing or rewarding of customers

based on their yearly accident claims. This is rate monitoring for
existing customers. It is done on the basis of their yearly accident
claims.
Q Under which category can the business under fire insurance
33. be categorised ?
Social insurance
Material Damage Insurance
Liability Insurance
Project Insurance
Hull Insurance

UnAttempted

CORRECT ANSWER:

Material Damage Insurance

Explanation:

Although as per Insurance Act, 1938 the non-life business is divided

under 3 categories Fire, Marine & Miscellaneous, for specialized risks,
further classification was felt necessary. Material Damage Insurance
falls under Fire insurance.

Q What items may necessitate a restatement of the historical

34. experience? 1. Change in management at the insurer 2.
Changes in mix of business written 3. The client profile of the
insurer
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:
 Only 2

Explanation:

When a portfolio has experienced significant changes in the mix of

business, actuaries often load or give credit for these changes in
exposure in their final rating.

Q During the phase of underwriting a proposal, the underwriter

35. has to judge the probability of operation of peril to be insured
in relation to -
Time of the loss
Frequency of the losses
The severity of losses
Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Both 2 and 3

Explanation:

Frequency & Severity of losses are the main areas under risk
management matrix. How frequent the occurrence of loss would be &
what would be its severity (over a period of time) has to be assessed for
underwriting the proposal for any insurance.

Q According to the guidelines laid by Insurance Act 1938, non

36. life insurance business can be mainly classified under
_______ .
 Fire
Marine
Miscellaneous
Both 1 and 2
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

All 1, 2 and 3

Explanation:

The Insurance Act 1938 classifies non-life insurance business into Fire,
Marine and Miscellaneous classes.

Q From the formulas below, which one is correct ?

37. Gross Premium = Pure risk Premium + Load
Net Premium = Pure risk Premium * load
Net Premium = Pure risk Premium - Load
Net Premium = Risk Premium / load
Gross Premium = Risk Premium + Load

UnAttempted

CORRECT ANSWER:

Gross Premium = Pure risk Premium + Load

Explanation:

Gross premium is the amount which is charged from the customer. It is

arrived at by loading the pure premium with expenses, commission &
 inflation.

Q Select which of listed duties are a part of an underwriter’s

38. profile .
Give on ob training to insurance agents
Give high level of customer service
Evaluate the risk of loss
Get new business
Adjust all who wishes coverage under policy

UnAttempted

CORRECT ANSWER:

Evaluate the risk of loss

Explanation:

Underwriter has the job and ability of and has to appraise risk correctly.
He has numerous functions to perform and has also to evaluate the risk
of loss & put a price for covering the loss.

Q Which of these can be categorized as Individual Rated

39. product ? 1. Packaged or customized products 2. Internal tariff
rated products 3. Exposure rated products
Only 1
Only 2
Only 3
Both 1 and 2
Both 2 and 3
 UnAttempted

CORRECT ANSWER:

Only 3

Explanation:

As per File and use guidelines of IRDA :

Class rated products are - i) Internal Tariff rated products ii) Packaged
or Customised products

Individual rated products are - i) Individual experience rated products ii)

Exposure rated products iii) Insurance of large risks

Q With reference to IT systems deployed across the insurance

40. enterprise, _____ can be grouped under Business intelligence.
Order Flow
Information sorting
Data mining
Workflow management
Document management

UnAttempted

CORRECT ANSWER:

Data mining

Explanation:

The IT system i.e. both Hardware & Software must be developed across
the enterprise & provide data mining services with speed, flexibility &
functionality. The technology must be state-of-art and next generation.
Q As per the term ‘Contra Preferentum’ any ambiguous provision
41. in the policy is constructed against the ________ .
IRDAI
Insured
Insurer
Agent
Insurance Broker

UnAttempted

CORRECT ANSWER:

Insurer

Explanation:

As per legal term ‘contra preferentum’ any ambiguous provision in the

policy is constructed against the insurer. This means that any
ambiguous provision in the policy is construed against the person who
drafted the contract.

Q As per IRDA, which of the following can be classified as a large

42. risk?
For liability insurance, it should be Rs 100 crore or more per
event
For liability insurance, it should be Rs 80 crore or more per
event
For liability insurance, it should be Rs 75 crore or more per
event
For liability insurance, it should be Rs 50 crore or more per
event
For liability insurance, it should be Rs 25 crore or more per
event
 UnAttempted

CORRECT ANSWER:

For liability insurance, it should be Rs 100 crore or more per event

Q The method of applying various factors to a base rate evolved

43. out of characteristics of an insured / or a group of
homogeneous risks is called __________.
Class rating
Factor rating
Individual risk rating
Exposure rating
Judgment rating

UnAttempted

CORRECT ANSWER:

Class rating

Explanation:

Once a risk has been accepted by an insurer, the next process is class
rating. Class rating involves applying various factors to a base rate
evolved out of characteristics of an insured / or a group of homogenous
risks.

Q With respect to First Loss Insurance - Which factor is likely to

44. be considered ?
The location of warehouses
Percentage of full value as sum assured
The value of warehouse
 Minimum probable loss
Construction of warehouse

UnAttempted

CORRECT ANSWER:

Percentage of full value as sum assured

Explanation:

When a total loss under the burglary risk is practically impossible in

respect of heavy machinery or bulk commodities, sum insured is agreed
to be less then & the insurers agrees not to penalize the insured for
under insurance, First Loss Insurance policies are issued.

Q During the selection of risks process,which of those listed

45. below is a step ? a. The risk has to classified b. Calculation of
price to cover the risk c. Evaluation of the information which
has been provided by the proposer
Only 1
Only 2
Only 3
Both 1 and 3
All 1, 2 and 3

UnAttempted

CORRECT ANSWER:

All 1, 2 and 3

Explanation:
 All risks are not insurable or equal. Insurability, pricing & classifying the
risk is the main role of any insurer/ underwriter. On the basis of
information’s provided by the proposer, if the risk is insurable, the
underwriter would proceed towards its pricing & classification.

Q What does the contents of general insurance policy include? 1.

46. Non-disclosure clause 2. Non – competing clause 3. Sum
insured and premium details
Only 1
Only 2
Only 3
Both 1 and 3
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Only 3

Explanation:

The contents of general insurance policy shall include sum insured and
premium details i.e. premium paid details & levels of indemnification.

Q The prime advantages of internet for the insurance sector

47. includes : 1. Even previous policies bought by the insured can
be included 2. Insurers can have a global reach 3. Insurers can
have a direct access to customers
Only 1
Only 2
Only 3
 Both 1 and 2
Both 2 and 3

UnAttempted

CORRECT ANSWER:

Both 2 and 3

Explanation:

Underwriters are now using the internet more frequently as various

databases of insurers are linked to it. It provides global reach & direct
access to the customers. However it cannot provide previous policies of
the insured.

Q When a certificate is given by the Principal Officer or

48. Designated Officer, than which of the following is confirmed ?
That the premium charged is as low as possible
That the product is class rated
That the cover offered is corresponding to the premium charged
That there is no loading element in the premium
That the rates and terms of the product filed with this certificate
have been determined in compliance with all regulations

UnAttempted

CORRECT ANSWER:

That the rates and terms of the product filed with this certificate
have been determined in compliance with all regulations

Explanation:

Every new product or revision of an existing product which is classified

as Class rated product needs to be filed & confirmed by the Principal
 Officer or Designated Officer confirming that the rates, terms and
conditions of the product filed with this certificate have been
determined in compliance with all acts and regulations.

Q _______ is an example of Liability Risk.

49. Business continuity after loss due to fire
House damage as a result of fire
Loss of income during restoration period
Defective product lawsuit
Forced business closure

UnAttempted

CORRECT ANSWER:

Defective product lawsuit

Explanation:

Underwriting risks are classified into various categories based upon the
subject matter that is being covered under the policy. Defective product
lawsuit claims would fall under liability risk.

Q Information on _______ is most likely to be sought in a

50. proposal form.
detailed description of Risk
matters not material to the risk
the proposers personal life
Both 1 and 3
All 1, 2 and 3
 UnAttempted

CORRECT ANSWER:

detailed description of Risk

Explanation:

Proposal form solicits information material to the risk. It is a very

important document & based upon the description & details of the
proposed risk, the insurers decides the rates, T & C of the policy. The
most important information desired is detailed description of the risk to
be covered.

Out of 50 questions 50 are un attempted.