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WHICH one of the following is not a peril?

1) a) theft; b) fire; c) burglary; d) wet road

2) A hazard: a) reduces the chances of loss; b) creates the chances of loss; c) increases the frequency and severity of loss; d) (b) and (c)

3) Organisations are mainly concerned with managing: a) pure risks; b)

speculative risks; c) personal risks; d) none of the above

4) Insurance is a risk-management technique involving: a) risk retention; b)

risk avoidance; c) loss control; d) risk transfer

5) Risk of premature death is a: a) financial risk; b) dynamic risk; c) personal risk; d) subjective risk

Answers: 1) d; 2) d; 3) a; 4) d; 5) c.

Insurance intro

1) The following is the similarity between insurance and gambling: a) promise to pay on the happening of an event; b) the amount of loss to be paid is known beforehand; c) both the parties win on happening of an event; d) both are enforceable at law

2) The principle of indemnity is not applicable to life insurance because: a) it does not meet the requirements of life insurance contract; b) it is applicable to general insurance contract; c) the monetary value of a person cannot be measured accurately; d) none of the above

3) Human life value forms the economic foundation of: a) property insurance; b) life insurance; c) liability insurance; d) miscellaneous insurance

4) Which one of the following comes under "Miscellaneous insurance"? a)

marine insurance; b) motor insurance; c) fire insurance; d) group insurance

5) Insurance business is based on: a) the theory of probability and law of large numbers; b) Parkinson's law; c) Newton's law; d) Boyle's law

Answers: 1) a; 2) c; 3) b; 4) b; 5) a

Legal principles

1) Subrogation means: a) something of monetary value; b) sharing of indemnity by a group of insurers; c) to make good loss; d) transfer of rights of an insured to another person

2) As per the doctrine of insurable interest, insurable interest should be present in the case of life insurance: a) at the time of claim settlement; b)

at the time of revival only; c) only at the inception of the policy; d) at the inception and at the time of revival.

3) The doctrine of `caveat emptor' governs: a) commercial contracts; b)

marine insurance contracts; c) group insurance contracts; d) all general insurance contracts

4) The doctrine of contribution is a corollary of: a) the principle of utmost good faith; b) the principle of insurable interest; c) the principle of indemnity; d) the principle of subrogation

5) Proximate cause in general insurance means: a) the insured peril; b)

the excluded peril; c) the direct cause that caused the loss; d) none of the above

Answers: 1) d; 2) d; 3) a; 4) c; 5) c.

Insurance contracts

1) Payment of premium to an LIC agent cannot be regarded as payment to the insurer because: a) LIC agents are not authorised to collect premium in accordance of rule 8 of Agents Regulation 1972; b) Satisfactory arrangements for payment of premium exist in LIC offices and, hence, payment of premium to an agent is not necessary; c) LIC feels the agent may misappropriate the premium; d) None of the above

2) What is `consideration' on the part of the insured in respect of a life insurance contract: a) a promise to take a new policy; b) the payment made towards premium by the insured; c) the insured's promise to pay the premium under the policy; d) proposal completed and signed by the person seeking insurance is called consideration

3) The policyholder's duty to disclose material facts lies at the time of: a) taking a policy; b) revival of the policy; c) reinstatement of surrendered policy; d) all the above

4) Which one of the following is considered an uninsurable peril: a) losses arising out of fire; b) losses arising out of war and war like operations; c)

property risk; d) travel risks

5) According to the Marine Insurance Act 1963, a contract of marine insurance is valid: a) only when it is in writing; b) only when it is verbal; c)

only if it fulfils the essentials of a valid contract; d) it can be an oral agreement or a written contract.

Answers: 1) a; 2) b; 3) d; 4) b; 5) a

Management of organisations

1) The person responsible for selecting, classifying and assessing risk in an insurance company is called: a) underwriter; b) undertaker; c) rate-maker; d) agent

2) Early death claims in life insurance require an investigation. Why?: a) it's a requirement as per IRDA; b) to meet the requirement of Section 45 of the Insurance Act, 1938; c) to rule out the possibility of suppression of material information by the insured at the time of insurance; d) to enable the insurer to repudiate the claim

3) A re-insurer is called insurer's insurer because: a) the re-insurer insures the insurer's risk above retention limit; b) re-insurers are not allowed to insure risk directly; c) the reinsurance company underwrites all the insurable risks of the insurer; d) none of the above

4) What is meant by `pure premium'?: a) premium covering expected loss; b) premium including loading; c) premium covering specific risk; d) it is another term for gross premium

5) An award made by ombudsman is binding: a) on the insured; b) on the insurer; c) on the insurer provided it is acceptable to the claimant; d) neither on the insurer nor on the insured

Answers: 1) a; 2) c; 3) a; 4) a; 5) c.

Personal policies

1) Personal accident insurance does not cover the injuries resulting from: a) intention self injury; b) accidental injuries; c) injuries while engaged in sports; d) injuries due to dog bite

2) Motor insurance is classified in India under: a) fire insurance; b) marine insurance; c) miscellaneous insurance; d) accident insurance

3) `Total loss' in motor insurance means: a) partial damage to the vehicle; b) theft of the vehicle; c) when the cost of repair exceeds the market value or second-hand value of the vehicle at the date and time of loss; d)

confiscation of the vehicle by RTA

4) Janata personal accident policy is meant for: a) executives; b) affluent businessmen; c) people from the weaker sections of society; d) none of the above

5) The income-tax relief available for premium paid towards a Mediclaim policy is subject to a maximum of: a) Rs 15,000; b) Rs 10,000; c) Rs 5,000; d) No relief is available

Answers: 1) a; 2) c; 3) c; 4) c; 5) a.

Commercial contracts

1) Contractors all risk insurance forms part of: a) personal general insurance; b) commercial general insurance; c) group insurance; d) social security insurance

2) Professional indemnity insurance does not cover: a) acts of commission and omission; b) acts of negligence; c) liability arising out of failure of doctor's treatment; d) criminal act

3) The standard erection all risk insurance policies does not cover: a) fire risk; b) negligence; c) storm caused damages; d) removal of debris

4) Implosion in fire insurance means: a) inward burst; b) sudden burst with loud report; c) damage caused by corrosion; d) damage caused by tempest

5) Forceful entry is the chief characteristic of: a) theft; b) arson; c) larceny; d) burglary

Answers: 1) a; 2) d; 3) d; 4) a; 5) d.

Investment funds

1) The investment regulations are as per section ____ of the insurance Act, 1938; a) Sections 45 and 27; b) Sections 39 and 29

2) The investment regulations are more stringent for: a) life business; b) general; c) pension and general annuity; d) reinsurance

Answers: 1) b; 2) a.

(Edited extracts from Module I Principles and Practice of Insurance of the ICAI's post-qualification course on insurance and risk management.)

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