CHAPTER 4

1) Underwriting is the name given to the procedure of a) assessing the risk which people bring to the
pool, b) determining the terms, conditions and scope of the cover to be offered, c) deciding whether
or not to accept the risk, or how much to accept
a
b
c
All Above
2) Who si responsible for selecting the individuals the insurance company can insure from among
those submitting proposals.
Agent
Development Officer
Underwriter
None of the above
3) On which principle is the business of insurance is based on
Risk sharing
Risk Management
Risk exclusion

All of the above

4) The insurance company carries the risks of the person insured in accordance with
The premium rates
The policy terms and conditions
The proposal form completed
All of the above
5) An underwriter is responsible for
The classification of the risks presented to them
Selected of the risks presented to them

Analysis of the risks presented to them

All of the above

6) Which is the first step in insurance underwriting

Calculating the premium based on the information provided
Allotting the policy number
Reviewing the information about the proposer from all the
None of the above
7) What does an underwriter do
Analyse a proposers real intentions for taking insurance
Make a decision on whether to accept or reject the proposal
Examine all the facts available to them
All of the above
8) Determine the order of insurance underwriting a) Accept (or reject) the proposal and classify and
rate into a risk group to calculate the premium b) Estimate the potential exposure and determine the
probability of loss c) issue the insurance policy d) collect information ab out the applicant and
analyse the risk associated.
a-b-c-dd-b-a-c
d-a-b-c
None of the above
9) For life insurance which is included in the term significant information
Persons income
Family health history
Report of the agent
All of the above
10) Why has the intention of the proposer has to be analysed carefully
To decide whether to accept or decline the proposal
To give him a rebate in premium
To issue him policy at the earliest
None of the above

11) MPL refers to

Minimum period of loss
Minimum possible loss

Maximum possible loss

Maximum period of loss

12) After due scrutiny the underwriter will decide whether to

Accept the risk at ordinary rates
Accept with a lien
Postphone or reject the risk as failing outside those that the company considers acceptable
All of the above
13) The term adverse selection is used to describe the situation where
An insurance company accepts too many prospers who bring a higher than average
risk to the pool
There are too many persons paying normal premium as against those paying extra premium
None of the above
All of the above
14) What will happen if a company finds itself exposed to adverse selection
It will collect more of extra premium than normal
The premium it collects will be more than the claims it pays?
It may find that it pays out more claims than anticipated
None of the above
15) What will have a bad effect on the company
Adverse selection
Changing extra premium
None of the above
All of the above
16) If an existing disease is not considered suitable for cover by a certain company, another company
might cover it to some extent with the payment of extra premium
Statement is partly true
Statement is
wholly correct
Statement is incorrect
None of the above
17) Each risk group has a rating based on
Company guidelines
Company profits

Company losses

All of the above

18) The risk group is very important as this is used to decide

How the premium can be reduced
To charge a minimum premium
To charge a maximum premium
What premium the proposer will have to pay
19) The regulations issued by the IRDA, require that the decision on the proposal must be conveyed to
the propser within .days of receiving the proposal.
30
15
8
45
20) Which is not a source of information for the underwriter to know more about the proposer
Proposal form
Policy document
Medical examination report
Insurance agent

21) Which is the most important source of preliminary information to the insurance underwriter
IT returns
Medical examiners report
Proposal form signed by agent
Proposal form signed by the proposer
22) Which of the following information does a proposal form contain
Agents remarks
Personal information
Medical information

All of the above

23) When does the proposers name and address also need to be entered on the proposal form
When the proposer and life assured and staying at different locations
When the life assured is not related to the proposer
Where the proposer and life assured are different individuals
None of the above
24) What information should the agents report contain
Analysis on the proposer with regrd to their lifestyle, habits and hobbies
Previous policy details
Telephone no. of the proposer
None of the above
25) Why is a complete medical check-up on the proposer called by the insurance company from a
certified doctor
the underwriter wants more information on the risk before agreeing to accept it
It may the policy of the insurer to ask for a medical examination report on all proposed risks of
a certain type
To reduce the chances of adverse selection by the company
All of the above
26) Why is the insurance agent in a good position to judge the risk profile fo the proposer
The agent has the opportunity to assess the answers of the propser
The insurance agent interacts directly with the proposer
The agent can determine their truthfulness
All of the above
27) The Information for the Agents Report is collected through
Insruance office employees
Family, friends and neighbours of the propeser
Family, friends and neighbours of the agent
None of the above
28) .. will enable the underwriter to determine whether the proposer has any
outstanding tax commitments or has defaulted on them in the past.
Proposers income tax records
Proposal form
Insurers office
None of the above
29) .. refer to the physical characteristics of the risk associated with the life insured
Moral hazard
Occupational hazard
Physical hazard
All of the above

30) The higher the age of the propser, the higher will be the probability of their natural death
Very true
Absolutely wrong
Very wrong
None of the above
31) Which of the following is not a criteria to consider the hazard of an occupation
Name of the occupation
Environmental
Physical condition
Risk from accident
32) Which of the following is a hazardous occupation
Climbing poles
Coal miner

Working in ferrous metallurgical industry

All of the above

33) Which of the following habit can incrase the risk that a proposer will die early or suffer a serious
illness
Use of tobacco
Drinking
Smoking
All of the above
34) Which of the following is not a dangerous hobby for insurance purpose
Bungee jumping
Watching horror movies
Scuba diving
Mountain climbing
35) Which of the following diseases is not of a hereditary nature
Heart trouble
Diabetes
Viral fever
36) Moral hazard related to
Conduct attitude
Both

Cancer

Earning and spending capacity

None of the above

37) Which of the following is not an indicator of fraudulent intention

When then nominee of the policy is not among the dependants of the insured
The proposer is requesting insurance for a fairly large amount at a later stage of their lifecycle
The insurance is being taken out by an individual with several dependants
All of the above
38) How can the amount of the Insurance that an individual is eligible for be arrived at
HLV
Premium calculation
referring to pre determined charges
None of the above
39) What does the HLV try to measure
The health of the person
The economic value of a person in monetary terms
The social status of the person
all of the above
40) What is not considered for financial underwriting
Personal income
Family income

Hereditary diseases

Insurable interest

41) Which of the following is not a safeguard practiced by an insurance company in non medical
underwriting
A restriction on maximum entry age
Restrictions on low risk plans
A restriction on selection
Requiring a moral hazard reports from an officer of the insurer

42) The amount of life insurance cover that a person should have should be equal to their
Present income
Income after retirement
HLV
None of the above
43) Which of the following is not a way of premium payment
Single premium
Level premium
Flexible premium

Terminal premium

44) The life insurance premiums collected by the insurance company are kept in a single pool, known as
the
Life fund
Uncommon fund
Premium pool
None of the above
45) The mortality rate is the that a certain person will die before their next birthday
Surety
Unsurety
Probability
Confirmation
46) The larger the sum insured the .. the premium
Lower
Higher

Level

None of the above

47) The adjustment to take account of the expenses and profit of the insurance company is known as
Unloading
Setting equilibrium
Loading
Setting right
48) Maximum expenses are incurred at the time of . of the policy
Inception
Claim settlement
Both inception and claim settlement
None of the above
49) Which of the following is not a type of bonus
Simple reversionary bonus
Compound reversionary bonus

Inception bonus
Terminal bonus

50) Is the payment of interim bonus made mandatory under section 112 of the insurance Act 1938
Yes
No
Sometimes
Rarely