Insurance: life and non-life, risk management, reinsurance, IRDA regulation - Question Bank

1. The principle of indemnity is most strictly applied in:
A) Life Insurance
B) Health Insurance
C) General Insurance
D) Annuity Plans
2. Which of the following is a key function of reinsurance?
A) Directly selling policies to the public
B) Providing capital to start new insurance companies
C) Spreading large risks among multiple insurers
D) Setting government insurance policies
3. Underwriting aims to balance the risk accepted by the insurer with the:
A) Marketing budget
B) Claim processing time
C) Premium charged
D) Number of employees
4. The 'insurable event' is the:
A) Event that increases the risk
B) Event that causes the loss, which is covered by the policy
C) Event that leads to the policyholder's death
D) Event that reduces the premium
5. Which type of insurance policy typically offers a maturity benefit if the insured survives the policy term?
A) Pure Term Insurance
B) Whole Life Insurance
C) Endowment Policy
D) Accident Insurance
6. A 'deductible' in an insurance policy is the:
A) Maximum amount the insurer will pay
B) Amount the policyholder must pay before the insurer starts paying
C) Commission paid to the agent
D) Annual premium amount
7. Which regulatory body oversees the insurance sector in India and ensures policyholder protection?
A) Securities and Exchange Board of India (SEBI)
B) Reserve Bank of India (RBI)
C) Insurance Regulatory and Development Authority of India (IRDAI)
D) Ministry of Finance
8. The 'claims settlement ratio' is a metric used to assess:
A) The profitability of an insurance company
B) The speed and efficiency of an insurer in settling claims
C) The number of new policies sold
D) The investment returns of the insurer
9. Which of the following is a responsibility of the policyholder?
A) To determine the premium amount
B) To disclose all relevant information truthfully
C) To approve reinsurance treaties
D) To audit the insurer's financial statements
10. The 'cedant' in a reinsurance contract is the:
A) Reinsurer
B) Insurance company ceding part of its risk
C) Policyholder
D) Insurance regulator
11. An annuity is a financial product that provides:
A) A lump sum payment upon death
B) Regular income payments over a period of time
C) Coverage against accidental damage
D) Insurance for business assets
12. Which of the following is a common type of hazard in fire insurance?
A) The actual fire itself
B) The presence of flammable materials
C) The policyholder's intention to cause a fire
D) The insurance company's inability to pay
13. The 'insurable interest' in property insurance must exist:
A) Only at the time of claim
B) Only at the time of policy inception
C) At the time of policy inception and at the time of loss
D) At the time of policy surrender
14. A 'claim' in insurance refers to:
A) The premium paid by the policyholder
B) The request made by the policyholder for compensation after a loss
C) The policy document itself
D) The financial reserve of the insurer
15. IRDAI's role in product approval ensures that:
A) Products are excessively profitable for insurers
B) Products are not misleading and meet regulatory standards
C) Products have the lowest possible premiums
D) Products are only sold through agents
16. Excess of Loss Reinsurance covers losses that exceed a predetermined:
A) Premium amount
B) Policy term
C) Monetary threshold
D) Number of claims
17. Which type of reinsurance involves the reinsurer paying a proportion of the losses incurred by the cedent (ceding company)?
A) Excess of Loss Reinsurance
B) Stop Loss Reinsurance
C) Quota Share Reinsurance
D) Surplus Share Reinsurance
18. The 'retention' level in risk management refers to:
A) The amount of risk transferred to an insurer
B) The amount of risk retained by the insured
C) The total value of the insured asset
D) The maximum payout by the insurer
19. Actuarial science is primarily used in insurance to:
A) Investigate fraudulent claims
B) Calculate premiums and reserves based on statistical probability
C) Market insurance policies
D) Provide customer service
20. Which of the following is NOT a type of non-life insurance?
A) Health Insurance
B) Travel Insurance
C) Life Insurance
D) Home Insurance
21. The 'grace period' in a life insurance policy allows the policyholder to:
A) Make a claim
B) Surrender the policy
C) Pay overdue premiums without penalty
D) Change the policy terms
22. A 'policy lapse' in life insurance occurs when:
A) The policyholder dies
B) The policyholder cancels the policy
C) The policyholder fails to pay premiums within the grace period
D) The policy matures
23. The 'Sum Assured' in a life insurance policy represents:
A) The total premiums paid
B) The maximum amount the insurer will pay upon the occurrence of the insured event
C) The administrative costs of the insurer
D) The profit earned by the insurer
24. What is the purpose of underwriting in insurance?
A) To settle claims
B) To assess and accept or reject risks
C) To market insurance products
D) To invest policyholder premiums
25. Motor insurance is a mandatory type of non-life insurance in India covering:
A) Damage to the vehicle itself
B) Third-party liability
C) Theft of accessories
D) Wear and tear of parts
26. Fire insurance covers financial losses arising from:
A) Theft
B) Flood
C) Accidental fire
D) Earthquake
27. Marine insurance typically covers risks associated with:
A) Aircraft accidents
B) Motor vehicle collisions
C) The transportation of goods by sea
D) Industrial accidents
28. Which type of life insurance policy offers coverage for the entire life of the insured?
A) Term Policy
B) Limited Payment Policy
C) Whole Life Policy
D) Annunity Policy
29. An endowment policy combines:
A) Pure insurance cover with loan facility
B) Insurance cover with a savings component
C) Insurance cover with annuity payments
D) Insurance cover with medical benefits
30. A life insurance policy that pays out a sum assured upon the death of the insured during the policy term is called:
A) Endowment Policy
B) Whole Life Policy
C) Term Insurance Policy
D) Money Back Policy
31. The IRDAI's primary objective includes protecting the interests of:
A) Insurance company shareholders
B) Insurance agents
C) Policyholders
D) Reinsurance brokers
32. Which of the following is a key function of IRDAI?
A) Setting interest rates for savings accounts
B) Issuing licenses to insurance agents and intermediaries
C) Regulating the stock market
D) Approving new bank branches
33. IRDAI is now known as:
A) Insurance and Reinsurance Development Authority
B) Indian Regulatory Development Authority
C) Insurance Regulatory and Development Authority of India
D) Insurance and Risk Development Agency
34. The Insurance Regulatory and Development Authority of India (IRDA) was established to:
A) Promote insurance fraud
B) Regulate and develop the insurance sector in India
C) Provide insurance coverage to the public
D) Set insurance premium rates exclusively
35. In facultative reinsurance, the reinsurer:
A) Automatically accepts all risks offered
B) Selectively accepts or rejects each risk offered
C) Shares a fixed percentage of all policies
D) Handles all claims directly
36. Which type of reinsurance involves the reinsurer automatically accepting a share of the insurer's business?
A) Facultative Reinsurance
B) Treaty Reinsurance
C) Proportional Reinsurance
D) Non-proportional Reinsurance
37. What is the primary reason for an insurance company to seek reinsurance?
A) To reduce administrative costs
B) To increase its underwriting capacity and stabilize its results
C) To directly sell more policies
D) To compete with other insurers
38. Reinsurance is essentially insurance for:
A) Individuals
B) Small businesses
C) Insurance companies
D) Government agencies
39. Subrogation allows the insurer, after paying a claim, to:
A) Cancel the policy
B) Recover damages from a third party responsible for the loss
C) Increase the policy premium
D) Deny future claims
40. An insurable interest must exist at which point in time for a life insurance policy?
A) At the time of policy surrender
B) At the time of death of the insured
C) At the inception of the policy
D) At the time of claim settlement
41. The principle of 'Utmost Good Faith' in insurance is also known as:
A) Uberrimae Fidei
B) Res Ipsa Loquitur
C) Caveat Emptor
D) Actio Personalis Moritur Cum Persona
42. Which insurance principle states that the insured should be compensated only to the extent of their actual loss?
A) Utmost Good Faith
B) Insurable Interest
C) Indemnity
D) Subrogation
43. In risk management, the process of identifying, assessing, and controlling threats is known as:
A) Underwriting
B) Claims Management
C) Risk Management
D) Actuarial Science
44. Moral hazard in insurance refers to:
A) The physical condition of the insured
B) The tendency of an insured party to take more risks because they are insured
C) The probability of an event occurring
D) The financial capacity of the insurer
45. A condition that increases the likelihood of a peril occurring is called a:
A) Peril
B) Hazard
C) Risk
D) Exposure
46. Which of the following is an example of a peril in insurance?
A) Flammable materials in a factory
B) A poorly maintained electrical system
C) A fire breaking out in a building
D) The insured's negligence
47. The possibility of loss or damage is known as:
A) Peril
B) Hazard
C) Risk
D) Exposure
48. Non-life insurance is also commonly referred to as:
A) Term Insurance
B) Endowment Insurance
C) General Insurance
D) Whole Life Insurance
49. Which type of insurance covers the financial loss arising from the death of the insured?
A) Health Insurance
B) General Insurance
C) Life Insurance
D) Marine Insurance
50. What is the primary purpose of insurance?
A) To generate profit for the insurer
B) To transfer risk from an individual or entity to an insurer
C) To invest premiums in high-risk ventures
D) To provide loans to policyholders