Q 1. What is the meaning of risk in the context of insurance?

a) Risk is the cause of loss

b) Risk is uncertainty of outcome

c) Risk is the likelihood of damage or loss resulting from perils

d) Risk is the financial impact of a loss

e) Risk is the prevention of perils

Report

Q 2. Which of the following terms is dissimilar to the other four options? (Find the odd-man out?)

Post-hospitalisation expenses

Expenses on treatment of pre-existing diseases

Reinstatement value

Funeral expenses

Report

Q 3. Which statement best describes the purpose of insurance?

a) Insurance aims to prevent the occurrence of perils.

b) Insurance compensates for non-economic losses.

c) Insurance reduces the impact of financial loss on the owner.

d) Insurance measures the frequency and intensity of perils.

e) Insurance protects assets from all types of risks.

Report

Q 4. Which of the following losses cannot be compensated by insurance?

a) Loss of property due to fire

b) Loss of life in an accident

c) Loss due to gambling or betting

d) Theft of a car

e) A and B both

Report

Q 5. What does the term "peril" refer to in the context of insurance?

a) The cause of loss

b) The uncertainty of outcome

c) The likelihood of damage or loss

d) The financial impact of a loss

e) The prevention of risks

Report

Q 6. What is the purpose of insurance in relation to risks and perils?

a) Insurance covers the risk arising out of perils

b) Insurance prevents the occurrence of perils

c) Insurance compensates for certain risks only

d) Insurance eliminates uncertainty about risks

e) Insurance covers all types of risks and damages

Report

Q 7. How are risks classified based on the extent of damage likely to be caused?

a) Catastrophic and important risks

b) Financial and non-financial risks

c) Temporary illnesses and accidents

d) Natural disasters and economic recessions

e) Ill-health and professional misconduct

Report

Q 8. Are non-financial risks insurable under insurance policies?

a) Yes, non-financial risks are fully insurable

b) No, non-financial risks are not insurable at all

c) Non-financial risks are partially insurable

d) Non-financial risks can be insured depending on the circumstances

e) Non-financial risks are insurable only if they have a financial impact

Report

Q 9. Which category of risks can lead to the bankruptcy of the owner or insurer?

a) Catastrophic risks

b) Important risks

c) Financial risks

d) Non-financial risks

e) Temporary illnesses and accidents

Report

Q 10. Can insurance cover risks where the possibility of occurrence is certain?

a) Yes, insurance covers all types of risks regardless of certainty

b) No, insurance only covers risks with uncertain possibility of occurrence

c) Insurance covers certain risks even if they are certain to occur

d) Insurance can cover risks based on their financial impact

e) Insurance covers all risks but with different terms and conditions

Report

Q 11. How are risks classified based on the nature of their occurrence?

a) Dynamic and static risks

b) Financial and non-financial risks

c) Catastrophic and important risks

d) Pure and speculative risks

e) Temporary illnesses and accidents

Report

Q 12. Which type of risks are generally considered less predictable?

a) Dynamic risks

b) Static risks

c) Financial risks

d) Non-financial risks

e) Speculative risks

Report

Q 13. Can static risks be managed through insurance?

a) Yes, static risks can be fully managed through insurance

b) No, static risks are not insurable at all

c) Static risks can be partially managed through insurance

d) Insurance is not suitable for managing static risks

e) Insurance coverage for static risks depends on the specific circumstances

Report

Q 14. What are speculative risks and can they be covered by insurance?

a) Speculative risks are under the control of the person concerned and can be covered by insurance

b) Speculative risks involve chances of loss and gain, but they cannot be covered by insurance

c) Speculative risks are not under the control of the concerned person and can be covered by insurance

d) Speculative risks are insurable depending on their financial impact

e) Insurance covers only speculative risks and not pure risks

Report

Q 15. Which type of risks are covered by insurance?

a) Pure risks

b) Speculative risks

c) Dynamic risks

d) Static risks

e) Catastrophic risks

Report

Q 16. How are risks classified based on the number of people affected?

a) Fundamental risks

b) Particular risks

c) Dynamic risks

d) Catastrophic risks

e) Pure risks

Report

Q 17. Give an example of a fundamental risk.

a) Train accident

b) Theft in a particular house

c) Earthquake

d) Explosives manufacturing unit fire

e) Life insurance business

Report

Q 18. Which type of risks does the life insurance business primarily deal with?

a) Fundamental risks

b) Particular risks

c) Dynamic risks

d) Catastrophic risks

e) Pure risks

Report

Q 19. How do natural disasters like earthquakes impact the life insurance company?

a) Natural disasters have no impact on the life insurance company

b) Natural disasters affect the experience of the life insurance company in calculating probabilities and pricing the premium

c) Natural disasters increase the profitability of the life insurance company

d) Natural disasters lead to the suspension of life insurance policies

e) Natural disasters result in the cancellation of life insurance contracts

Report

Q 20. What is a hazard?

a) A condition that increases the chances of loss

b) A specific type of risk

c) An unforeseeable event

d) A situation that leads to gain instead of loss

e) A synonym for peril

Report

Q 21. What is an example of a physical hazard?

a) Smoking

b) Dishonesty

c) Carelessness

d) Fraudulent claims

e) Tidal waves near the seashore

Report

Q 22. In the case of fire insurance, which of the following can be considered a physical hazard?

a) Dishonesty of the insured

b) Fraudulent claims

c) Tidal waves near the seashore

d) Carelessness of individuals

e) Loose wiring in a house

Report

Q 23. Which type of hazards relate to life insurance in the case of individuals with a history of tuberculosis?

a) Physical hazards

b) Moral hazards

c) Dynamic hazards

d) Catastrophic hazards

e) Static hazards

Report

Q 24. What is moral hazard?

a) Losses resulting from dishonesty

b) Physical attributes of the subject matter

c) Carelessness on the part of individuals

d) Character of the person approaching the insurance company

e) Characteristics and qualities of the subject matter proposed for insurance

Report

Q 25. GA as used in insurance

a) General Assurance

b) General Average

c) General Adjustment

d) Guaranteed Assurance

Report

Q 26. How can physical hazard be assessed?

a) By examining the subject matter proposed for insurance

b) Through hazard assessment

c) By past history of the proposer

d) By risk-improvement measures

e) By intuition and experience

Report

Q 27. Which example demonstrates a moral hazard?

a) Installation of smoke detectors

b) Increased availability of medical facilities in rural areas

c) Early warning systems for natural calamities

d) A person fraudulently suppressing critical/terminal illness while taking life insurance

e) Reduction of mortality rate in newborn babies and mothers

Report

Q 28. What has advanced technology contributed to the assessment of hazards and risks for insurance companies?

a) Reduction of the mortality rate in newborn babies and mothers

b) Installation of fire extinguishers in office premises

c) Early warning systems for natural calamities

d) Better pricing of insurance products

e) Increased availability of medical facilities in rural areas

Report

Q 29. What are the two kinds of hazards ?

a) Morale hazard and physical hazard

b) Physical hazard and risk-improvement

c) Moral hazard and risk avoidance

d) Hazard assessment and premium rates

e) Ethical conduct and hazard management

Report

Q 30. A hazard influences the operation or effect of which perils?

a) Fire

b) Floods

c) Earthquakes

d) Both fire and floods

e) All of the above

Report

Q 31. Question 1 What type of risk would political upheaval or government suddenly losing voting of confidence be classified as?

a) Dynamic risk

b) Static risk

c) Particular risk

d) Financial risk

e) None of the above

Report

Q 32. What is the purpose of risk management?

a) To eliminate risks completely

b) To reduce risks to zero

c) To identify and eliminate risks

d) To identify and reduce risks

e) To measure and analyze risks

Report

Q 33. 2.1. What are the costs included in the actual loss from a peril?

a) Repair, replacement, or reinstatement

b) Consequential losses until repair, replacement, or reinstatement

c) Expenses for cleaning up and removal of debris

d) Loss of rent, production, revenue, and profits until normalcy is restored

e) All of the above

Report

Q 34. The total loss that can happen is referred to as:

a) Maximum Possible Loss (MPL)

b) Probable Maximum Loss (PML)

c) Total Potential Loss (TPL)

d) Overall Loss Exposure (OLE)

Report

Q 35. What is the Probable Maximum Loss (PML) calculated as?

a) MPL multiplied by the probability of the peril striking

b) MPL divided by the probability of the peril striking

c) MPL added to the probability of the peril striking

d) MPL subtracted from the probability of the peril striking

Report

Q 36. What are the three factors necessary to understand risk?

a) Maximum Possible Loss (MPL)

b) Probable Maximum Loss (PML)

c) Credibility of the data used in the analysis

d) All of the above

Report

Q 37. How can the credibility of the data be established in risk analysis?

a) Comparing the forecasts of losses made in the past with the actual losses

b) Assessing the probability of the peril striking

c) Consulting with experts in the field

d) Conducting surveys and collecting new data

Report

Q 38. Why is prevention of risks sometimes perceived to cost too much?

a) Because it requires significant financial resources

b) Because it may lead to negative publicity

c) Because it may result in loss of revenue

d) Because it involves implementing alternative measures

e) Because it is influenced by the objectives

Report

Q 39. In Scenario 1, why do makers of passenger aircrafts incur additional costs?

a) To fulfill their moral obligation

b) To ensure the safety of everyone on board

c) To prevent a crash and associated costs

d) To attract more customers for the airline

e) To comply with aviation regulations

Report

Q 40. What is the purpose of maintaining inventories of essential spares in factories?

a) To reduce delays in repairs

b) To ensure efficient production processes

c) To minimize financial risks

d) To meet customer demands

e) To comply with industry standards

Report

Q 41. Which of the following is NOT a financial risk related to financial resources?

a) Fluctuations in the stock market

b) Exchange rate fluctuations

c) Political disturbances

d) Interest rate fluctuations

e) Changes in government regulations

Report

Q 42. What is one of the reasons for backing up or duplicating critical information?

a) To prevent loss of revenue

b) To comply with data protection laws

c) To reduce the impact of political disturbances

d) To ensure efficient decision-making

e) To avoid the risk of losing important information

Report

Q 43. Which of the following is NOT a method used in industrial establishments to reduce physical risks?

a) Early detection systems

b) Regular drills (mock drills) to test readiness

c) Automatic responses to dangerous situations through instrumentations

d) Regular maintenance of detection systems

e) Implementation of safety protocols

Report

Q 44. What does duplication involve in loss reduction techniques?

a) Keeping 'back up' copies to prevent loss interruption

b) Spreading risks across different areas

c) Isolating subjects exposed to the same risk

d) Making financial transactions to offset losses

e) Implementing redundant safety measures

Report

Q 45. Which of the following is an example of diversification in risk management?

a) Keeping inventories in different places

b) Using indemnity agreements to compensate for losses

c) Spreading risks across areas that may not be affected equally

d) Implementing early detection systems

e) Conducting risk assessments regularly

Report

Q 46. Which of the following is an ethical consideration in risk management?

a) Monitoring and assessing risks regularly

b) Implementing safety protocols and procedures

c) Maximizing financial gains through risk mitigation

d) Minimizing negative publicity and reputational damage

e) Considering the impact of actions on others and the environment

Report

Q 47. Which of the following is true regarding the techniques used to manage different types of risks?

A) The techniques for flood-related risks are different from those for fire, burglary, or machine breakdown risks.

B) The techniques for fire-related risks are the same as those for flood, burglary, or machine breakdown risks.

C) The techniques for flood-related risks are the same as those for fire, burglary, or machine breakdown risks.

D) The techniques for managing different types of risks are not necessary.

E) The techniques for managing different types of risks are determined by the insurer's risk-bearing capacity.

Report

Q 48. How are risks measured?

A) The cost of actual loss

B) The cost of consequential loss

C) The likely loss that may occur if a peril strikes

D) The likelihood for a peril striking

E) The total risk bearing capacity of the insurer

Report

Q 49. In the context of risk management for individuals, what happens to the risk regardless of having or not having insurance?

A) The risk disappears if insurance is obtained

B) The risk remains the same regardless of insurance

C) The risk increases without insurance

D) The risk decreases with insurance

E) The risk is eliminated with proper risk management techniques

Report

Q 50. Without insurance, what could be the immediate problem for businesses in the event of unexpected events such as the proprietor's sudden death, shop fire, or major burglary?

A) Repaying debtors and financiers who would want to collect outstanding debts

B) Rebuilding the business quickly and easily with the benefit of insurance money

C) Acquiring new assets to replace the damaged ones

D) Continuing business operations smoothly without any impact

E) The immediate problem would not be significant without insurance

Report

Q 51. How did risk management formally evolve?

A) As a function of business enterprise

B) As a function of debt collectors

C) As a function of financial lending

D) As a function of investment organization

E) Risk management did not evolve formally

Report

Q 52. What are some ways of managing risks?

A) Prevention of risk only

B) Reduction of risk only

C) Retaining risk only

D) Transferring risk only

E) Prevention of risk, reduction of risk, retaining risk, and transferring risk

Report

Q 53. What is the term for the total of the actual loss and the consequential loss?

A) Maximum Probable Loss

B) Probable Maximum Loss

C) Maximum Possible Loss

D) Minimum Possible Loss

E) Total Loss

Report

Q 54. What are separation and duplication examples of?

A) Consequential losses

B) Hedging

C) Loss reduction techniques

D) Financial risks

E) Risk assessment methods

Report

Q 55. How is the Probable Maximum Loss (PML) determined?

A) The probability of the peril striking multiplied by the Maximum Possible Loss (MPL)

B) The cost of implementing loss reduction techniques

C) The cost of the actual loss

D) The cost of consequential losses

E) The likelihood of the peril striking divided by the potential loss

Report

Q 56. If the cost of damage is being met using internal resources/funds, how is the risk being managed?

A) Avoidance/prevention

B) Transfer

C) Reduction

D) Retaining

E) Diversification

Report

Q 57. What is the term for spreading risk across areas that may not be affected equally or at the same time?

A) Diversification

B) Separation

C) Duplication

D) Transfer

E) Risk pooling

Report

IC01 - Principles of Insurance

IC01 - Principles of Insurance

Chapter 01

IC01 - Principles of Insurance

Q 1. What is the meaning of risk in the context of insurance?

Q 2. Which of the following terms is dissimilar to the other four options? (Find the odd-man out?)

Q 3. Which statement best describes the purpose of insurance?

Q 4. Which of the following losses cannot be compensated by insurance?

Q 5. What does the term "peril" refer to in the context of insurance?

Q 6. What is the purpose of insurance in relation to risks and perils?

Q 7. How are risks classified based on the extent of damage likely to be caused?

Q 8. Are non-financial risks insurable under insurance policies?

Q 9. Which category of risks can lead to the bankruptcy of the owner or insurer?

Q 10. Can insurance cover risks where the possibility of occurrence is certain?

Q 11. How are risks classified based on the nature of their occurrence?

Q 12. Which type of risks are generally considered less predictable?

Q 13. Can static risks be managed through insurance?

Q 14. What are speculative risks and can they be covered by insurance?

Q 15. Which type of risks are covered by insurance?

Q 16. How are risks classified based on the number of people affected?

Q 17. Give an example of a fundamental risk.

Q 18. Which type of risks does the life insurance business primarily deal with?

Q 19. How do natural disasters like earthquakes impact the life insurance company?

Q 20. What is a hazard?

Q 21. What is an example of a physical hazard?

Q 22. In the case of fire insurance, which of the following can be considered a physical hazard?

Q 23. Which type of hazards relate to life insurance in the case of individuals with a history of tuberculosis?

Q 24. What is moral hazard?

Q 25. GA as used in insurance

Q 26. How can physical hazard be assessed?

Q 27. Which example demonstrates a moral hazard?

Q 28. What has advanced technology contributed to the assessment of hazards and risks for insurance companies?

Q 29. What are the two kinds of hazards ?

Q 30. A hazard influences the operation or effect of which perils?

Q 31. Question 1 What type of risk would political upheaval or government suddenly losing voting of confidence be classified as?

Q 32. What is the purpose of risk management?

Q 33. 2.1. What are the costs included in the actual loss from a peril?

Q 34. The total loss that can happen is referred to as:

Q 35. What is the Probable Maximum Loss (PML) calculated as?

Q 36. What are the three factors necessary to understand risk?

Q 37. How can the credibility of the data be established in risk analysis?

Q 38. Why is prevention of risks sometimes perceived to cost too much?

Q 39. In Scenario 1, why do makers of passenger aircrafts incur additional costs?

Q 40. What is the purpose of maintaining inventories of essential spares in factories?

Q 41. Which of the following is NOT a financial risk related to financial resources?

Q 42. What is one of the reasons for backing up or duplicating critical information?

Q 43. Which of the following is NOT a method used in industrial establishments to reduce physical risks?

Q 44. What does duplication involve in loss reduction techniques?

Q 45. Which of the following is an example of diversification in risk management?

Q 46. Which of the following is an ethical consideration in risk management?

Q 47. Which of the following is true regarding the techniques used to manage different types of risks?

Q 48. How are risks measured?

Q 49. In the context of risk management for individuals, what happens to the risk regardless of having or not having insurance?

Q 50. Without insurance, what could be the immediate problem for businesses in the event of unexpected events such as the proprietor's sudden death, shop fire, or major burglary?

Q 51. How did risk management formally evolve?

Q 52. What are some ways of managing risks?

Q 53. What is the term for the total of the actual loss and the consequential loss?

Q 54. What are separation and duplication examples of?

Q 55. How is the Probable Maximum Loss (PML) determined?

Q 56. If the cost of damage is being met using internal resources/funds, how is the risk being managed?

Q 57. What is the term for spreading risk across areas that may not be affected equally or at the same time?

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