IC45 Mock Test Sample 3
General Insurance Underwriting is the process of evaluating risks, determining premiums, and deciding policy terms. Underwriters assess risks using rating factors, underwriting guidelines, and past claims experience. Customized policies are designed for unique risks that cannot be covered under standard products. Technology and automation improve underwriting efficiency through digital workspaces, data analysis, and better risk assessment. Reinsurance helps insurers manage large exposures while retention limits define the portion of risk retained. Business interruption insurance protects against income loss during restoration periods. Loss development methods, profitability analysis, premium calculations, and regulatory compliance are essential for maintaining financial stability and sustainable insurance operations.
Q1. Which are the contingencies under which a policy is customized?
a) Personal forms of customized policies like covering a footballer’s legs
b) When a customer is not able to pay premiums of an existing policy
c) When the risk is deemed unique and requires special coverage
d) Both a and c
Q2. Which strategy or technology will automate and manage underwriting more effectively?
a) Digital workspace for sales staff and underwriters
b) Underwriting decisions based solely on judgment
c) Approval for all changes before implementation
d) Both a and c
Q3. _________ is an example of Business Interruption Risk.
a) Damage to a house due to floods
b) Loss of income during restoration period
c) Damage to an automobile in an accident
d) Theft of a car
Q4. Which underwriters can be classified as Personal and Commercial Line Underwriters?
a) Property Underwriters
b) Motor Underwriters
c) Fire Underwriters
d) Liability Underwriters
Q5. Which of the following premium formulas is correct?
a) Gross Premium = Pure Risk Premium + Load
b) Net Premium = Pure Risk Premium × Load
c) Net Premium = Pure Risk Premium – Load
d) Net Premium = Risk Premium ÷ Load
Q6. Which of the following is generally contained in a proposal form?
a) Previous Insurance, if any
b) Bank Guarantee Required
c) Surety Bond Required
d) Both b and c
Q7. Which class of insurance generally requires approval from the controlling office before underwriting?
a) Householders’ Policy
b) Health Insurance
c) Mediclaim Insurance
d) Aviation Insurance
Q8. The method based on claim movement from unreported to reported and unpaid to paid is called _________.
a) Pure Development
b) Loss Development
c) Loaded Premium
d) Loss Ratio
Q9. What corrective action can an insurance company take to reduce losses?
a) Difficult-to-understand policy wording
b) Sell policies with longer auto-renew periods
c) Modify underwriting guidelines
d) Invest premiums in high-risk assets
Q10. Which of the following is a rating factor for Motor Insurance?
a) Lingual Preference
b) Annual Income
c) Class of Vehicle
d) Marital Status
Q11. The portion of risk retained by an insurer before reinsurance is known as ______ .
a) Detention Limit
b) Preservation Limit
c) Withholding Limit
d) Retention Limit
Q12. Due to ______, insurance companies face competitors from around the world.
a) Globalisation
b) Deregulation
c) Challenging Market Conditions
d) Economic Slowdown
Q13. What is a major benefit computers provide to underwriters?
a) Reducing insurance costs automatically
b) Eliminating all possible risks
c) Analyzing and rating insurance proposals
d) Guaranteeing profits
Q14. Estimation of underwriting profitability of an account begins with determination of the ______ .
a) Written Premium
b) Earned Premium
c) Saved Premium
d) Net Premium
Q15. The premium level at which an insurer neither makes a profit nor incurs a loss is called ______ .
a) Pure Premium
b) Break-even Premium
c) Net Premium
d) Gross Premium
Q16. When variation in rates compared to the manual or tariff exceeds _____, justification requires critical evaluation.
a) 10%
b) 20%
c) 25%
d) 30%
Q17. Within how many days should an insurer dispose of a claim after receiving the survey report?
a) 7 Days
b) 10 Days
c) 15 Days
d) 30 Days
Q18. An insurance policy covers perils that can cause ______ .
a) Loss
b) Damage
c) Injury
d) All of the Above
Q19. If a proposal falls within the lowest risk boundaries of underwriting standards, the policy is issued on a _____ .
a) Standard Basis
b) Sub-standard Basis
c) Preferred Basis
d) Proposal Declined
Q20. In the Loss Development Triangle method, the vertical line represents _____ .
a) Change in Exposure Level
b) Evaluation Date
c) Claim Development Over Time
d) Premium Growth Over Time
