IC45 Mock Test Sample 6
General Insurance Underwriting is a structured process of evaluating risks, determining premiums, and ensuring compliance with regulatory requirements. The underwriting philosophy guides risk acceptance throughout the policy lifecycle. Rate making involves analyzing exposure, claims experience, economic conditions, and underwriting judgment to arrive at fair and sustainable premiums. Compliance officers and underwriting departments play important roles in maintaining adherence to IRDAI guidelines. Methods such as loss development, class rating, factor rating, exposure rating, and merit rating help insurers assess and price risks effectively. Proper product design, disclosures, prospectuses, and underwriting policies contribute to consumer protection, profitability, and long-term insurer stability.
Q1. With whom does the overall responsibility of compliance rest?
a) Area Manager
b) IRDAI & RBI
c) Insurance Agent
d) Chief Executive Officer
Q2. _____ the cover is an option that helps secure a balance between broad coverage and a fair price.
a) Organising
b) Configuring
c) Structuring
d) Constructing
Q3. ________ is the method for projecting unpaid and unreported losses to their ultimate settlement values.
a) Loss Development Method
b) Pure Premium Method
c) Loss Ratio Method
d) Reported Loss Method
Q4. An insurer should:
a) Design products with fair terms and conditions
b) Speculate to maximize profits
c) Have discriminatory insurance policies
d) Focus only on profit generation
Q5. Define 'Rate'.
a) Highest amount of premium that can be charged
b) Lowest amount of premium that needs to be charged
c) Price per unit of insurance against each exposure unit
d) Average premium charged in a risk pool
Q6. For ratemaking, an insurer should consider:
a) Underwriter’s knowledge, skill, and experience
b) Economic, social, political, and technological factors
c) Historical claims experience
d) All of the above
Q7. When stock value exceeds the value declared for insurance purposes, the additional condition is called _______.
a) Uninsured Coverage
b) Minimal Loss Coverage
c) Granted Coverage
d) Partial Average Coverage
Q8. The method of applying various factors to a base rate evolved from characteristics of homogeneous risks is called ________.
a) Class Rating
b) Factor Rating
c) Individual Risk Rating
d) Exposure Rating
Q9. Responsibilities of a Compliance Officer include:
a) Filing category-wise list of new products with IRDAI
b) Underwriting risks
c) Marketing and distribution
d) Claims settlement
Q10. If rates are based on reinsurance market levels, an appropriate justification of price is to:
a) Defend estimated claim cost logic
b) Compare with unrelated risks
c) Ignore prevailing market rates
d) Focus only on acquisition costs
Q11. Exposure Rating Method is commonly used in:
a) Personal Accident Products
b) Specialty and Liability Products
c) Motor Insurance
d) Travel Insurance
Q12. Which statement is a feature of the Merit Rating System?
a) All members are charged the same rate
b) Average rate is never modified
c) Appropriate rate depends on group claim experience
d) Risk is recognized only at group level
Q13. Poor underwriting can result in:
a) Reduced profitability
b) Increased marketing expenditure
c) Reduction in business volume
d) Both reduced profitability and reduced volume
Q14. The underwriting policy placed before the Board should cover:
a) Margin for acquisition costs, expenses, and profit
b) Business classes the company intends to write
c) Both a and b
d) Neither a nor b
Q15. Which IRDAI procedure requires products to be filed before launch or sale?
a) Compliance
b) Use and File
c) File and Use
d) Credit Rating
Q16. A _______ of any insurance product shall clearly state the scope of benefits and extent of cover.
a) Disclosure
b) Statement of Facts
c) Prospectus
d) Insured Details
Q17. If acquisition costs are set too low relative to the sales channel, it may lead to ________.
a) Adverse Selection
b) Anti-selection
c) Moral Hazard
d) Morale Hazard
Q18. Which department should be constituted to ensure underwriting complies with guidelines?
a) Underwriting and Compliance Department
b) Marketing and Sales Department
c) Claims Processing Department
d) Customer Service Department
Q19. Which statement is true regarding the underwriting philosophy of an insurance company?
a) It considers risks only until policy issuance
b) It considers risks only until the point of sale
c) It considers risks only until application receipt
d) It considers risks throughout the policy term and beyond issuance
Q20. With regard to the Schedule Rating System, which statement is correct?
a) It cannot be used for small entities
b) It is used in case of large exposures
c) It is a type of class rating method
d) It does not reflect characteristics not evident in experience
