S-08- Loss of Profits Insurance Mock Test 10
Underwriting basically involves risk assessment and pricing to determine suitable insurance terms. Reinsurance involves a reinsurer accepting part of an insurer’s potential obligation in return for a share of premium. Dual Basis methods specify minimum proportions of wages to be insured. DSU/ALOP insurance is generally taken by project owners or principals. Fine-tuning provisions help determine the appropriate gross profit rate and annual turnover by considering actual business results and circumstances affecting operations. MLOP policies may contain minimum time exclusions and provisions for underinsured Increased Cost of Working. Project financiers depend heavily on project viability and revenue generation for debt servicing. Business environment is a key aspect of business operations.
1. What are the two components that underwriting basically consists of?
a) Premium collection and claims processing
b) Risk transfer and risk retention
c) Policy issuance and policy renewal
d) Market analysis and product development
e) Risk assessment and pricing
2. What is the party called that accepts a portion of the potential obligation in exchange for a share of the insurance premium?
a) The ceding party
b) The co-insurer
c) The retrocessionaire
d) The broker
e) The reinsurer
3. What is the minimum proportion of wages that must be insured under the Dual Basis method?
a) 0.05
b) 0.1
c) 0.15
d) 0.2
e) 0.25
4. Who can take the DSU/ALOP insurance policy?
a) Any Entity which has undertaken to construct a project and owns the same can take the DSU/ALOP insurance. The policy has to be taken by the Principal (Owners) and NOT the contractors or sub-contractors
b) Only the main contractor of the project
c) Both the contractor and the project owner jointly
d) Any subcontractor involved in the critical path of the project
e) The insurance company's appointed surveyor
5. What is the Fine-tuning/Adjustment Clause in the ALOP/DSU policy for calculating the Rate of Gross Profit?
a) It allows the insurer to adjust the rate upward based on industry benchmarks
b) When calculating rate of gross profit and annual turnover, the following aspects shall be taken into consideration: the results of the business insured for the 12-month period after the date of commencement and any circumstances which would have affected the business had the delay not occurred. The final figures shall represent as closely as possible the results the business insured would have achieved after the scheduled date of commencement
c) It allows the insured to claim higher rates if the market improved
d) It is a clause allowing automatic revision of premium mid-term
e) It allows retroactive adjustment of the sum insured after a loss
6. What is the Minimum Time Exclusion for all industries (other than Power Plants, Fertilizer Plants, etc.) under MLOP policies?
a) 14 days
b) 10 days
c) 7 days
d) 5 days
e) 3 days
7. Why is the financier critically dependent on the technical, commercial and financial viability of a project in the context of ALOP/DSU insurance?
a) Because the financier wants to purchase the project once completed
b) The financier relies on the technical, commercial and financial viability of the project and its earnings as the sole source for debt servicing. The revenue generating capability of a project has thus become a critical financing factor
c) Because the financier needs the project's assets as collateral
d) Because financial institutions are legally required to insure all projects they fund
e) Because the financier must approve all construction contracts
8. What specific additional provision applies to the Increase in Cost of Working under the MLOP policy when the sum insured for this item is less than required?
a) The insurer automatically pays the full ICOW amount
b) Less any sum saved during the indemnity period in respect of the insured standing charges as may cease or be reduced in consequence of the damage; and if the sum insured for ICOW is less than the sum produced by applying the rate of gross profit to the annual output, the amount payable shall be proportionately reduced
c) The shortfall in ICOW coverage is always covered by the insurer
d) The insured must pay the difference out of own funds first
e) ICOW payments are limited to 25% of the gross profit sum insured
9. Which of the following is described as the most important aspect of any business?
a) Business Environment
b) Financial capital
c) Marketing strategy
d) Product quality
e) Government regulations
10. In the Hydroelectric Plant example, what was the Revenue per machine per Day with the Rate of Rs. 7 per Unit?
a) Rs. 2,52,000
b) Rs. 3,78,000
c) Rs. 4,20,000
d) Rs. 5,04,000
e) Rs. 6,30,000
