Ic 11 Top4sure Most Important 'Last Day Revision' Test 1

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IN IC 11 – PRACTICE OF GENERAL INSURANCE
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MOST IMPORTANT
‘LAST DAY REVISION’ - TEST 1
WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE
MOST IMPORTANT ‘LAST DAY REVISION’ - TEST 1
Question1 Which independent agency’s services are used to assess property losses?
(a) Insurance Agents association
(b) TPA's
(c) Claim technician
(d) Actuaries
(e) Surveyor and loss assessor
Correct Answer Surveyor and loss assessor

Answer Explanation Engineer surveyors specializing in property, assess the risks associated with fire, explosion,
storms etc. to a building and / or contents based on processes and activities that take place
and other features specific to the location.
Question2 What is the kind of protection under which the cumulative effect on the insurer due to
losses under various policies will be ascertained?
(a) Per risk protection
(b) Per premium protection
(c) Per insurance protection
(d) Per event protection
(e) Per damage protection
Correct Answer Per risk protection

Answer Explanation
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MOST IMPORTANT
Question3 _________ is the minimum and maximum amount of sum assured allowed for Industrial All
Risks insurance.
(a) 100000 - 10,00,000
(b) 10,00,000 - 1,00,00,000
(c) 1,00,00,000 - 50,00,00,000
(d) 50,00,00,000 - 100,00,00,000
(e) 100,00,00,000 and above
Correct Answer 100,00,00,000 and above

Answer Explanation The Industrial All Risks insurance policy is designed for industrial risks with an overall sum
assured of Rs 100 crore and above.
Question4 Which form has to be filled by the proposer for furnishing all material information required
by the insurer in respect of a risk in order to enable the insurer to decide whether to accept
or decline the insurance proposal?
(a) Inquiry Form
(b) Application form
(c) Registration form
(d) Proposal form
(e) Agreement form
Correct Answer Proposal form

Answer Explanation
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MOST IMPORTANT
Question5 How is the fire insurance for residential properties classified?

(a) Simple Risk
(b) Dynamic Risk
(c) Hazardous Risk
(d) Storage Risk
(e) Institutional Risk
Correct Answer Simple Risk

Answer Explanation
Question6 What is the consignment called which is sent by registered parcel post ?
(a) Air consignment
(b) Postal consignment
(c) Land consignment
(d) Speed consignment
(e) Other modes of consignment
Correct Answer Postal consignment

Answer Explanation
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MOST IMPORTANT
Question7 Under the Motor third party insurance, the compensation for death claims to a pedestrian
is _________ .
(a) Rs 5000
(b) Rs 25000
(c) Rs 50000
(d) Rs 100000
(e) Rs 500000
Correct Answer Rs 50000

Answer Explanation Under Motor Vehicles Act 1988 the amount of compensation payable is Rs 50000 for death
and Rs 25000 for permanent disablement of any person resulting from an accident arising
out of the use of motor vehicle.
Question8 Who receives the complaints in respect of repudiation of claims by an insurer ?

(a) Agents
(b) Insurance Brokers
(c) Insurance Companies
(d) Judge
(e) Ombudsman
Correct Answer Ombudsman

Answer Explanation An Ombudsman is quasi judicial person who hears complaints for repudiation of claims.
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MOST IMPORTANT
Question9 Whose functions are identification and acceptance of risk based on factual information,
evaluation and acceptance?
(a) Underwriters
(b) TPAs
(c) Surveyors
(d) Agents
(e) Brokers
Correct Answer Underwriters

Answer Explanation Underwriters identify risk, calculate, evaluate and decide on acceptance.
Question10 The maximum validity of a cover note in motor insurance is _____ days
(a) 10
(b) 20
(c) 25
(d) 45
(e) 60
Correct Answer 60
Answer Explanation A Cover Note is a document issued in advance of the policy. It is issued when the policy
cannot for some reason or other, be issued straightaway.
A Cover Note is temporary and is generally valid for 15 days. It can be extended for
a further period of 15 days at a time, but in no case the total period of validity of a Cover
Note shall exceed two months (60 days).
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MOST IMPORTANT
Question11 Business risk is a / an ____________ risk.

(a) Catastrophic
(b) Controllable
(c) Non-Controllable
(d) Insurable
(e) Non-Insurable
Correct Answer Non-Insurable

Answer Explanation Business risks are commercial risks, these risks are normally associated with speculative or
dynamic risks and are usually regarded as being uninsurable.
Question12 Speculation risk is also known as __________

(a) Stock Market risk
(b) Insured risk
(c) Trade risk
(d) Business risk
(e) Declined risk
Correct Answer Trade risk

Answer Explanation
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MOST IMPORTANT
Question13 On what does the Carriage of goods by sea act determine the liability?
(a) Marine port warehouse receipt
(b) Transporters challan
(c) Airways bill
(d) Bill of Lading
(e) Railway receipt
Correct Answer Bill of Lading

Answer Explanation A bill of lading is a legal document between the shipper of goods and the carrier detailing
the type, quantity and destination of the goods being carried.
Question14 __________ can intervene in the affairs of an insurer.

(a) RBI
(b) Finance Ministry
(c) State Government
(d) Policy holder
(e) IRDAI
Correct Answer IRDAI

Answer Explanation
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MOST IMPORTANT
Question15 From the given options, the renewal notice is effected by _________ .
(a) payment of penalty
(b) payment of renewal charges
(c) payment of premium
(d) payment of bonus
(e) payment of insurance charges
Correct Answer payment of premium

Answer Explanation A Renewal Notice is sent one month in advance of the date of expiry, inviting renewal of
policy. As per statutory provisions, no risk can be assumed unless premiums are paid in
time.
Question16 The special declaration deposit premium of 100% of the premium on the sum insured is
based on the ___________ (marine insurance).
(a) Estimated next year's turnover
(b) Current year's turnover
(c) Previous year's turnover
(d) Last two year's turnover
(e) First year's turnover
Correct Answer Previous year's turnover

Answer Explanation When a Special Declaration Policy is issued, sum insured is based on previous years
turnover or in case of fresh proposal, on a fair estimate of annual dispatches.
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MOST IMPORTANT
Question17 What is the final process known as where the selected techniques have to be implemented
by the firm through the different functional managers?
(a) Management of Risks
(b) Voluntary deductibles
(c) Risk retention
(d) Implementation
(e) Risk evaluation
Correct Answer Implementation

Answer Explanation
Question18 Which social peril is included in Standard fire insurance?

(a) Explosion
(b) Lightning
(c) Landslide
(d) Floods
(e) Riot
Correct Answer Riot

Answer Explanation Fire Perils include:
• Fire.
• Explosion / implosion.
• Aircraft damage.
• AOG perils.
• Lightning. Storm, cyclone, tempest, hurricane, tornado & flood.
• Subsidence & landslide including rock slide.
Social Perils in fire insurance includes:
• Riot, strike, malicious damage.
• Terrorism (the optional cover).
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MOST IMPORTANT
Question19 Which is the treaty in which the arrangement can be ‘per risk’ or ‘per event/accident’?
(a) Excess of loss treaty
(b) Excess of profit treaty
(c) Proportional treaty
(d) Reinsurance treaty
(e) Facultative treaty
Correct Answer Excess of loss treaty

Answer Explanation Excess of Loss treaties do not protect risk exposure but protect loss as incurred by an
insurer.
While standard Excess of Loss is related to single loss amounts, either per risk or per event,
stop-loss covers are related to the total amount of claims in a year over and above a
particular limit.
Question20 Mr. X has a factory and he fears that excess rains will cause flooding, so he plans to shift
the factory’s location to a safer place. This is called _______ .
(a) Risk avoidance
(b) Risk evaluation
(c) Risk identification
(d) Risk detection
(e) Risk control
Correct Answer Risk avoidance

Answer Explanation It’s a risk management technique where in the losses of high severity & high frequency are
best dealt in a manner of just avoiding it. No insurer would insure such risk/ losses & none
could manage it of its own.
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MOST IMPORTANT
Question21 Who is exempt from the IRDA prescribed compulsory training for various intermediaries?
(a) Surveyors
(b) TPA’s
(c) Brokers
(d) Corporate agents
(e) Risk engineers
Correct Answer TPA’s

Answer Explanation Only one officer of the TPA firm has to go for training and pass exam.
Question22 'Employment Practices' fall under what type of risk?

(a) Strategic risk
(b) Operational risk
(c) Knowledge management risk
(d) Compliance risk
(e) Financial risk
Correct Answer Compliance risk

Answer Explanation Risks like Data protection, Employment practices, Consumer protection etc. all fall under
Compliance Risks.
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MOST IMPORTANT
Question23 Which of these is NOT a deficiency of the Modern Portfolio Theory (MPT) ?
(a) Investors are emotional
(b) The financial returns distribution is ‘asymmetrical’
(c) Co-relation of asset classes changes on externals
(d) Optimal diversification strategy
(e) Financial Markets are not efficient
Correct Answer Optimal diversification strategy

Answer Explanation MPT is a form of diversification. It explains how to find the best possible diversification
strategy under certain assumptions of risk and return.
Question24 In which currency should the settlement of claims under non-marine insurance made in?
(a) Indian Rupees
(b) Swiss Francs
(c) US Dollars
(d) Euro's
(e) British Pound
Correct Answer Indian Rupees

Answer Explanation As FEMA rules apply here, the claims are settled in Indian Rupees.
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MOST IMPORTANT
Question25 As per the regulations of IRDAI, a Surveyor and Loss Assessor should have a _____ .
(a) Proof of Authority
(b) Contract
(c) License
(d) Legal Formality document
(e) Policy
Correct Answer License

Answer Explanation
Question26 With a minimum premium of Rs 15, what is the sum assured offered in a Janta Personal
Accident policy ?
(a) Rs 20000
(b) Rs 22500
(c) Rs 25000
(d) Rs 27500
(e) Rs 30000
Correct Answer Rs 25000

Answer Explanation In Janta Personal Accident policy the minimum sum insured is Rs 25000/- and maximum Rs
1,00,000/- per person per annum.
The rate of premium is Rs 15/- per sum assured of Rs 25000/- which can be increased in
multiples of Rs 25,000/-.
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MOST IMPORTANT
Question27 On what basis is the risk premium calculated?

(a) Value of people insured
(b) Number of people insured
(c) Profit & Loss Ratios
(d) Average profit ratios
(e) Average loss ratios
Correct Answer Average loss ratios

Answer Explanation The loss ratio is the difference between the ratios of premiums paid to
an insurance company and the claims settled by the company. The loss ratio is the total
losses paid by an insurance company in the form of claims.
The premium calculation principle is one of the main objectives of study for actuaries.
There seems to be full agreement among the leading theoreticians in the field that the
insurance premium should reflect both the expected claims and certain loadings.
Question28 Which of these perils is excluded under inland transit (B) clause?
(a) Collision of vehicles
(b) Derailment of railway wagons
(c) Malicious damage
(d) Breakage of bridges
(e) Lightning
Correct Answer Malicious damage

Answer Explanation Risk covered in Inland transit Rail / Road (B) clause are:
1. Fire
2. Lightning
3. Breakage of bridges
4. Collision of vehicles
5. Overturning of carrying vehicle
6. Derailment / accidents of railway wagons
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MOST IMPORTANT
Question29 If the loss amount exceeds the overlying limit, the balance will revert to _______ .
(a) Insurer
(b) Re-insurer
(c) Insured
(d) Underwriter
(e) TPA
Correct Answer Insurer

Answer Explanation The Insurer has to bear the excess of loss above overlying limit.
Question30 In marine insurance, the Special declaration policy can be applied by individual companies
having a minimum turnover of Rs __________ .
(a) 1 crore
(b) 2 crore
(c) 3 crore
(d) 4 crore
(e) 5 crore
Correct Answer 2 crore

Answer Explanation The Special declaration policy is issued to clients whose annual estimated dispatches
(turnover) by rail / road / inland waterways exceeds Rs 2 crore.
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MOST IMPORTANT
Question31 Vessels under steam or pressure, boilers, steam pipes, air receivers etc. are insurable under
__________ .
(a) Vessels insurance
(b) Fire insurance
(c) Engineering insurance
(d) Boiler insurance
(e) Marine insurance
Correct Answer Boiler insurance

Answer Explanation Boiler and Pressure Plant insurance policy covers damage, other than fire, to boilers and /
or other pressure plant and surrounding property.
Question32 A catastrophic event can cause huge strain on the _______ funds.
(a) Insured
(b) Insurer
(c) Solatium
(d) Underwriters
(e) Contingency
Correct Answer Insurer

Answer Explanation A catastrophe is an event causing great and usually sudden damage or suffering. Such
events cause big strains on the insurers funds as a lot of claims come up for payments. For
eg - Big earth quakes, terrorist strikes like attack on World Trade Center buildings etc.
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MOST IMPORTANT
Question33 How are rates quoted in Marine cargo insurance and burglary?
(a) Total amount basis
(b) Round off basis
(c) Recurring basis
(d) Percentage basis
(e) Point basis
Correct Answer Percentage basis

Answer Explanation
Question34 All insurers have to prepare what type of account?

(a) Cash book
(b) Balance sheet
(c) Income & Expense statement
(d) Company register
(e) Reconciliation statement
Correct Answer Balance sheet

Answer Explanation Accounting items like Balance Sheet, Receipt and Payments A/c (Cash Flow) and Profit &
Loss A/c are prepared by all insurers as per Accounting Standards issued by ICAI.
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MOST IMPORTANT
Question35 Regulatory Issues is an example of ________ risk.

(a) Operational
(b) Strategic
(c) Compliance
(d) Financial
(e) Knowledge management
Correct Answer Compliance

Answer Explanation Risks like Data protection, Employment practices, Consumer protection, Regulatory Issues
etc. all fall under Compliance Risks.
Question36 The insurance of which companies is dealt mainly by State Insurance Funds?
(a) Private companies in a particular State
(b) State Government owned companies
(c) Unlisted State companies
(d) Local Government owned companies
(e) Multi National owned companies
Correct Answer State Government owned companies

Answer Explanation
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MOST IMPORTANT
Question37 Motor insurance policy for private or commercial vehicles is also known as ________ .
(a) Vehicle Damage policy
(b) Liability only policy
(c) Declaration policy
(d) Floating policy
(e) Accident policy
Correct Answer Liability only policy

Answer Explanation
Question38 Settlement of claims is an important function of which organization?

(a) Mutual Fund organization
(b) Insurance organization
(c) NGO's
(d) Service organization
(e) Govt. organization
Correct Answer Insurance organization

Answer Explanation
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MOST IMPORTANT
Question39 _________ are large losses which may occur on rare occasions but have a devastating
effect on an organisation.
(a) Catastrophes
(b) Speculative
(c) Chronic
(d) Fundamental
(e) Dynamic
Correct Answer Catastrophes

Answer Explanation Chronic Losses are small but regular.
Sporadic Losses are medium but irregular.
Catastrophic Losses are very large but rarely occur.
Question40 The information which is obtained from the proposal form, the details of risk inspection etc
are fed into the computers. This procedure is called ______ .
(a) Policy Procedure
(b) Duty Procedure
(c) Agreement Procedure
(d) Documentation Procedure
(e) Implementation Procedure
Correct Answer Documentation Procedure

Answer Explanation
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MOST IMPORTANT
Question41 Where are the accounting transactions posted?

(a) Balance Sheet
(b) Cash book
(c) Day book
(d) Subsidiary book
(e) Account book
Correct Answer Account book

Answer Explanation
Question42 The provision of percentage in investment in a approved investments like infrastructure

and social sector should not be less than ______ .
(a) 5
(b) 10
(c) 15
(d) 20
(e) 25
Correct Answer 10
Answer Explanation This is as per IRDA investment regulations 2000.
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MOST IMPORTANT
Question43 Whose responsibility is to collect detailed information of client’s business?

(a) Sales agent
(b) Insurers
(c) Direct brokers
(d) Underwriters
(e) Business agents
Correct Answer Direct brokers

Answer Explanation Direct brokers came into the insurance market after IRDA (Insurance Brokers) Regulations,
2002. They act as an intermediary between insured &the insurers to obtain client’s detailed
information for insurance.
Question44 When does a General Insurance policy expire?

(a) At 12 noon of the day of expiry
(b) Midday of the date of expiry
(c) Midnight of the date of expiry
(d) Midnight of the day before the date of expiry
(e) On the morning of the date of expiry
Correct Answer Midnight of the date of expiry

Answer Explanation
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MOST IMPORTANT
Question45 Which policy specifies the perils covered for property at specified locations?
(a) Hull insurance policy
(b) Motor insurance policy
(c) Fire insurance policy
(d) Medi Claim policy
(e) PA policy
Correct Answer Motor insurance policy

Answer Explanation In general insurance motor insurance policies are issued on basis of various zones. Ex.
premium for car insurance will be more in zone A likely to be metros.
Question46 What do the insurers do if they are not interested in the renewal of the policy?
(a) They give a actual notice
(b) They give a public notice
(c) They give a prior notice
(d) They give a meeting notice
(e) They give a expired notice
Correct Answer They give a prior notice

Answer Explanation Renewal of a policy is a benefit to insured, insurer has to give prior notice.
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MOST IMPORTANT
Question47 The indemnity of _________ is covered under the refrigeration plant insurance.
(a) Shopping Malls
(b) Factories
(c) Warehouses
(d) Cold storage
(e) Godowns
Correct Answer Cold storage

Answer Explanation
Question48 Which policy provides cover for plant and machinery while being erected and tested?
(a) Pre Launch insurance
(b) Erection insurance
(c) Loss of profit insurance
(d) Fire insurance
(e) Marine Cum Erection insurance
Correct Answer Erection insurance

Answer Explanation Erection All Risks Insurance policy is concerned with erection / installation of plant,
machinery and equipment and structures involving no or very little civil engineering work.
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MOST IMPORTANT
Question49 What is the term used for the retention risk that an insurer would like to keep?
(a) Reinsurance limit
(b) Excess limit
(c) Marginal limit
(d) Base limit
(e) Underlying limit
Correct Answer Underlying limit

Answer Explanation
Question50 Why was the expert group constituted at the request of General Insurance Council?
(a) To look into insurance disputes
(b) To look into underwriting issues
(c) To look into customer complaints
(d) To look into misrepresentation
(e) To look into damages
Correct Answer To look into underwriting issues

Answer Explanation
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MOST IMPORTANT
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IN IC 11 – PRACTICE OF GENERAL INSURANCE

WE WISH YOU ALL THE BEST!

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

MOST IMPORTANT ‘LAST DAY REVISION’ - TEST 1

Correct Answer Surveyor and loss assessor

Correct Answer Per risk protection

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer 100,00,00,000 and above

Correct Answer Proposal form

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Question5 How is the fire insurance for residential properties classified?

Correct Answer Simple Risk

Correct Answer Postal consignment

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Rs 50000

Question8 Who receives the complaints in respect of repudiation of claims by an insurer ?

Correct Answer Ombudsman

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Underwriters

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Question11 Business risk is a / an ____________ risk.

Correct Answer Non-Insurable

Question12 Speculation risk is also known as __________

Correct Answer Trade risk

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Bill of Lading

Question14 __________ can intervene in the affairs of an insurer.

Correct Answer IRDAI

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer payment of premium

Correct Answer Previous year's turnover

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Implementation

Question18 Which social peril is included in Standard fire insurance?

Correct Answer Riot

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Excess of loss treaty

Correct Answer Risk avoidance

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer TPA’s

Question22 'Employment Practices' fall under what type of risk?

Correct Answer Compliance risk

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Optimal diversification strategy

Correct Answer Indian Rupees

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer License

Correct Answer Rs 25000

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Question27 On what basis is the risk premium calculated?

Correct Answer Average loss ratios

Correct Answer Malicious damage

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Insurer

Correct Answer 2 crore

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Boiler insurance

Correct Answer Insurer

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Correct Answer Percentage basis

Question34 All insurers have to prepare what type of account?

Correct Answer Balance sheet

WWW.TOP4SURE.IN IC 11 – PRACTICE OF GENERAL INSURANCE

Ic 11 Top4sure Most Important 'Last Day Revision' Test 1

Ic 11 Top4sure Most Important 'Last Day Revision' Test 1