PRE-CONTRACT FOR INSURANCE

AGENTS EXAMINATION AND

INVESTMENT-LINKED LIFE
INSURANCE
(PCIL)

Sample Question Set 1

INTERNAL USE ONLY

 1. Schedule 9 of the Financial Services Act (FSA) 2013 sets out the ______. (PCEIA C2)
a) Licensing of life and general insurers
b) Financial Ombudsman Scheme
c) Pre-contractual duty of disclosure
d) Conversation to single insurance business

2. Consumers are required to submit their complaints to Financial Mediation Bureau within______ from the
date of the final decision of the financial service provider. (PCEIA C3)
a) One month
b) Three months
c) Six months
d) Nine months

3. The regulations and supervision of financial institutions consisting of banks and insurance companies,
payment systems and other relevant entities money and foreign exchange markets is now under the
_______ (PCEIA C3)
a) Banking and Financial Institutions Act 2000
b) Financial Services Act 2013
c) Insurance Act 1996
d) Financial Institutions and Takaful Act 2012

4. All contracts are governed by the general principle of the law of contract as specified in the _______.
(PCEIA C4)
a) Insurance Act 1996
b) Financial Services Act 2013
c) Contract Act 1950
d) Companies Act 1965

5. Exclusions are inserted into policies for the following reasons, EXCEPT _______. (PCEIA C4)
a) The risks are uninsurable
b) Cover can be provided under more appropriate policies
c) The cover is not demanded by the insured
d) The insurer requires additional premium for such cover

6. In the context of insurance, an ‘offer’ is made by the________ when submitting a completed and signed
proposal form to the insurer. (PCEIA C4)
a) Finance company
b) Proposer
c) Broker
d) Agent

7. The Competitions Act 2010 came into force _______ (PCEIA C3)
a) To promote collaborations among consumers
b) To promote collaborations among commercial entities
c) To curtail anti-competitive practices
d) To encourage healthy competition among retailers

8. If a policyholder is dissatisfied with the response on an insurers final decisions or receives no response
after 60 days, he can refer ______. (PCEIA C3)
a) The case to a court of competent jurisdiction in Malaysia
b) Complaint to Bank Negara Malaysia (BNM)
c) The complaint to the Ombudsman for Financial Services (OFS)
d) To LIAM or PIAM in accordance to whether it relates to life of general insurance

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 9. Insurance companies in Malaysia are required to be incorporated as ______. (PCEIA C3)
a) mutual companies
b) Private companies
c) Public companies
d) Large corporations

10. A Policy owner is allowed to return a life policy within _______ days after policy delivery to obtain a refund
from the insurer (PCEIA C4)
a) 10
b) 21
c) 15
d) 5

11. When applying for an insurance contract, who makes the offer? (PCEIA C4)
a) The insurer
b) The broker
c) The proposer
d) The agent

12. What is the term for a relationship created under the circumstances when the agent makes a critical
decision on behalf of another party who is NOT in a condition to do so. (PCEIA C5)
a) Agency by contract
b) Agency by ratification
c) Agency by agreement
d) Agency by necessity

13. A principle may terminate an agency by giving one of the following notices to the agent EXCEPT _______.
(PCEIA C5)
a) Extension
b) Renunciation
c) Revocation
d) Completion

14. The expenses of running the insurance agency are normally funded by the agent out of his _______.
(PCEIA C5)
a) Contribution
b) Profits
c) Reimbursements
d) Commissions

15. For Continuity of coverage of renewable policies, the insurer shall NOT ______. (PCEIA C6)
a) Refuse to increase the amount of cover due to certain material fact
b) Unilaterally terminate the MHI policy during the cover period
c) Renew the policy upon the renewal date
d) Reject the policy renewal

16. One limitation applied to core benefits of the Hospital and Surgical Insurance (HSI) policy to address cost
containment measures is _______. (PCEIA C6)
a) Inner limits
b) Deferred cover
c) Stop cover
d) Rejection limit

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 17. Which of the following benefits is provided to the policy owner of a Critical Illness (CI) or Dread Disease
Insurance? (PCEIA C15)
a) A lump sum payment upon diagnosis of any of the (36) dread disease
b) The reimbursement of medical expenses incurred by the policy owner
c) An income stream to replace wages lost due to illness
d) Payment of an allowance on a daily, weekly or monthly basis

18. With additional premium, a hospital and surgical insurance (HSI) policy can also be extended to include
the following benefits, EXCEPT _______. (PCEIA C6)
a) Insured child’s daily guardian allowance
b) Accidental death benefit
c) Organ transplant
d) Cosmetic surgery

19. Identify the risk category under medical and health insurance that will be imposed special terms, higher
premiums or limitations in coverage or both. (PCEIA C6)
a) Special risk
b) Standard risk
c) Sub-standard risk
d) Decline risk

20. An agent is prohibited from “engaging in conduct that is misleading or deceptive, or is likely to mislead or
deceive in relations to be service or product” as stipulated under _______. (PCEIA C5)
a) Schedule 12 of the Financial Services Act 2013
b) Schedule 9 of the Financial Services Act 2013
c) Schedule 10 of the Financial Services Act 2013
d) Schedule 7 of the Financial Services Act 2013

21. Which of the following is NOT a medical and health insurance product? (PCEIA C6)
a) Hospital and surgical insurance
b) Disability income insurance
c) Permanent disability income insurance
d) Critical illness or dead disease insurance

22. ______ can be extended under a hospital and surgical insurance policy with the payment of additional
premium (PCEIA C6)
a) Overseas cover
b) Life insurance
c) Mental disorder
d) Disability income

23. The two most common expenses participation methods in major expenses insurance policies are ______.
(PCEIA C6)
a) Qualifying period and co-payment
b) Reimbursement and non-reimbursement
c) Deductibles and cost sharing
d) Deductibles and qualifying period

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 24. In respect of renewal where the insured has made previous claims or has pending claims under an
existing medical and health insurance policy an insurer should ______. (PCEIA C6)
a) Exclude cover for a specific disability which gave rise to a previous claim
b) Refuse to renew a policy that is guaranteed renewable ‘
c) Refuse to renew cover for a risk already insured
d) Unilaterally terminate cover during the period of insurance

25. An annuity is_____ fund which can be purchased for the right to a series of periodic payments under a
contract (PCEIA C12)
a) An investment
b) A savings
c) A retirement
d) A trust

26. ______ is / are the investments that a life office has made from the premiums it has received after
meeting its outgoes.
a) Assets
b) The market value
c) Surplus
d) Liability

27. In the context of a personal accident rider which pays additional benefits in the event of death or
disability caused by an accident, ‘accident’ is defined as ______. (PCEIA C12)
a) Illness or disease
b) Self-inflicted or intentional injury
c) Inevitable or gradual wear and tear
d) External, violent and visible means

28. The eligibility criteria to automatically add new employees to a group life policy from the date of
recruitment is ______. (PCEIA C12)
a) Permanent and temporary workers with valid work permits
b) All employees selected by an internal recruitment process
c) Permanent employees between the ages of 16 and 60
d) Healthy employees under a contract of services regardless of age

29. _______ is recommended for a person who has started a new business venture and has invested heavily
into the business (PCEIA C12)
a) Investment linked life insurance
b) Key man insurance
c) Endowment assurance
d) Whole life insurance

30. To counter the effects of _______insurers ask a range of questions and may request a policy (PCEIA C14)
a) Unfavorable claims
b) Adverse selection
c) Poor underwriting
d) Moral hazard

31. The aim of financial underwriting in life insurance is to assess ______. (PCEIA C14)
a) Pysical hazard
b) Potential risk
c) Contractual capacity
d) Moral hazard

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 32. An important consideration in the pricing of life insurance premiums is the insurers ability to pay
management expenses which comprise___________ (PCEIA C13)
a) Advertising and branding costs
b) Staff salaries and agents’ commissions
c) Corporate tax and leaves
d) Office maintenance charges

33. Clients must be told that there is a________ trade-off and they must be able to accept this before
venturing into a high-risk portfolio (IL C5)
a) offer- acceptance
b) Buy-sell
c) Low high
d) Risk return

34. The administration fee, insurance charge, fund management fee, etc. of an investment linked life
insurance policy are usually_______ (IL C4)
a) Not guaranteed
b) Fixed
c) Guaranteed
d) Decided by Bank Negara Malaysia

35. Investment-linked life insurance policies (especially those risks which are fully invested in units of equity
funds) are only suitable for policy owners ______. (IL C4)
a) Cannot tolerate the risks of short-term fluctuations
b) Are looking for regular income
c) Have a long term objective
d) Can tolerate the risks of shorts term fluctuations

36. The shortfall between the basic sum assured and the account value is termed as ______. (IL C3)
a) Life value
b) Par value
c) Risk parity
d) Sum at risk

37. In the discount market, the difference between the discounted price and the par value is represented as
the___________ (IL C6)
a) Coupon
b) Profit
c) Interest
d) Yield

38. Select the statement that is correct regarding diversification in investment (IL C5)
a) It is the act of using technical analysis to determine the future movement of the market, using
industry data
b) It is the process of investing across different countries in specific areas or segments which shows
high return
c) It is the process of investing across different asset categories and across different market segments
d) It is the act of balancing the investment portfolio every year to ensure the percentage of each
investment stays constant

39. The first stage in Risk management is ______. (PCEIA C1)

a) Transfer
b) Analysis
c) Control
d) Identification

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 40. From the following statements, select the statement that is true of unit trust investment (IL C6)
a) The trustee manages the portfolio of investment and administers the buying and selling of shares in
the unit trust
b) Unit trust investment, comprising an array of funds ranging from equity bond, fixed income, balanced
funded is established by the trustee
c) A unit trust is a two-way arrangement among investors represented by the agent and the unit trust
operating company
d) The deed enables a fund manager to hold the pool of money and assets in trust on behalf of the
investors

41. One of the particularly important conditions to be satisfied before an investment linked policy can be
considered as not lapsed even if the account value is insufficient to cover the CDE and other necessary
charges is ______. PCEIA C12
a) the premium holiday has been affected only once
b) The regular premium has been paid without fail
c) Partial withdrawal from the account value has been made
d) Investment requests like fund switching have been made

42. Raymond would like to purchase a single premium investment linked policy. He wants to ensure that his
account value after purchase is exactly RM100 000 after the initial cost involved are deducted. His
premium will be_______
a) RM 100 000
b) RM95 000
c) RM105 263
d) RM90 250

43. Select the statement that is true of an investment linked policy PCEIA C12
a) Premiums paid will only be used for specific investment funds of the policy owner’s choice from the
range of funds available
b) The cash value is 100% guaranteed by the insurer and any losses incurred during the policy tenure
will be borne by the insurer
c) The maturity benefit is equal to 60 times of the total premium paid during the tenure of the policy
d) Premiums paid provide life insurance cover and are also invested in specific investment funds of the
policy owner’s choice.

44. Investment linked life insurance policies (especially those risks which are fully invested of equity funds
are only suitable for policy owners who ______ PCEIA C12
a) Cannot tolerate the risks of short-term
b) Are looking for regular income
c) Can tolerate the risks of short-term
d) Have a long-term objective

45. Policyholders can choose to request a premium holiday if they do not have the means to pay the
premium. During a premium holiday _______. CEILLI C2
a) The premium will be paid by the insurance company as an act of goodwill
b) The premium paid by other policyholders will be used to pay the premium of the policyholders who
take a premium holiday
c) The Bank Negara Malaysia Emergency Fund will be used to pay the premium via the insurance
company
d) The cost of insurance will still have deducted from the account value if it is sufficient

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 46. If an 80-years-old is found to own very aggressive funds, or a single person in his twenties has invested
purely in force, it shows that _______.
a) The single person in risk averse
b) Older people are more aggressive in their investment strategy
c) Risk profiling exercise may not have been done
d) The 80-years-old is not risk averse

47. To ascertain the correct mix of objectives that client has and to realize th e completion of these
objectives, the agent has to make sure that clients are given a understanding of how ______
PCEIA C10
a) Investments work
b) The expert decides
c) To do technical analysis
d) To achieve high return

48. Investors also have secondary objectives that are closer to their hearts, that are more focused on
specific reeds, one example is _______. PCEIA C12
a) Saving up for funds for their children’s future business
b) Guaranteeing a successful business operation
c) Ensuring a comfortable annual holiday for the family
d) Ensuring a comfortable standard of living

49. PIDM is a government agency established under Akta Perbadanan Insurans Deposit Malaysia 2005 to
protect against ______ PCEIA C3
a) The failure of a bank to give returns to depositors
b) Lawsuits from depositors in the unlikely event of a bank failure and to promote financial system
stability.
c) The loss of deposits in the unlikely event of a bank failure and to promote financial system stability.
d) Profit loss experienced by a bank

50. Select the statement that is true with regard to shares. CEILLI C6
a) The investor can convert his investment from a fixed interest loan to being part-owner and be entitled
for the company’s profit
b) The shareholders control the company through the fact that basically each share carries one vote at
company meetings
c) The security is either a fixed charge on the company’s property or some of its assets such as trading
stock
d) These are unsecured loans to a company. Both the interest rate and the term are fixed

51. Identify the three basic types of real estate investments CEILLI C6
a) Agricultural property, residential property and commercial property
b) Development property, residential property and commercial property
c) Development property, residential property and high-rise high-value property
d) Agricultural property, residential property and high-rise high-value property

52. Which of the following statements is true with regard to corporate bonds? CEILLI C6
a) Corporate bonds tend to give a lower return than government bonds
b) Debenture stocks are classified as corporate bonds
c) Loan stocks are secured loans to a company
d) Corporate bonds are issued by Bank Negara Malaysia

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 53. Which of the following statement is true about Sukuk? CEILLI C6
a) Sukuk is similar to an obligation backed by an asset as it is a bond
b) Malaysia is the world’s third largest issuer of Sukuk
c) Sukuk securities are structured to comply with Islamic law and its investment principles
d) Sukuk is considered riskier than conventional bonds

54. Select the list of investments that is arranged in order of lowest risk to highest risk. CEILLI C7
a) Derivative funds, equity funds, property funds
b) Equity funds, derivative funds, property funds
c) Equity funds, property funds, derivative funds
d) Property funds, equity funds, derivative funds

55. Select the statement that is correct regarding the Malaysian bond market. CEILLI C7
a) The yield of ten-year-old Malaysian Government Securities (MGS) is slightly above 10%
b) Malaysian bonds are less volatile than global bonds
c) Corporate bonds are deemed lower risk than Government bonds
d) The yields of bonds are not stable

56. The BNM Guidelines on Investment-Linked business state that the initial offer period (of a new fund)
must not ______. CEILLI C8
a) Be less than one month
b) Be less than two months
c) Exceed two months
d) Exceed one month

57. The following is stated in the BNM Guidelines on Investment-Linked business regarding the requirement
for minimum death benefit and top-up premiums: CEILLI C8
a) There is a special requirement for minimum death benefits for top -up premiums which is half of the
basic requirement, thus some of the top-up premiums must be used to pay the cost of insurance
b) The requirement for minimum death benefits does not apply to top-up premiums, thus, the whole of
the top-up premiums can be used to purchase units
c) The requirement for minimum death benefits does not apply to top -up premiums but some of the top-
up premiums must be used to purchase the leverage premium
d) The requirement for minimum death benefits does not apply to top-up premiums, thus, the whole of
the top-up premiums cannot be used to purchase units

58. The Guidelines on Minimum Standards for Treating Customers Fairly states that _____ CEILLI C9
a) Agents should well-trained, especially in investment and savings products
b) Informing customers fully on the key benefits, key risks and exclusions isn’t the agent’ s responsibility
c) The training of agents is not the insurer’s responsibility. thus, it is the responsibility of the agents to
obtain training themselves
d) Products must be sold based only on market needs

59. The following statement is correct CEILLI C9

a) Agents are expected to adopt a professional approach in order to serve sound advisors on the right
plan and right funds to help to set customer’s risk profile, needs and goals
b) Insurers are responsible to pay a claim in any circumstances even in the event that the p olicy owner
has acted irresponsibly
c) Agents are expected to upgrade their knowledge and professional themselves
d) The responsibility of ensuring agents is knowledgeable and professional does not lie on the insurer

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 60. A prospective policy owner may ask intermediary for advice concerning the technical aspect of
investment. Identify what the intermediary should be: CEILLI C9
a) The intermediary should immediately offer advice, whether he is knowledgeable or not
b) The intermediary should offer his advice as he must be knowledgeable in all aspects
c) The intermediary should inform the prospect that is not a big issue
d) The intermediary should advice only on those matter in which he is competent and recommend
another specialist if necessary

61. If an intermediary realizes a prospective policy owner has a policy that is very much inferior compared to
what his insurer offers, the _______. CEILLI C9
a) Intermediary should inform the prospective policy owner of all the benefits available in the p olicy has
insurer offers as it will help Influence the prospective policy owner to cancel his existing policy
b) Intermediary should make a comparison between the product his insurer offers and the existing
policy so the prospective policy owner will be influenced and decide to alter policy
c) Intermediary should insist that the prospective policy owner purchase a new policy while continuing
with the one he already has
d) Intermediary should not attempt to persuade the prospective policy owner to cancel the existing
policy unless it is clearly to unsuited his needs

62. ______ has a better chance to secure loyalty of his customer at the time of renewal CEILLI C9
a) The agent who keeps in contact with his customer and provides important information of risk
evaluation
b) The agent who is highly educated and is very knowledgeable
c) The agent who provides a rebate although this is not allowable
d) The professional agent who has won awards and is well known in the industry

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 ANSWERS
1 C 11 C 21 C 31 D 41 B 51 A 61 D
2 C 12 D 22 A 32 B 42 C 52 B 62 A
3 B 13 A 23 C 33 D 43 D 53 C
4 C 14 D 24 A 34 A 44 C 54 D
5 C 15 B 25 C 35 D 45 D 55 B
6 B 16 A 26 C 36 D 46 C 56 C
7 C 17 A 27 D 37 D 47 A 57 B
8 B 18 D 28 C 38 C 48 D 58 A
9 C 19 C 29 B 39 D 49 C 59 A
10 C 20 D 30 B 40 D 50 B 60 D

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