UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION. (2011 Admn. onwards) VI Semester RISK MANAGEMENT AND INSURANCE

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1 UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION (2011 Admn. onwards) VI Semester B.Com-BANKING - SPECIALISATION RISK MANAGEMENT AND INSURANCE Question Bank & Answer Key Choose the correct Answer from the bracket. 1. The danger of loss from the unforeseen circumstances in future refers to A. Risk B. Perils C. Hazards D. Damage 2. is concerned with the conversion of a firm s asset and earning power against risks of accidental loss. A. Risk retention. B. Risk management. C. Risk control. D. Risk identification. 3. involved those losses that occur even if there were no changes in the economic environment. A. Dynamic risk. B. Static risk. C. Fundamental risk. D. Particular risk. 4. Risks are not suited to treatment by insurance refers to A. Static risk. B. Property risk. 5. Fundamental risk is also termed as A. Particular risk. B. Speculative risk. C. Dynamic risk. D. Liability risk. C. Group risk. D. Pure risk. 6. Unemployment, war, inflation, earthquakes etc., are the examples of A. Pure risk. B. Particular risk. C. Personal risk. D. Fundamental risk. 7. Any risk involved a situation where there is a possibility of gain refers to A. Liability risk. B. Personal risk. 8. Direct or Consequential losses refer to C. Pure risk. D. Speculative risk. A. Dynamic risk. B. Particular risk. Risk Management and Insurance 1

2 C. Property risk. D. Pure risk. 9. Spreading of risk otherwise termed as A. Shifting of risk. B. Acceptance of risk. C. Reduction of risk. D. Spreading of risk. 10. The principle of prevention is better than cure refers to A. Avoiding of risk. B. Reduction of risk. C. Transferring of risk. D. Shifting of risk. 11. Insurance is a risk management technique involving A. risk retention. B. risk avoidance. C. loss control. D.risk transfer. 12. Risk management follows a systematic process which involves steps. A. two. B. three. C. four. 13. Organizations are mainly concerned with managing A. pure risks. B. speculative risks. 14. The first step in risk management process is A. risk avoidance. B. risk identification. D. five. C. personal risks. D. other risks C. insurance. D. risk evaluation. 15. Which of the following steps in the risk management process helps in determining sum insured under policies? A. risk identification. B. risk retention. 16. Main emphasis of risk management is on A. risk retention. B. reduction of cost of handling risk. C. risk transfer. D. risk evaluation. C. risk transfer. D. insurance. 17. When the subject is partially lost by a peril insured against, it is called A. General average loss. B. Constructive total loss. C. Actual total loss. D. Particular average loss. 18. The Concept of Insurance is A. to share losses by many B. to make money out of death 19. Insurance covers the risk of most certain event C. to earn interest D. to earn a status Risk Management and Insurance 2

3 A. birth of a person B. protection of the childhood 20. Insurance cover A. protects assets B. prevents loss C. Protection in old age D. death of a person 21. The person whose risk is insured a is called A. Insured B. Assured C. reduces the impact of loss D. insurances immorality C. Indemnity D. Both a and b 22. The person who agrees to compensate the loss arisingfrom the risk is called the A. insurer B. assurer 23. Risk insured against death is a contract of A. assurance B. agreement C. underwriter D. all the above C. indemnity D. disagreement 24. is a document which provides evidence of the contract of insurance. A. Proposal form B. Policy form C. Cover note D. Certificate of Insurance 25. The proportion of the risk which the direct insurer holds on his own account refers to A. Line B. Retention 26. A Re-insurance of re-insurance refers to A. Line B. Retention 27. Reinsurance also termed as A. insurance of insurance B. reinsurance of reinsurance C. Retrocession D. Ceding insurer C. Retrocession D. Cession C. double insurance D. reinsurance 28. When the same risk and subject matter is insured with more than one insurer is called as A. Double Insurance B. Over Insurance C. Reinsurance D. Non-Proportional Reinsurance 29. When the amount for which a subject matter is insured is more than its actual value it is called A. Double Insurance B. Over Insurance C. Reinsurance 30. The business of insurance is related to protection of D. Non-Proportional Reinsurance Risk Management and Insurance 3

4 A. status B. savings 31. Who are the beneficiaries of Insurance? A. Society B. Individual C. economic value of assets D. profits C. Business D. All of these 32. In insurance contracts, the insurance company is also known as A. Insured B. Beneficiary C. Insurer 33. For introduction of a group scheme, we need a A. Large group of persons B. Small group of persons D. policy holder C. Homogeneous group D. Insured group 34. When choosing group life insurance, most groups buy A. whole life insurance B. one year renewable group term assurance C. variable life insurance D. universal life insurance 35. On the death of the bread-earner, two losses occur in the family-one is loss of human life and the other A. Loss of insurance B. Loss of investment C. Loss of bank deposits D. Earning power of family 36. Consideration on the part of the life insured in respect of a life insurance contract is A. a promise to take a new policy B. the insured promise to pay the premium under the policy C. the payment made towards premium by the insured D. proposal completed and signed by the person 37. The policy holder s duty to disclose material facts lies at the time of A. taking a policy B. revival of policy 38. Master policy is issued for A. Term insurance schemes B. permanent insurance C. reinstatement of surrendered policy D. all of the above C. individual insurance D. group insurance schemes 39. Who pays premium under social security group insurance scheme? A. Every member of the group B. Panchayat of the village 40. Subrogation means C. 50% by a social security fund maintained by LIC of India D. LIC of India Risk Management and Insurance 4

5 A. something of monetary value B. to make good loss C. payment of premium D. transfer of rights of an insured to another person 41. What is full form of FPA in the context of marine underwriting? A. Foreign Policy Association C. Free Port Association B. Free of Particular Average D. Food and Perishable Accounting 42. Premium fixed by insurance company must be sufficient to A. meet the claims C. both (a) and (b) B. cover the expenses D. none of these 43. Broker s Association of India was granted recognition by IRDA on. A. Dec 11, C. Dec 11, B. Dec 11, D. Dec 11, Foreign equity participation is allowed in insurance sector up to a limit of percent. A. 80. C. 49. B. 73. D Moral hazard may be suspected in cases where A. the life to be insured is old. B. the insurance is for a very large sum insured C. in the both the cases D. none of the above cases 46. Which one of the following statements is correct? A. The underwriter assesses the risk B. No policy can be issued without underwriter decision C. Both (a) an (b) statements are correct D. Both (a) and (b) statements are wrong 47. Which one of the following statements is correct? A. Underwriting is done only when there is a medical examination B. Medical examination is necessary before a policy can be issued C. Both (a) an (b) statements are correct D. Both (a) and (b) statements are wrong 48. Which one of the following statements is correct? A. Workingwomen are treated at par with men B. Educated women are treated at par with men C. Both (a) an (b) statements are correct Risk Management and Insurance 5

6 D. Both (a) and (b) statements are wrong 49. Financial underwriting is done to evaluate A. the probability of the policy lapsing in future B. the possibility of moral hazard C. Both (a) an (b) statements are correct D. Both (a) and (b) statements are wrong 50. The net premium will be A. less than the risk premium B. more than the risk premium C. calculated by adding expenses to the risk premium D. more than the pure premium 51. When interest rates fall, the tabular premium rates are likely to A. increase B. decrease 52. The reason for charging level premium is A. risk increases as age increases B. it is convenient to the policyholders C. remain the same D. equal 53. What is meant by a claim under an insurance policy? A. Any demand made by the policy holder on the insurer B. A demand to fulfill the policyholders obligations C. A demand to fulfill the insurer's obligations D. All the three above 54. Which one of the following statement is correct? C. it is convenient to the insurer D. all the above reasons A. A death claim within two years of commencement is treated as an early claim B. A death claim within two years of revival is treated as an early claim C. Both (a) and (b) statements are correct D. Both (a) an (b) statements are wrong 55. Which one of the following statement is correct? A. Maturity proceeds are paid to the nominee, if the policyholder dies earlier B. Maturity proceeds are paid to the heirs, if the policy holders dies earlier C. Both the above statements are correct D. Both the above statements are wrong 56. Which one of the following statement is correct? A. No claim is paid unless the original policy is produced B. Claim can be paid even without the original policy, if it is lost Risk Management and Insurance 6

7 C. Both the above statements are correct D. Both the above statements are wrong 57. Which one of the following statement is correct? A. In the case of SSS policies, the grace period is one month B. If the due date is 27th February the grace period ends on 26th March C. Both (a) and (b) statements are correct D. Both (a) and (b) statements are wrong 58. Which one of the following statement is correct? A. If death occurs in grace period, the premium due is waived. B. The date of payment of premium is the date on which the cheque is cleared C. Both (a) and (b) statements are correct D. Both (a) and (b) statements are wrong 59. Which one of the following statement is correct? A. When a policy lapses, the policy holders loses everything B. When a policy lapses, some benefits are protected C. Both statements are Correct D. Both the statements are wrong 60. Which one of the following statement is correct? A. In group insurance, a single policy is issued covering many persons B. A master policy covers servants of a master C. Both the statements above are correct D. Both statements above are wrong 61. Which one of the following statement is correct? A. Group insurance covers a large number of persons in the policy B. Group insurance is relatively cheaper than individual insurances C. Both the statements above are correct D. Both statements above are wrong 62. Which one of the following statement is correct? A. A master policy is issued in a group insurance policy. B. Each member in a group policy pays the premium directly to the insurer C. Both statements above are correct D. Both the statements above are wrong 63. Which one of the following is true for a group policy? A. Copies of the master policy are given to all members by the insurer. B. The group has to be formed exclusively for the purpose of insurance Risk Management and Insurance 7

8 C. Entry into the scheme and exit out of it, is at the option of the members. D. The amount of the cover is determined by the scheme 64. State which one of the following statement is correct? A. A trade union can take out a group insurance policy B. The cover for an employee can be equal to his age multiplied by a fixed number C. Both the statements above are correct D. Both the statements above are wrong 65. One of the fundamental principles of life insurance is A. there is an insurer and policy holder B. utmost good faith 66. Facts which need to be disclosed is A. facts of common knowledge B. facts which lessen the risks C. facts which every one is supposed to know in general D. family history C. insurable interest D. Both (b) and (c 67. Guarantees for employer for the loss out of employee's dishonest is. A. burglary insurance. B. fidelity insurance. C.third party insurance. D. medical insurance. 68. This policy covers all risks to the ship and its cargo while the ship is at a particular port. A. Voyage policy. B. floating policy. 69. Fire insurance can be taken in respect of. A. movable property only. B. immovable property only. C. time policy. D. port risk policy. C. both movable and immovable properties. D. persons only. 70. The principle of indemnity is applicable to only. A. life insurance. B. personal accident insurance. C. proximate cause. D. property insurance. 71. Except life assurance the maximum term of other insurance is A. 12 months. B. 24 months. C. 6 months. D. 36 months. 72. The person whose risk is insured is called A. Insured. B. Assured. C. Indemnity. D. Both 1 and The person who agrees to compensate the loss arising from the risk is called the Risk Management and Insurance 8

9 A. Insurer. B.Assurer. C. Underwriter. D. All the above 74. policy in which the limits of the risks are determined by place of particular voyage. A. Valued. B. Time. C. Voyage. D. Unvalued. 75. policy is which covers the risk during all situations. A. Floating. B. Wagering. C. Valued. D. Mixed. 76. The term run off or fully declared refers to A. Floating policy. B. Wagering policy. 77. Wagering policy is otherwise termed as A. Policy proof of interest. B. Open policy. 78. Risk insured against death is a contract of A. assurance. B. agreement. 79. The term Assurance refers to A. Life Insurance Business. B. Marine Insurance Business. C. Builders risk policy. D. Open cover policy. C. Builders risk policy. D. Port risk policies. C. indemnity. D. caveat emptor. C. Fire Insurance Business. D. Motor Vehicle Business. 80. The proportion of the risk which the direct insurer holds on his own account refers to A. Line. B. Retention. 81. IRDA refers to A. Insurance Regulatory Development Authority. B. Indian Regulatory Development Authority. C. Institute of Regulatory Development Authority. D. Insurance Regulatory Development Association. C. Retrocession. D. Ceding insurer. 82. An international code of York Antwerp Rules applied to A. marine losses. B. losses of fire. 83. Cargo ship caught by fire is an example of A. particular average loss. B. general average loss. C. losses of crop. D. losses of human life. C. constructive total loss. D. actual total loss. Risk Management and Insurance 9

10 84. policy is granted only in respect of stock of inventories of the insured under fire insurance business. A. Floating. B. Declarations. 85. Insurance business is based on A. Parkinson s law. B. Newton s law. C. The theory of probability and law of large numbers. D.Boyle s law. C. Replacement. D. Valued. 86. Duty to minimize loss is incorporated in the policies through A. warranties. B. Conditions. C. clauses. D. declaratives 87. means those risks which involve a situation where there is a possibility of gain. A. Personal risk. B. Speculative risk. C. Other risk. D. Liability risk. 88. A policy protecting a group of persons, usually employees of a firm generally called as A. Fire insurance policy. B. Group insurance policy. 89. When was IRD Act passed? A B C. Marine insurance. D. Automobile insurance. C D Which of the following is the similarity between insurance and gambling? A. The amount of loss to be paid is known before hand. B. Promise to pay on the happening of an event. C. Both the parties win on happening of an event. D. Both are enforceable at law. 91. A human life is an income-generating asset A. true. B. false. 92. Which of the following risks are insurable? A. Speculative. B. Economic. C. partially true. D. partially false. C. Sure to happen. D. Other risks. 93. The premium actually paid by the policy holder depends upon A. the wealth of the person to be insured. B. the level of risk assessed by the insurer. Risk Management and Insurance 10

11 C. the tables of rates printed by the insurer. D. agents report. 94. Which one of the following statement is correct? A. A life insurance policy is a contract, enforceable in a court of law. B. A life insurance policy is not required to be stamped. C. Both the statements are correct. D. Both the statements are wrong. 95. Notification of Alteration in Risk is a condition. A. precedent to liability. C. precedent to the contract. B. subsequent to liability. D. subsequent to the contract. 96. As the age increases risk on the life. A. Increases. C. does not change. B. Decreases. D. Moderate. 97. If the interest rates in the market are higher, then cost of insurance. A. Increases. C. Decreases. B. moderate. D. no change. 98. One who shares the risk under an insurance policy or policies is known as. A. Assurer. C. Co-insurer. B. Insurer. D. Agent. 99. The concept of bancassurance originated in. A. France. C. England. B. U.S.A. D. Italy Individuals define risk as. A. deviation from some expected return. C. a quantitative measure. B. a cost of investing. D. losing money Committee of reforms in insurance sectors during 1993 headed by. A. R.N. Malhotra. C. Manmohan Singh. B. S. Narashiman. D. P.Chidambaram. Risk Management and Insurance 11

12 Answer Key: 1-A 12-D 23-A 34-B 45-C 56-B 67-B 78-A 89-B 100-B 2-B 13-A 24-B 35-D 46-C 57-D 68-D 79-A 90-A 101-A 3-B 14-B 25-B 36-B 47-D 58-D 69-C 80-B 91-A 4-C 15-D 26-C 37-D 48-C 59-B 70-D 81-A 92-B 5-C 16-B 27-A 38-D 49-B 60-A 71-A 82-A 93-B 6-D 17-D 28-A 39-C 50-A 61-C 72-D 83-B 94-A 7-D 18-A 29-B 40-D 51-A 62-B 73-D 84-B 95-D 8-C 19-D 30-C 41-C 52-D 63-D 74-C 85-C 96-A 9-D 20-C 31-D 42-C 53-D 64-C 75-D 86-B 97-C 10-A 21-D 32-C 43-A 54-C 65-D 76-A 87-B 98-C 11-D 22-D 33-C 44-D 55-B 66-D 77-A 88-B 99-A Reserved Risk Management and Insurance 12