School of Distance Education
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
C. Hazards
B. Perils
D. Damage
2. _________ is concerned with the conversion of a firm’s asset and earning power against
risks of accidental loss.
A. Risk retention.
C. Risk control.
B. Risk management.
D. Risk identification.
3. ________ involved those losses that occur even if there were no changes in the economic
environment.
A. Dynamic risk.
C. Fundamental risk.
B. Static risk.
D. Particular risk.
4. Risks are not suited to treatment by insurance refers to ____________
A. Static risk.
C. Dynamic risk.
B. Property risk.
D. Liability risk.
5. Fundamental risk is also termed as _________
A. Particular risk.
C. Group risk.
B. Speculative risk.
D. Pure risk.
6. Unemployment, war, inflation, earthquakes etc., are the examples of ________
A. Pure risk.
C. Personal risk.
B. Particular risk.
D. Fundamental risk.
7. Any risk involved a situation where there is a possibility of gain refers to ________
A. Liability risk.
C. Pure risk.
B. Personal risk.
D. Speculative risk.
8. Direct or Consequential losses refer to _________
A. Dynamic risk.
Risk Management and Insurance
B. Particular risk.
1
School of Distance Education
C. Property risk.
D. Pure risk.
9. Spreading of risk otherwise termed as _________
A. Shifting of risk.
C. Reduction of risk.
B. Acceptance of risk.
D. Spreading of risk.
10. The principle of prevention is better than cure refers to __________
A. Avoiding of risk.
C. Transferring of risk.
B. Reduction of risk.
D. Shifting of risk.
11. Insurance is a risk management technique involving____________
A. risk retention.
C. loss control.
B. risk avoidance.
D.risk transfer.
12. Risk management follows a systematic process which involves _______ steps.
A. two.
C. four.
B. three.
D. five.
13. Organizations are mainly concerned with managing
A. pure risks.
C. personal risks.
B. speculative risks.
D. other risks
14. The first step in risk management process is
A. risk avoidance.
C. insurance.
B. risk identification.
D. risk evaluation.
15. Which of the following steps in the risk management process helps in determining sum
insured under policies?
A. risk identification.
C. risk transfer.
B. risk retention.
D. risk evaluation.
16. Main emphasis of risk management is on
A. risk retention.
C. risk transfer.
B. reduction of cost of handling risk.
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
C. to earn interest
B. to make money out of death
D. to earn a status
19. Insurance covers the risk of most certain event _____
Risk Management and Insurance
2
School of Distance Education
A. birth of a person
C. Protection in old age
B. protection of the childhood
D. death of a person
20. Insurance cover _______
A. protects assets
C. reduces the impact of loss
B. prevents loss
D. insurances immorality
21. The person whose risk is insured a is called ____________
A. Insured
C. Indemnity
B. Assured
D. Both a and b
22. The person who agrees to compensate the loss arisingfrom the risk is called the ______
A. insurer
C. underwriter
B. assurer
D. all the above
23. Risk insured against death is a contract of _________
A. assurance
C. indemnity
B. agreement
D. disagreement
24. ________ is a document which provides evidence of the contract of insurance.
A. Proposal form
C. Cover note
B. Policy form
D. Certificate of Insurance
25. The proportion of the risk which the direct insurer holds on his own account refers to
_______
A. Line
C. Retrocession
B. Retention
D. Ceding insurer
26. A Re-insurance of re-insurance refers to _____
A. Line
C. Retrocession
B. Retention
D. Cession
27. Reinsurance also termed as ______
A. insurance of insurance
C. double insurance
B. reinsurance of reinsurance
D. reinsurance
28. When the same risk and subject matter is insured with more than one insurer is called as
_______
A. Double Insurance
C. Reinsurance
B. Over Insurance
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
C. Reinsurance
B. Over Insurance
D. Non-Proportional Reinsurance
30. The business of insurance is related to protection of ________
Risk Management and Insurance
3
School of Distance Education
A. status
C. economic value of assets
B. savings
D. profits
31. Who are the beneficiaries of Insurance?
A. Society
C. Business
B. Individual
D. All of these
32. In insurance contracts, the insurance company is also known as ________
A. Insured
C. Insurer
B. Beneficiary
D. policy holder
33. For introduction of a group scheme, we need a ______
A. Large group of persons
C. Homogeneous group
B. Small group of persons
D. Insured group
34. When choosing group life insurance, most groups buy _______
A. whole life insurance
C. variable life insurance
B. one year renewable group term
assurance
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
C. Loss of bank deposits
B. Loss of investment
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
C. reinstatement of surrendered policy
B. revival of policy
D. all of the above
38. Master policy is issued for _______
A. Term insurance schemes
C. individual insurance
B. permanent 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
C. 50% by a social security fund
maintained by LIC of India
D. LIC of India
40. Subrogation means ______
Risk Management and Insurance
4
School of Distance Education
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, 2001.
C. Dec 11, 1999.
B. Dec 11, 2002.
D. Dec 11, 2003.
44. Foreign equity participation is allowed in insurance sector up to a limit of ____ percent.
A. 80.
C. 49.
B. 73.
D. 26 .
45. 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
School of Distance Education
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
C. remain the same
B. decrease
D. equal
52. The reason for charging level premium is _______
A. risk increases as age increases
C. it is convenient to the insurer
B. it is convenient to the policyholders
D. all the above reasons
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?
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
School of Distance Education
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
School of Distance Education
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
C. insurable interest
B. utmost good faith
D. Both (b) and (c
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
67. Guarantees for employer for the loss out of employee's dishonest is_____________.
A. burglary insurance.
C.third party insurance.
B. fidelity 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.
C. time policy.
B. floating policy.
D. port risk policy.
69. Fire insurance can be taken in respect of_____.
A. movable property only.
B. immovable property only.
C. both movable and immovable
properties.
D. persons only.
70. The principle of indemnity is applicable to _______ only.
A. life insurance.
C. proximate cause.
B. personal accident insurance.
D. property insurance.
71. Except life assurance the maximum term of other insurance is _________
A. 12 months.
C. 6 months.
B. 24 months.
D. 36 months.
72. The person whose risk is insured is called __________
A. Insured.
C. Indemnity.
B. Assured.
D. Both 1 and 2.
73. The person who agrees to compensate the loss arising from the risk is called the _____
Risk Management and Insurance
8
School of Distance Education
A. Insurer.
C. Underwriter.
B.Assurer.
D. All the above
74. _______ policy in which the limits of the risks are determined by place of particular
voyage.
A. Valued.
C. Voyage .
B. Time.
D. Unvalued.
75. _______ policy is which covers the risk during all situations.
A. Floating .
C. Valued.
B. Wagering.
D. Mixed.
76. The term ‘run off’ or ‘fully declared’ refers to ___________
A. Floating policy.
C. Builders risk policy.
B. Wagering policy.
D. Open cover policy.
77. Wagering policy is otherwise termed as _________
A. Policy proof of interest.
C. Builders risk policy.
B. Open policy.
D. Port risk policies.
78. Risk insured against death is a contract of ________
A. assurance.
C. indemnity.
B. agreement.
D. caveat emptor.
79. The term ‘Assurance’ refers to ________
A. Life Insurance Business.
C. Fire Insurance Business.
B. Marine 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.
C. Retrocession.
B. Retention.
D. Ceding insurer.
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.
82. An international code of York Antwerp Rules applied to__________
A. marine losses.
C. losses of crop.
B. losses of fire.
D. losses of human life.
83. Cargo ship caught by fire is an example of __________
A. particular average loss.
C. constructive total loss.
B. general average loss.
D. actual total loss.
Risk Management and Insurance
9
School of Distance Education
84. ___________ policy is granted only in respect of stock of inventories of the insured under
fire insurance business.
A. Floating.
C. Replacement.
B. Declarations.
D. Valued.
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.
86. Duty to minimize loss is incorporated in the policies through _________
A. warranties.
C. clauses.
B. Conditions.
D. declaratives
87. _______ means those risks which involve a situation where there is a possibility of gain.
A. Personal risk.
C. Other risk.
B. Speculative risk.
D. Liability risk.
88. A policy protecting a group of persons, usually employees of a firm generally called as
___________
A. Fire insurance policy.
C. Marine insurance.
B. Group insurance policy.
D. Automobile insurance.
89. When was IRD Act passed?
A. 1972.
C. 1989.
B. 1999.
D. 2000.
90. 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.
C. partially true.
B. false.
D. partially false.
92. Which of the following risks are insurable?
A. Speculative.
C. Sure to happen.
B. Economic.
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
School of Distance Education
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.
100. Individuals define risk as____________.
A. deviation from some expected return.
B. a cost of investing.
C. a quantitative measure.
D. “losing money.”
101. 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
School of Distance Education
Answer Key:
1-A
2-B
3-B
4-C
5-C
6-D
7-D
8-C
9-D
10-A
11-D
12-D
13-A
14-B
15-D
16-B
17-D
18-A
19-D
20-C
21-D
22-D
23-A
24-B
25-B
26-C
27-A
28-A
29-B
30-C
31-D
32-C
33-C
34-B
35-D
36-B
37-D
38-D
39-C
40-D
41-C
42-C
43-A
44-D
45-C
46-C
47-D
48-C
49-B
50-A
51-A
52-D
53-D
54-C
55-B
56-B
57-D
58-D
59-B
60-A
61-C
62-B
63-D
64-C
65-D
66-D
67-B
68-D
69-C
70-D
71-A
72-D
73-D
74-C
75-D
76-A
77-A
78-A
79-A
80-B
81-A
82-A
83-B
84-B
85-C
86-B
87-B
88-B
89-B
90-A
91-A
92-B
93-B
94-A
95-D
96-A
97-C
98-C
99-A
100-B
101-A
©
Reserved
Risk Management and Insurance
12