imt assignment

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Amity Campus

Uttar Pradesh

India 201303

ASSIGNMENTS

PROGRAM: BFIA SEMESTER-VI

Subject Name INSURANCE MANAGEMENT

Study COUNTRY SOMALIA LC

Roll Number (Reg. No.) BFIA01512010-2013019

Student Name Mohamed Abdullahi Khalaf

INSTRUCTIONS

a) Students are required to submit all three assignment sets.

ASSIGNMENT DETAILS MARKS

Assignment A Five Subjective Questions 10

Assignment B Three Subjective Questions + Case Study 10

Assignment C Objective or one line Questions 10

b) Total weight age given to these assignments is 30%. OR 30 Marks

c) All assignments are to be completed as typed in word/pdf.

d) All questions are required to be attempted.

e) All the three assignments are to be completed by due dates and

need to be submitted for evaluation by Amity University. f) The students have to attach a scanned signature in the form.

Signature :

Date : 05/05/2013

( √ ) Tick mark in front of the assignments submitted.

Assignment ‘A’ √ Assignment ‘B’ √ Assignment ‘C’ √

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INSURANCE MANAGEMENT (BFIA)

Assignment A

Q: 1). What is risk and how risk is determined in life insurance?

Answer:

Risk is a condition whereby there is a possibility of loss occurring. In insurance the subject matter insured is called the Risk.

In insurance, risk is the possibility of a loss or other adverse event that has the potential to interfere with an organization’s ability to fulfill its mandate, and for which an insurance claim may be submitted.

Risk is the probability that a hazard will turn into a disaster. Vulnerability and hazards are not dangerous, taken separately. But if they come together, they become a risk or, in other words, the probability that a disaster will happen.

Nevertheless, risks can be reduced or managed. If we are careful about how we treat the environment, and if we are aware of our weaknesses and vulnerabilities to existing hazards, then we can take measures to make sure that hazards do not turn into disasters.

There are two main components in the risk definition:

1) Uncertainty: it refers to a situation where an event may or may not happen. For example: a building may or may not have a fire accidents.

2) Undesired Consequences: this refers to the negative results that may arise out of an event, such as a fire accident which may result in damage to a property as well as result in consequential loss of business due to stoppage of work.

Life insurance, like other types of insurance, is based on the concept of sharing risks. In life insurance usually risk is determined by some factors, specially the factors affecting mortality. The mortality is not the only risk but the capacity and willingness of a person also influence the insurance decision. Besides mortality there are some other factors which are needed in determination of risk in life insurance. They are- how long the customer keeps the policy, how efficient the company operates, Investment, return of and on invested cash flows.

Q: 2). What are the various assumptions underlying the calculation or premium.

Answer:

A premium is a fee paid to the insurer to be covered under specified terms. It is two types: net premium and gross premium. The net premium is based on the mortality and interest rates whereas the gross premium depends upon the mortality rate, the assumed interest rate, the expenses and the bonus loading.

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The various assumptions underlying the calculation of the premium are:

a) As many policies of given type are being issued as are the number of persons.

b) Premiums are collected in advance or in the beginning of the period. c) All collections are immediately invested and will remain invested until

money is needed for the payment of claims. d) The insurer will receive an assumed rate of interest. The assumed rate

should be conservative to avoid future decline in interest rate. e) The interest or dividend or any return of the invested funds is immediately

invested for re-earning. f) Mortality rate will be the same as given in the mortality table and will be

uniformly distributed throughout the year. g) All policies are of the same amount, say Rs. 1,000. h) Claims will be paid only at the end of the period.

These assumptions may not be totally practicable, but they are taken as for making calculation easy.

Q: 3). How is reserve created and for what is it created?

Answer:

The reserve in life insurance is different from the reserve in other business. It is not an accumulation of profit. In insurance, it is a liability which is to be met by the insurer at and when it arises. It represents a liability which must be adequately met.

Definition: The reserve is that fund, which together with future premiums and interest, will be sufficient to pay the future claims. This is called prospective definition because here the future amounts are considered. Another definition of the reserve is the retrospective definition under which the reserve is considered as the accumulation at interest of the difference between the net premiums received in the past and the claims paid out.

The reserve has nothing to do with an insurer’s actual past experience. It is always, calculated on the assumption that experience has been in accordance with the mortality table selected and interest rate assumed. However, the assumptions as to future interest and mortality are made on a safe basis. It is, thus, clear that on each policy a certain sum must be accumulated every day to be increased at an interest to

form fund to meet the future liability of the policy. This accumulation is called the Reserve on the Policy.

Origin of Reserve

The reserve in any group of policies originates in the excess of premium receipts over payment of claim. The premium receipts are more than the payments in the beginning and less after a point. The excess receipts are accumulated at the assumed rate of interest and build up the ‘Reserve’ up to a point of time, the reserve grows, particularly, because of such receipts. It is to be noted again here that the reserve is

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accumulated on the assumed mortality and interest. The reserve based on this assumptions is compared to the funds based on the actual experience. The difference may create ‘surpluses, or deficit. As has been noted that the reserve accumulates at a point and starts declining thereafter because of heavy mortality and receipts of premium at the advanced age.

Sources of Reserve

1. Premium: The first and the foremost source of reserve is premium. It should be noted that reserve is accumulated in level premium plan because the premium is more the actual cost of insurance in the beginning. In other tow method of premium, reserve cannot be accumulated. This is discussed as below:

(a) Assessment Premium Plan: The members of a group would, under this plan, contribute to a fund which could be utilized in rendering assistance at the time of death to the deceased’s deponents. The payment is made by contribution only at the time of death. Therefore, there is no need to accumulate amount for payment of claim.

(b) Natural Premium Plan: Under this plan, the rate of premium will increase as the insured grows older. It is based on the risk. Since, risk increases as the time passes, the premium charged from the policy holder also increases. The premium increases year after year with the increase in mortality rate and, so it is also called yearly renewable premium plan. The reserve is not accumulated in this case, because premium increases as the cost of insurance increases.

(c) Level Premium Plan: Here, the premiums to be paid are leveled so that usually the same premiums are paid every year. The premiums in the early years are greater than the actual cost (determined by the mortality rate) with the result that the excess payments of premiums in the earlier years are accumulated as reserve which makes up any deficiency out of lower premium in later years.

2. Interest: The second source of reserve is interest because the accumulated fund is not remaining idle, it is invested. While calculating premium it was assumed that the insurer will earn a certain rate of interest, so to earn at least that much of amount, the accumulated funds have to be invested. The assumed rate of interest is the source of reserve.

3. Nature of Policy: The reserve can be calculated only in those policies where payment is not certain, reserve is generally not requiring. Thus amount of reserve depends upon the duration of the policy and nature of the policy.

Q: 4). What is fund and why the fund is invested?

Answer:

A premium is a fee paid to the insurer to be covered under specified terms.

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While calculating premium, it has been assumed that the accumulated premiums are invested. The funds are invested to earn at least assumed rate of interest. The needs of investment of funds are given here in brief.

NEEDS OF INVESTMENT

1. Payment of Claims: The first and most important obligation of the insurer is to pay the amount of claims whenever they arise. For this, insurer is getting a substantial amount in form of premiums and has to preserve them for payment later on, to keep such amounts idle will be a failure on the part of the insurer who is expected to invest them on behalf of the policy-holders.

2. To Avoid Financial Deficit: If funds are not invested, the total income of the

insurer will fall short of its requirement for meeting its commitments because a particular rate of interest on its investments has been assumed while calculating the rate or premium. Again, if funds are not invested and interest not earned, it would be an under-estimation of its future liability which may prove disastrous at the time of higher mortality.

3. National Interest: A huge fund of the society is taken by the insurers in form of premiums. Therefore, it is essential for the insurers to invest the funds for the economic development of the nation.

SOURCES OF FUNDS

The funds with the insurers are accumulated from the various sources, some of which are given below:

(i) Premiums: The main source of funds is the premiums collected by the insurer. The premiums may be single premium, level premiums or annuity considerations. The excess of these premiums over the needed premiums for meeting claims and expenses is the source of funds.

(ii) Interest: The second source of funds is the excess interest earned over the assumed rate of interest. The assumed rates are lesser than the actual rate in most of the cases. In reverse, the funds will decline.

(iii) Capital Gain: Funds obtained from the sale of share capital and debentures are included under capital gains.

(iv) Savings in Expenses: Savings in expense loading, bonus loadings or mortality savings are also contributing to the funds of the insurers.

(v) Non-Payment of Claims: In pure endowment or term insurance, the claims may not arise, therefore, the premiums paid for such benefits are saved. Sometimes, in certain cases, the claimants do not come for payment at all. Thus, saved money also form part of the funds of insurers.

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Q: 5). Explain in detail: (a) Proposal Form. (b) Medical Examination,

(c) Proof of age, and (d) Insurance of female lives.

Answer:

a) Proposal form- the first and important source of risk information is proposal form. The proposer is ready to disclose all the material facts truly and fully. If any question is not asked by the insurer, the proponent should reveal the information. Usually the agents ask all the questions which are written in the proposal form. The proposal form is of two parts- application form and personal statement. Application form includes questions relating name, terms of insurance, sum to be assured, mode of premium payment, date of birth, object of the insurance, name of the nominee, previous insurance history, acceptance or rejection of proposal. Personal statement includes

name of the life to be assured, family history of father, mother, brother and sister in connection with their death, illness and cause of death.

b) Medical examination- the medical examination has to identify the applicant to avoid the case of impersonation. The knowledge of medical examiner to assured is also required. Through the medical examination the examiner prepares a report. This medical examiner’s report contains the information about measurement of height, weight, condition of teeth, chest, heart, digesting power, nervous system operations and other physical test of life.

c) Proof of age- To calculate the premium rate the most essential part is proof of age. Unless age is proved the payment of claim is not made. Age must be admitted at the time of proposal to avoid dispute. On the basis of age, in future, if a misstatement is discovered after the policy has become a claim; the amount of the claim is adjusted In accordance with the rectification of age. Age proof is essential at the proposal if the policy is term insurance, non-medical policies and immediate annuity or the insurance is taken at advance age or for a child.

d) Insurance of female lives- In the case of insurance, women have different needs to men- as well as different roles in society, and different risk profiles. For this reason, a range of insurance products have been created to meet the unique needs of female policyholders. Women don’t only face a very different set of life experiences to men, but they also tend to play a very different role in society. This means that women often need to focus on the needs of their families, and on their own needs, before they can turn their attention to financial matters. Take pregnancy, for example. Between staying healthy, going for regular check-ups, preparing for Baby’s arrival and actually

giving birth, do you really have time to worry about endless paperwork and policies. Female lives will be classified into four categories such as women with earned income, women with unearned income and women not covered by previous two categories.

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Assignment B

Q: 1). What are the various factors affecting the calculation of premium.

Answer:

Insurance companies use different factors when determining premiums for a specific type of insurance policy. This can include automobile insurance policies, health insurance policies as well as a homeowner’s insurance policy. Many factors are similar from one type of policy to another, however certain policies have special requirements such as driving history and claims history that are factored into the premium.

The premium is two types: (1) Net Premium and (2) Gross Premium. The two

premiums are further sub-divided into two parts: (i) single premium, and (ii) level premium. The net premium, is based on the mortality and interest rates whereas the gross premium depends upon the mortality rate, the assumed interest rate, the expenses and the bonus loading. Single premium is paid in one lump sum while the level premium is paid periodically in instalments. The level premium may be yearly, half-yearly quarterly and monthly. Firstly, net single premium is calculated and other premiums are based on the calculation.

Q: 2). Critically examine the various factors affecting risk. From where this information of risk is obtained?

Answer:

There are various factors affecting the risks in insurance. In life insurance we can focus on some important factors. These are age, build, physical condition, personal history, family history, occupation, residence, personal habits, morals, race and nationality, sex, economic status, defense service, plan of insurance etc. by focusing on each of the factors very briefly we can critically examine the effect of these factors in life insurance.

In life insurance, the factors which may affect the risk are usually those factors which are affecting the mortality; they are also called factors affecting longevity of a person. The mortality is not the only risk but the capacity and willingness of a person also influence the insurance decision. These factors are discussed in following paragraphs:

1. Age: The age of the life to be assured is the most important factor to affect

mortality. Except for a few years of childhood, the premium is determined at every year of the completion of age. The corporation asks for the age nearer to birthdays. The person below six months and the person above six months older will be treated of the same age. For instance, a person of 23 years 7 months and another person of 23 years 5 months will be treated the age of 23 years.

2. Build: Build refers to physique of proposed life and includes height, weight and the distribution of weight and chest expansion. There are standards of weight according to maximum weight reveal the indication of certain hidden diseases. Therefore this sign

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is not favourable. The relationship between height, weight, girth and expansion of chest are the basic determinants of mortality expectations.

3. Physical Condition: The physical condition of the age life proposed has a direct bearing on the mortality of the life. Insurer are, therefore, very particular about the conditions of the applicants’ sight, hearing, heart, arteries, lungs, tonsils, teeth, kidneys, nervous system, etc. The experts in the field can assess the longevity or mortality of a person due to impairment of certain organs. The questions are also designed to elicit information on the physic status of the applicant in proposal form. The information is confirmed and supplemented by the medical examination. The prime purpose of the medical examination is to detect any malfunctioning of the vital organs of the body.

4. Personal History: The personal history of the life purposed would reveal the possibility of death to him. The history may be connected with the (i) health record, (ii) past habit, (iii) previous occupation, (iv) insurance history.

5. Family history: Like the personal history, family history also requires information of habit, health, occupation and insurance of other family members, particulars of the parents, brother and sisters. The children’s history of health is also required. The certain diseases, like tuberculosis and insanity, etc., and longevity of the parents will be relevant factors for determining the degree of risk of the proponents. The favourable family history, however, is not considered for offsetting the adverse effect of the personal history. The family history, is considered significant to know the transmission of certain, characteristics by heredity, heart, lungs, build, etc., follow family.

6. Occupation: Occupation is an important factor to affect the risk. It affects the occupation in various ways. Firstly, the nature of work may be hazardous because he may suffer an accident at any time while at work. Secondly, the morale of the workers may go down. They may be tempted to indulge in intoxicating or liquor or forms of immoral living. Thirdly, the chemical effect may be poisonous. For instance, the workers may contact poison while engaged match or chemical factories. Fourthly, the dusty or unventilated house, unhealthy or insanitary environments may deteriorate the health of the workers. Fifthly, in certain occupation, the occupational diseases are common. Sixthly, excessive mental and nervous strain may cause financial worries, and lastly, the lesser income may affect the health of the worker.

7. Residence: The residence also affects the risk. The risk will be lesser in a good

climate area and more in a bad climate although the difference is narrowed down because of better medical and sanitary facilities. Information about the previous residence is equally important. The geographical location, atmosphere, political stability, climate, construction of house, travel, etc., are important factor which may affect the risk.

8. Present habits: The general mode of living of the proposer affects the risk. Drunkards and non-temperate persons cause increase in mortality. Similarly, temperate habits tend to increase longevity of a person. Excessive and careless smoking tends to shorten the life due to development of nicotine poisoning. The past

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habits are also considered important. The intoxication affects the health of a person and consequently his mortality. The general mode of living is also considered in habits.

9. Morals: It has been observed that the departure from the commonly accepted standards of ethical and moral conduct involve extra mortality. Infidelity and departure from the code of sex behavior are seriously regarded because they may affect the health. Unethical conduct is considered to be another form of moral hazard. Insurance is not generally given bankrupt and reputed dishonest person.

10. Race and Nationality: The mortality are differs from race to race and nation to nation. In India, person of high, race or caste are expected to live longer than the scheduled caste or tribes. Similarly, countries near to equators have more mortality.

The climate and way of life of a country affects the health conditions of the people.

11. Sex: Mortality among female sex is, generally, higher than the male sex because the physical hazard of maternity is present the former case. Moreover, the ladies are physically more handicapped. The lesser education, conservatism and non-employment of the ladies also affect the mortality. The absence of proper examination of the ladies also count more hazard. The chances of moral hazard are also present in the female insurance. So, unless woman has well financial for insurance, her proposal not generally conceded.

12. Economic status: It is essential to examine that the family and business circumstances of the proponents are such as to justify the amount of insurance applied for. This investigation also reveals whether the income of the applicants bears a reasonable relationship to amount of insurance which he proposes to carry. The higher economy status generally a better field for insurance due to various reasons. Educational, financial and professional consciousness make the proponent insurance minded. The chances of death is also lower in higher strata of society.

13. Defense services: Though there has been much improvement in defense technology, yet flying and gliding, etc., is still considered hazardous one. Sometimes, certain restrictive clauses are imposed for insuring person engaged in such services. In some other works, extra premiums are required. In commercial flying, no occupational extra is required. The war clause is added to avoid the occupation risk in defense, say, navy, air force and military.

14. Plan of insurance: Certain plans involve more responsibility to the insurer at

death and so these plans are restricted to only first class lives. Similarly, some plans have lesser risk and therefore, can be issued without any extra investigations. For example, the multi-purpose policy is issued only to first class lives and the pure endowment policy can be issued to any one irrespective of health.

The mortality rate differs from race to race and nation to nation. The climate and way of life of a country affect the health condition of the people.

There are also some factors affecting the risks of life insurance such as economic status, defense service Personal and plan of insurance etc.

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Risk Information is obtained from various sources because it is not possible to get all information from one source. Moreover, information from various sources on a particular item will provide an effective check. The following are risk information sources:

Information on the factors affecting risk is collected before it can be evaluated to determine the degree of risk. It is collected from various sources because it is not possible to get all information from one source. Moreover, information from various sources on a particular item will provide an effective check.

1. The proposal form: The first and important source of risk information is application form. The proposer is required to disclose all the material facts truly and fully. If any information is not asked by the insurer, the proponent should reveal the

information if he thinks it to be material. Usually, the agent asks all the questions which are written in proposal form.

The proposal form is divided into two parts.

(i) Application form; and

(ii) Personal Statement.

The application includes questions pertaining to home, address, term of insurance, sum to be assured, mode of payment, date of birth, object of insurance, name of the nominee, previous insurance history, acceptance or rejection of the proposal, engagement in navy, air force and military services or the intention to engaged in these services. Double accident benefit is sought or not. There are some additional questions to be answered by formal proposers, which are about education, their income, income occupation and insurance of husband. There is declaration in the end of the form which the basis of contracts between the insured and the insurer.

Part II of the proposal form is called personal statement which is filled by (1) either the life to be assured, or (ii) the agent of development officer, writing at the dictation of the life to be assured. This statement mentions name of the life to be assured, family history of father, mother, brothers and sisters in connection with their health and illness and cause of death. Questions about the bodily impairments, serious disease, habits, operation, accident or injury. There are special questions for such as observing of predate, conceptions, miscarriages and abortion for female proposers. Declaration of the proposer is also essential.

In non-medical proposals some detail information is also required. Name and address of family physician, absent on ground of ill-health, height, weight, name and address of present and previous employers and declaration.

The proposal form gives all the required information of risk. Different types of proposal forms are used for different policies.

2. Medical Examiner’s Report: The medical examiner has to identify the applicant to avoid the case of impersonation. The knowledge of medical examiner to the assured is

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also required. General appearance is an important question where proposal’s apparent age, general health, habit, vaccination, deformity are asked. Measurement of height, weight, condition of teeth, gums, ears, chest, heart, digestive tract, gentito-urinary system, nervous system operations and other details, etc. are inquired by physical test of the life to be assured. There are special questions for female proposers. Opinions of the medical examiner for the longevity, suspected health, first class lives, etc., are required. He has to declare that the findings are true and correct.

The information given by the medical examiner is deemed to be correct and it is expected that the medical examiner would give true picture; but certain cases in India have revealed that the reports of medical examiner are not hundred percent reliable. Therefore, underwriting officers at divisional or zonal office are required to go into details suspected cases because once proposal has been accepted it cannot be repudiated on the ground of wrong medical reports.

3. Agent’s Report: Although agents has to pursue or canvass a lot for getting proposal. Yet he is required to state whether the life to be assured, is insurable or not. He has finish information of sum assured, name, acquaintances with the proposer, time and place of first introduction, identity of the life, medical examiner’s name and address, monthly income and occupation of the proposer, general state of health, relationship with the agent, etc. The agent has also to disclose the financial and social position of the proposer. The agent is required to disclose all the unfavorable information of the life proposed. The agent’s report can be of great value to the underwriting department because he has personal acquaintance with the life proposed and can give a full and correct information of all the factors affecting the risk.

Insurers do not place too much reliance of the agent’s certificate e because, he, in his zeal to increase his commission, might tend to colour his judgment. The comparison of agent’s reports with information of other sources may reveal the fair or unfair reports of the agent. In case of wrong information of material facts, his license may be cancelled.

4. The inspection report: The insurer generally verify the information obtained by an independent agency. Sometimes this investigation is conducted without the knowledge of the applicant. Today, insurer have their own inspection staff who are generally known as inspectors or field officers or development officers. When the amount of insurance is not large, the inspectors make a general inquiry but when the amount is substantial, a deep and thorough inquiry of habits, character, social condition, occupation and health is required. In this case, the inspector interviews the

applicant’s neighbours, employers, bankers, business associates and other who have had special information pertaining to business, personal ethics, temperate habit, social behavior and health.

The main advantage of this source is that the inspectors provide fair and frank information because they have no interest in the outcome of the case.

5. Private Friends Reports: The information from private friends is not generally required. But for some checking purposes, confidential reports of the friends of the proposer are considered. They are requested to reply those questions which are

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generally asked in agents report. Since friends are fully aware of the personal and private life of the proposer, they can give better information than the agents. But naturally the real friends does not want to harm his friend. So friends report may not always correct.

6. Attending physicians: The attending or family physicians can give better records of health, history of the proposed life and his family. It has been revealed that the family physicians have given true and fair reports of the required information by the insurers. The family physicians give the information only after charging a certain amount of fees.

7. Medical Information Bureau: The organization commonly known as ‘MIB’ is an effective bureau for furnishing confidential medical reports. This bureau is common in

U.S.A, but in India such bureau has not started. The insurer are members of this bureau and pay a certain fee annually. Sometimes they are required to pay commission for furnishing information. The MIB has recorded sufficient information os reputed and distinguished persons so the bureau is competent enough to report adequate and fair information.

8. Neighbours and Business Associates: Confidential reports about the applicant can be easily obtained from the neighbours and business associates although it may be prejudice to the extent of friendship or enmity with the proposer. The obtained information can be tallied with other information.

9. Commercial Credit Investigation Bureau: The bureau assembles financial and social information of businessmen. The credit worthiness is decided by the Bureau. The information given by the Bureau is treated confidential. These reports are expected to be correct and fair to greater extent.

Q: 3). Give the various solutions of the problems of investment

Answer:

While investing the funds, the insurer will have to face various problems, some of which are given in the following sections:

1) The main problem of investment is to preserve the interest of the policy-holders. The insurer keeps the money of the policy-holders as a trust money. To maintain the trusteeship it is essential that the fund must be invested in such securities which are

sage and secured.

2) The payment of the claim amount is the second problem of the life insurer. The insurer must have sufficient funds to pay the claims. So, the interest earned from the investment must be adequate enough.

3) The assets of the insurer should be protected from any elements of fluctuations. Therefore, the insurer must earn sufficient amount to pay its expenses. Moreover, the earning should be constant and the market price of the securities must not fall considerably.

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4) There should be complete good faith of the public in the insurer’s management of funds. In case of doubtful investment the purpose of public may be defeated. The insurer, therefore, may be loosing its business in future.

5) A great care has to be taken while selecting suitable channels of investment. The principles of investment should be followed to a considerable extent. Investment should be such that profit thereon should be followed to a considerable extent.

Investment should be such that profit thereon should be maximum without hampering safety and marketability.

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CASE STUDY

1. Calculate the value of an anticipated endowment assurance for a person aged 25 with the following benefits.

(i) A sum of Rs.100 at the end of 2nd year. PV = Sum[(1+r)^n -1/r]

= 100[(1.05)^2 -1]/0.05 = Rs 205

(ii) A sum of Rs.200 at the end of 3rd year PV = 200[(1.05)^3 -1]/0.05 = Rs 315.25

(iii) A sum of Rs.300 at the end of 5th year if the life assured is alive at the end of respective years. PV = 300[(1.05)^5 -1]/0.05 = Rs 1657.689

iv A sum of Rs.600 whenever the dies during the 5 years period

PV = 600[(1.05)^5 -1] /0.05 = Rs 3315.379

Use the data given above with 5 percent rate of interest

2. Calculate on the basis of mortality table given below, net annual premium at 5% rate of interest for a 5 years Term Insurance for Rs.1,000 effective at the age of 60 years.

Age Number living Number Dying Mortality rate per1000

60 1000 20 20 61 980 22 22.45 62 958 25 26.1 63 933 33 25.37 64 900 40 44.44 65 860 45 52.33

Total pv of all claims = Rs190.69 Premium per policy = 190.69/1000 = Rs 0.19069

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Assignment C

Q: 1). Risk is the possibility of an unfortunate _______________

a) Recurrence

b) Occurrence () c) Event d) None of the above

Q: 2). Risk is a combination of ____________.

a) Events b) Losses

c) Hazards () d) Doubts

Q: 3). Certainty is a state of being Free from ___________.

a) Touts

b) Doubts () c) Hazards d) Loss

Q: 4). Risk gives rise to ________.

a) Clarity b) Certainty

c) Uncertainty () d) Doubt

Q: 5). __________ is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for.

a) Risk () b) Certainty c) Uncertainty d) Doubt

Q: 6). ________ is defined as the relative variation of actual loss from expected loss.

a) Subjective risk b) Risk

c) Objective Risk () d) None of the above

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Q: 7). ________ is defined as uncertainty based on a person’s mental

condition or state of mind.

a) Subjective risk () b) Risk c) Objective Risk d) None of the above

Q: 8). _________ refers to the long run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in the underlying conditions.

a) Objective probability () b) Subjective Probability c) Probability d) Chance

Q: 9). _________ is the individual’s personal estimate of the chance of loss

a) Objective probability

b) Subjective Probability () c) Probability d) Chance

Q: 10). A peril refers to cause of ______ or ________ that may cause a loss.

a) Loss, contingency () b) Doubt, contingency c) Loss, doubt d) Doubt, hazard

Q: 11). Risk is a condition in which there is a possibility of _______ from a _______ that is expected or hoped for.

a) Desired outcome, adverse deviation

b) Adverse deviation, desired outcome () c) No outcome, deviation d) Exposure, Outcome

Q: 12). Two aspects of probability are _________ and ____________.

a) Objective, financial b) Subjective, financial

c) Objective, subjective () d) None of the above

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Q: 13). Dynamic risks are those resulting from ________ in the ____________.

a) Change, economy () b) Change, financial position c) Finalization, business d) None of the above

Q: 14). A fundamental risk is a risk that affects the entire _______ or large number of ___________.

a) Organization, members

b) Country, citizens () c) Business, employees d) Economy, persons

Q: 15). Actuarial modeling involves a ____________ mechanism.

a) Temporary b) Permanent

c) Feedback () d) Revert back

Q: 16). Hazards can be classified as follows:-

I. Physical II. Morale

III. Financial IV. Monetary V. Moral

a) i, ii and iii b) ii, iii and iv c) iii, iv and v

d) i, ii and v ()

Q: 17). Certification of risk include:

I. Financial and non financial risk II. Objective and subjective risk

III. Static and dynamic risk IV. Acceptable and unacceptable risk V. Fundamental and particular risk

VI. Pure and speculative risks

a) All of the above () b) i,iii,iv,v,vi c) i,ii,iii,iv,v d) i, ii,iii,iv,vi

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Q: 18). which of the statements are true:

I. Risk is the possibility of an unfortunate occurrence II. Risk is a combination of hazards

III. Risk is predictable IV. Risk is certainty of loss V. Risk is possibility of loss

a) All of the above () b) i, ii, and iv c) ii, iii and v d) i,ii and v

Q: 19). Pure risks include:

I. Personal risks II. Fundamental risks

III. Property risks IV. Liability risks V. Technological risks

a) i, ii and iii

b) i, iii and iv () c) ii, iv and v d) ii, iii,and v

Q: 20). Personal risks include:

I. Risk of premature death II. Risk of property

III. Risk of insufficient income during retirement IV. Risk of poor health V. Risk of unemployment

a) All of the above

b) i, iii, iv and v () c) ii, iii, iv and v d) None of the above

Q: 21). Insurance is defined as a co-operative device to ______ the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against that risk.

a) Reduce b) Stop

c) Spread () d) Divide

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Q: 22). Risk is uncertainty of a financial loss.

a) True

b) False ()

Q: 23). Insurance protects ______ property.

a) Personal b) Public

c) Registered () d) Mortgaged

Q: 24). Insurance eliminates_______

a) Fear () b) Dependency c) Protection d) Capital

Q: 25). Insurance policies are _______ from tax.

a) Subtracted b) Deducted c) Adjusted

d) Exempted ()

Q: 26). The business can obtain loan by _______ the policy.

a) Hedging

b) Pledging () c) Lending d) None of the above

Q: 27). Insurance may provide __________ Indemnification to business.

a) Keyman () b) Lockman c) Chairman

d) None of the above

Q: 28). ______ was made to provide workers and their families, working in the industries located in certain notified areas.

a) Motor vehicle act, 1988 b) Public liability act, 1991 c) Workman compensation act, 1923

d) Employee state insurance act, 1948 ()

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Q: 29). _______ made the liability of the employer fixed and he is now

required by law to pay compensation to victims of accidents while on duty.

a) Employee state insurance act, 1948 b) Public liability act, 1991

c) Workman compensation act, 1923 () d) Motor vehicle act, 1988

Q: 30). As per _______ no uninsured vehicle is allowed to ply the roads in any public place in India.

a) Employee state insurance act, 1948 b) Public liability act, 1991

c) Workman compensation act, 1923

d) Motor vehicle act, 1988 ()

Q: 31). A contract of ________ means the insured must accept the entire contract with all of its items and conditions

a) Peril b) Bailment

c) Adhesion () d) Indemnity

Q: 32). Principal of Uberrima Fides or Utmost good ______.

a) Insurance

b) Faith () c) Control d) Protection

Q: 33). Rescission is an agreement by both parties to _________ a contract.

a) End () b) Start c) Carry forward d) None of the above

Q: 34). A condition precedent is something that must be done by one party

to ______ the other parties’ duty to perform.

a) Deactivate

b) Activate () c) End d) Terminate

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Q: 35). Majority of products and services are produced only if _______ is

available to them.

a) Marine Insurance () b) Fire Insurance c) Theft Insurance d) Liability Insurance

Q: 36). IRDP stands for:

a) Integrated Rural Development Programme () b) International Rural Development Programme c) Indian Rural Development Programme d) None of the above

Q: 37). ________ Insurance is offered through some form of government, usually on a compulsory basis.

a) Private

b) Public () c) Social d) Personal

Q: 38). The increase in GDP is positively co related with the growth of trade and commerce in the economy.

a) False

b) True ()

Q: 39). The definition of insurance can be ____________ and ______________

a) Objective, subjective

b) Functional, contractual () c) Ancient, modern d) None of the above

Q: 40). Insurance provides _______ of payment against the _______ of loss.

a) Uncertainty, certainty

b) Certainty, uncertainty () c) Option, certainty d) Option, uncertainty

imt assignment

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