pce sample questions - set 6 (eng)

7/28/2019 PCE Sample Questions - SET 6 (ENG)

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PCE Sample Questions (Eng)Set 6

Zurich confidential or proprietary information Version: Jan 2013

Prepared by: Agency Training & Development Page 1

1. Risk is defined as ______________.

A. An uncertainty regarding loss suffered by an individual.B. A certainty regarding loss suffered by an individual.C. An uncertainty of how to fix premiums for products.D. An uncertainty in estimating returns from the life fund.

2. A Peril ______________.

A. Is usually the cause of a loss B. Is usually a solution to a lossC. Is usually a tool to measure a loss D. None of the above

3. Some of the following are examples of Risk. Which one of the following is incorrect?

A. Loss due to premature death B. Loss of a ship at seaC. Loss due to fire D. Investing in a house

4. The concept of the Law of Large Numbers ______________.

A. States that we can only calculate a loss when there are large numbers of prospects.B. States that we can predict the growth of the life fund if only there are a large number of

prospects.C. States that the probability of loss can be accurately predicted when there are a large number

of policyholders.

D. Is not an important consideration in life insurance.

5. For the Law of Large Numbers to operate, the following must apply:

I. Large number of similar loss exposures.II. Random or chance occurrence of losses.

A. I only B. I and II onlyC. II only D. None of the above

6. Examples of moral hazard will include ______________.

A. Life style issues B. Physical conditionC. Age D. Occupation

7. A fundamental risk is a risk that ______________.

A. Affects life insurance agents onlyB. Affects the entire economyC. No relevance to insuranceD. Does not affect people generally

SET 6: PCE SAMPLE QUESTIONS


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8. Which of the following statements are true?

I. Pure risk exists when there is the possibility of either loss or no lossII. Speculative risk exists when there is the possibility of profit, loss or no loss

A. I only B. I and II onlyC. II only D. None of the above

9. There are four methods of handling pure risks. One of the methods given below is incorrect.

A. Risk avoidance B. Loss controlC. Risk transfer D. Mortality control

10. In the absence of insurable interest, a policy becomes ______________.

A. In force B. Void

C. Legal D. Automatically assigned

11. For a life insurance contract, insurable interest must be present _____________.

A. At all times during the contract B. At the time of claimC. At the inception of the contract D. None of the above

12. For a general insurance contract, insurable interest must be present __________.

A. At all times of the contract B. At the time of claimC. At the time of inception D. At inception and at the time of claim

13. In property insurance, the following individuals will have insurable interest ________.

I. TrusteeII. MortgageeIII. OwnerIV. Hirer

A. I and II only B. II and III onlyC. I, II and III only D. All of the above

14. The principle of contribution states that ______________.

A. The insured, insurer and third party must contribute to the claim amount.B. The insurer who has indemnified an insured may call other insurers liable for the same loss to

contribute proportionately to the claim.C. The insurer who has indemnified an insured may call the insured liable for the same loss to

contribute proportionately to the claim.D. All of the above.

15. When there is an unbroken chain of events leading to a loss under a covered event______________.

A. The insured is liable B. Nothing should be paidC. The insurer is liable D. The third party will be liable


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16. When there is a broken chain of events and there is a loss due to the covered event______________.

A. We must first determine the proximate cause of the loss.B. We must determine which the first cause was.C. We must determine who started the chain of events.D. We must determine who broke the chain of events.

17. Takaful companies provide insurance based on ______________.

A. The size of the life fund B. Syariah lawC. The principles of common law D. None of the above

18. A proprietary company is owned by ______________.

A. The participating policy owners B. The shareholders

C. The agency force D. All policy owners

19. A mutual company is also called ______________.

A. A proprietary company B. A composite companyC. A co-operative society D. A brokerage

20. The association for life insurance agents in Malaysia is called ______________.

A. LIAM B. NAMLIFAC. ASM D. AMLA

21. The association of general insurers is called ______________.

A. LIAM B. ASMC. NAMLIFA D. PIAM

22. The concept of self-regulation has a two-fold objective that includes _______________.

I. Instill discipline and promote healthy competitionII. To force as many prospects as possible to buy life insurance

A. I only B. II onlyC. Both I and II D. None of the above

23. A person who wishes to act as an insurance broker must be licensed by the ___________.

A. General Insurance Association of MalaysiaB. Life Insurance Association of MalaysiaC. Actuarial Society of MalaysiaD. Director General of Insurance

24. The examples of self-regulation by insurance companies include _____________.

A. Voluntary codes of practice for members B. Draw up inter-company agreementsC. Instil self-discipline D. All of the above


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25. The disadvantages of self-regulation include ______________.

I. Voluntary codes of practice that do not have the force of law.II. The decisions made by the companies regarding claims are final with no course of appeal to

the courts.

A. I only B. II onlyC. I and II only D. None of the above

26. An insurance contract is a legally binding contract between ______________.

A. An insured and the agent B. An insured and the agencyC. An insured and the insurer D. An insured and Bank Negara Malaysia

27. For a contract to be legally binding, the following must be observed ________________.

I. Offer and acceptance

II. ConsiderationIII. Legal capacity to contractIV. Intention to create legal relations

A. I only B. I and II onlyC. I, II and III only D. All of the above

28. The consideration of the insured in an insurance contract is called the ______________.

A. Sum assured B. PremiumsC. Bonuses D. Dividends

29. In General Insurance, the contract is deemed to be legal when ______________.

A. The agent collects the premiumB. The cover note is issuedC. The applicant thinks of renewing the policyD. None of the above

30. As far as minors are concerned, Section 153(1) of the Insurance Act, 1996 allows childrenbetween the age of_______ and _______ to buy life insurance with the written consent of theparent or guardian.

A. 10 and 18 B. 18 and 21C. 10 and 16 D. 16 and 18

31. Who is an agent?

A. A person who acts on his own behalf.B. A person who acts on behalf of another person.C. A person who represents all the middlemen.D. None of the above.

32. A person who appoints another to act on his behalf is called ______________.

A. An agent B. An intermediaryC. A principal D. Nobody


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33. An agent can do one of the following ______________.

A. Act as he wishes.B. Act with the permission of Bank Negara Malaysia.C. Act within the authority granted by the principal.D. Do anything within his emergency powers.

34. There are generally three classes of agents. One of the following classes is incorrect.

A. Special agent B. Express agentC. General agent D. Universal agent

35. The knowledge of an insurance agent during the course of contracting business is deemed theknowledge of the insurer. This is covered under Section________ of the Insurance Act, 1996.

A. 150 B. 151

C. 152 D. 153

36. When we refer to the pricing of a life insurance policy, we are referring to _________________.

A. The bonuses B. The premiumsC. The dividends D. The cash surrender value

37. The main distribution channel for life insurance products is ______________.

A. The agency force B. Through the banksC. Through brokers D. Through the general public

38. A distribution channel is ______________.

A. A channel through which money flows.B. A system of printing life insurance policies.C. A channel through which a company distributes /sells its products.D. A channel through which complaints are handled.

39. An agent must have a sales goal because ______________.

A. It will make the agent feel good.B. It will make the agency manager happy.C. The agent can measure the results against goals.

D. None of the above.

40. What is a sales strategy?

A. It is a plan of achieving the sales goal.B. It allows an agent to sell policies to everybody.C. It is not an important element of planning.D. The agent only does it to please the manager.

41. The first case of life insurance was issued on the life of ______________.

A. William Tilbon B. William GaebonC. William Gybbon D. Wilson Gaebon


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42. In 1762, the Equitable Society issued life insurance policies based on all of the following exceptone.

A. Health requirements.B. Level premium system.C. No extra premiums were charged for additional risk.D. Upon issuance of policy, no further proof of continuing good health was required.

43. The premium rates for a life insurance policy are based on ______________.

A. The mortality rate B. The expenses of the companyC. The investment income D. All of the above

44. A contract in which one party provides something of value to another party in exchange for apromise that the other party will perform a stated act is called ______________.

A. A contract uberrima fides B. An aleatory contractC. A conditional contract D. A contract of insurable interest

45. In life insurance contracts, the amount that can be claimed upon death is _____________.

A. Fixed at the beginning of the contract.B. To place the beneficiary in the same financial position as before the insureds death.C. Decided at the time of death only.D. None of the above.

46. Insurable interest does not exist in the following situations ______________.

A. An insured on his/her own lifeB. A husband on the life of his wifeC. A parent on the life of his youngest daughterD. A man on the life of his fianc

47. A whole life insurance policy is one where ___________.

A. Protection is provided for a period of 20 years only.B. Protection is provided for the whole duration of life.C. Where payment is made on the 20th year or when death occurs, if earlier.D. Premiums are only paid for the first 20 years.

48. A whole life policy where premiums are paid for a limited period of time is ____________.

A. A limited payment whole life policy B. A limited sum assured whole life policyC. A limited dividend whole life policy D. A limited bonus whole life policy

49. A limited payment whole life policy can be:

I. One where premiums are paid for a limited period.II. One where the premiums are paid up to a certain fixed age.

A. I only B. II only

C. Both I and II D. None of the above


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50. The characteristics of an endowment policy are listed below. Choose the correct combination.

I. Payment of the face value upon deathII. Payment of the face value upon survival to the end of the policy termIII. Payment of the face value upon death or survival to the end of the policy term

IV. No riders can be attached to such policies

A. I and II only B. I, II and IV onlyC. I, II and III only D. I, III and IV only

51. A joint life annuity provides _______________.

A. A contract for an unlimited amount of income for two or more persons.B. A contract for a minimum of five persons.C. For a specified income for two or more persons with payment ceasing upon the first death.D. For the payment to end only when all the annuitants die.

52. One of the following is not an annuity contract.

A. Annuity Certain B. Last Survivor AnnuityC. First Survivor Annuity D. Reversionary Annuity

53. An annuity contract which provides for guaranteed payments over a fixed period and thereafter tilldeath is called _________________.

A. A Guaranteed Annuity B. A Deferred AnnuityC. A Joint Life Annuity D. An Annuity Certain

54. The Last Survivor Annuity provides that the annuity payments will ____________.

A. Continue as long as the first of two or more lives dies.B. Continue as long as the last of two or more lives dies.C. Continue for a fixed number of years irrespective of the insureds survival.D. Ends when the dividends are all paid out.

55. It is normal for Permanent Health Insurance policies to be designed with a deferred period. Thedeferred period is ___________________.

A. A period of disability where the disability benefits is paid.B. A period of disability where no disability benefits is paid.C. A period where only the rider benefits are paid.D. None of the above.

56. A policy that pays out a lump sum on the diagnosis of a dread disease is called ______________.

A. A Permanent Health Plan B. A Disability PlanC. A Major Accident Plan D. A Dread Disease Plan

57. The surrender value can be explained as follows:

A. The value of the policy when it is surrendered at any time.B. The cash value of the policy after 3 years.

C. The cash value of the policy after 5 years.D. None of the above.


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58. Section ____________, of the Insurance Act 1996 covers the fact that a policy in force for morethan 3 years shall acquire a cash value.

A. 154 B. 155C. 156 D. 157

59. Policy loans are ______________.

A. Granted to any person who wants a loan from the insurance company.B. Granted to any policy owner who wants a loan from the company.C. Granted to policy owners whose policy has acquired a cash value.D. Granted to policy owners of participating policies only.

60. The conditions in a policy that add to the benefits of the life insurance cover are called privileges.One of the following is not a policy privilege.

A. Days of Grace B. Surrender valueC. Paid-up Policy D. Incontestability clause

61. A paid-up policy comes into existence when ______________.

A. The cash value is used as a single premium to provide for insurance coverage.B. When the policy owner decides to pay all outstanding premiums in one lump sum.C. When the policy expires.D. When the policy owner does not wish to continue and all premiums paid are refunded.

62. An Automatic Premium Loan will ______________.

A. Only come into effect when the policy owner signs the loan form.B. Only come into effect if the policy has acquired a cash value.C. Only come into effect if the company gives the approval.D. All of the above.

63. The objective of the non-forfeiture clause is to ______________.

I. Protect the interest of the life insured.II. Give free cover to policy owners who can no longer continue the plan.

A. I only B. II only

C. Both I and II D. None of the above

64. In life insurance there are many factors that can affect mortality. These factors include______________

I. AgeII. OccupationIII. SexIV. Height

A. I only B. I and II onlyC. I, II and III only D. All of the above


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65. As far as mortality is concerned, which one of the following statements is true?

A. Female lives have higher mortality than males.B. Females have lower mortality than males.C. There is no difference between the mortality of male and female lives.D. None of the above.

66. As far as morbidity is concerned, which one of the following statements is true?

A. Female lives have higher morbidity than males.B. Females have lower morbidity than males.C. There is no difference between the morbidity of male and female lives.D. None of the above.

67. Which one of the following statements is true for life insurance?

A. Females are generally less insurable than males.B. The premium rates for males are lower compared to females of equal age.C. The premium rates for female lives are lower then males of equal age.D. There is no difference in the premium rates between male and female lives of equal age.

68. An insurer underwrites proposals for life insurance ______________.

A. To protect the agents good work in bringing business.B. To ensure anti-selection exists.C. To fulfil the requirements of the agency force.D. To avoid anti-selection.

69. The aim of financial underwriting is to ______________.

A. Detect the presence of moral hazard.B. Detect the presence of irrelevant information.C. Detect the presence of statements made by the agent.D. None of the above.

70. The purpose of medical underwriting is to ______________.

A. Determine if the proposed life can be insured at standard rates.B. Determine if extra premium must be loaded for the proposed life.C. Determine if the proposed life is a standard or sub-standard life.

D. All of the above.

71. Medical underwriting seeks to determine the extent of ______________.

A. Moral Hazard B. Physical HazardC. Occupational Hazard D. Every kind of hazard

72. Generally, a life insurance company incurs three categories of expenses in respect of each policy.These expenses include all the following of except one.

A. Initial expenses B. Renewal expensesC. Termination expenses D. Monitoring expenses


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73. An example of initial expenses is ______________.

A. First year commission B. Policy servicing expensesC. Litigation expenses D. Premium collection expenses

74. Which of the following statement(s) is/are true of Risk Premium?

I. It covers the cost of mortality only.II. It is also called the natural premium.

A. I only B. II onlyC. I and II only D. None of the above

75. The level premium system requires _____________.

A. The payment of level commissions.

B. The payment of level sum assured among policies.C. The payment of level premiums during the policy term.D. The payment of level dividends during the policy term.

76. When a prospect is involved in hazardous occupations, a life insurance company will impose______________.

A. Extra health loading B. Occupational loadingC. Large sum assured loading D. Bonus loading

77. The premium rates for female lives is usually lower than male premium rates for the same policy atthe same sum assured because ______________.

A. Females like to enjoy life more than males.B. Females are sicklier than males.C. Females generally have longer life spans than males.D. Females are weaker than females.

78. The premiums charged for a life insurance policy are based on the following factors except one:

A. Mortality B.Expenses incurredC. Investment income D. The number of agents in the market

79. The actuarial valuation of a life insurance company includes ______________.

I. Calculating the present value of liabilities under all inforce policies.II. Calculating the present value of capital gains and income produced from the assets of the life

fund.

A. I only B. II onlyC. I and II D. None of the above

80. The purpose of an actuarial valuation is to determine if a life insurance company is______________.

A. Solvent B. Selling reasonable productsC. Having a professional agency force D. Liked by its policyholders


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88. In a life insurance policy, claims can arise through ______________.

I. DeathII. Maturity

A. I only B. II onlyC. Both I and II D. None of the above

89. Why is proof of age required at the time of death claims?

A. Because if the age is incorrect, there is no need to pay claims.B. Because the age would have determined whether insurance would have been offered in the

first place.C. To determine if there has been a misstatement of age.D. Because a misstatement of age constitutes a breach of Utmost Good Faith.

90. Upon making a claim, the beneficiary or claimant must provide the following details to the lifecompany except one ______________.

A. Name of life assured B. Identity card numberC. Policy number D. Number of relatives and children

91. Proof of death can be made through ______________.

A. Death certificate B. Coroners reportC. A statutory presumption of death D. All of the above

92. Some of the documents showing proof of title and ownership of a life policy are ______________.

I. A deed of assignmentII. A letter of administration issued by the companyIII. A probate of the will obtained from a court of lawIV. A letter written by the beneficiary

A. I and II only B. I and III onlyC. II and III only D. All of the above

93. All of the following documents are required for the settlement of maturity claims, except______________.

A. Proof of age B. A probate of the willC. Proof of survival D. The policy document


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For Questions 94 to 96, please refer to the following information.

Age Next Birthday. Premium for RM1,000 sum assured.

Age(Next Birthday)

Premium / RM1,000Sum Assured

24 39.5025 40.0026 40.5027 41.0028 41.5029 42.0030 42.50

94. If the prospect wishes to purchase a policy for a sum assured of RM10,000, how much of premiummust the prospect pay for the policy if his age next birthday is 30 years?

A. RM 42.50 B. RM 425.00C. RM 4,250.00 D. RM 4.25

95. If Mr. Jason was born on June 1, 1975, and has agreed to sign the proposal for a sum assured ofRM100,000 on June 15, 2000. What is the premium that Mr. Jason must pay?

A. RM 3,950.00 B. RM 4,000.00C. RM 4,050.00 D. RM 4,150.00

96. If Mr. Tan has just turned 29 years old and has paid RM2100.00 for his premium. What is the sumassured of Mr. Tans policy?

A. RM 40,000.00 B.RM 45,000.00C. RM 50,000.00 D. RM 55,000.00

97. If Mr. Rama was born on September 20, 1960 and his policy commenced on December 25, 1999.What is the age last birthday used for the calculation of the premium rates?

A. 38 years B. 39 yearsC. 40 years D. 41 years

98. In Question 97, if the premium is calculated based on age next birthday; what age will be used forthe calculation of premiums?

A. 39 years B. 40 yearsC. 41 years D. 42 years

99. The unethical practice of encouraging a policy owner to surrender a policy and buy a new one inits place is called ______________.

A. Rebating B. TwistingC. Selling in competition D. None of the above


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100. An agent should not do one of the following practices ______________.

A. Sell a policy at all costB. Sell according to needsC. Avoid conflict of interestD. Ensure confidentiality of all communication with the prospect


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ANSWERS

1 A 26 C 51 C 76 B

2 A 27 D 52 C 77 C

3 D 28 B 53 A 78 D

4 A 29 B 54 B 79 C

5 B 30 C 55 B 80 A

6 A 31 B 56 D 81 D

7 B 32 C 57 B 82 A

8 B 33 C 58 B 83 C

9 D 34 B 59 C 84 D

10

B35

B60

D85

C11 C 36 B 61 A 86 B

12 D 37 A 62 B 87 D

13 D 38 C 63 C 88 C

14 B 39 C 64 C 89 C

15 C 40 A 65 B 90 D

16 A 41 C 66 A 91 D

17 B 42 A 67 C 92 B

18 B 43 D 68 D 93 B

19 C 44 B 69 A 94 B

20

B45

A70

D95

C21 D 46 D 71 B 96 C

22 A 47 B 72 D 97 B

23 D 48 A 73 A 98 B

24 A 49 C 74 C 99 B

25 A 50 C 75 C 100 A

pce sample questions - set 6 (eng)

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