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Basic Concepts & Principles In General Insurance Free Preview
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Which are cases the added capital is applied on the basis of the conclusions of the process of control?
I. Quantitative insufficiency of the standard formula
II. Quantitative insufficiency of the internal model
III. Lack of risk governance
IV. Qualitative insufficiency of the external model
Please Note! The added capital is not applied on Qualitative insufficiency of the external model
Please Note! The added capital is not applied on Qualitative insufficiency of the external model
Which test introduced by International Financial Reporting Standards (IFRS) for recognized insurance liabilities are adequate?
Please Note! The liability adequacy test requires an insurer to assess at each reporting date whether recognized insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts.
Please Note! The liability adequacy test requires an insurer to assess at each reporting date whether recognized insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts.
What is the definition of reinsurance?
Please Note! The definition of reinsurance is that is insurance purchased by insurers from reinsurers to limit the total loss an insurer would experience in case of an extreme event
Please Note! The definition of reinsurance is that is insurance purchased by insurers from reinsurers to limit the total loss an insurer would experience in case of an extreme event
The maximum amount an insurer accepts to lose on a single loss risk is a definition of?
Please Note! Definition of Underwriting capacity is Maximum amount an insurer accepts to lose on a single loss risk.
Please Note! Definition of Underwriting capacity is Maximum amount an insurer accepts to lose on a single loss risk.
Which of the following Bias drive us take action less thoughtfully than we should?
Please Note! Action-oriented biases drive us to take action less thoughtfully than we should
Please Note! Action-oriented biases drive us to take action less thoughtfully than we should
Most people think that 3 dollars a day less costly than 1095 dollars a year. This statement belongs to which type of bias?
Please Note! Framing bias is that people think 3 dollars a day less costly than 1095 dollars a year.
Please Note! Framing bias is that people think 3 dollars a day less costly than 1095 dollars a year.
Which type of risk included in Parameter risk?
I. Estimation risk
II. Projection risk
III. Ruin risk
IV. Event risk
Please Note! Ruin risk is not included in parameter risk.
Please Note! Ruin risk is not included in parameter risk.
A company’s Own Funds are split between three tiers depending on how well they can absorb losses emanating from risks written. Keeping in view the above statement and Solvency II framework own funds, “Net Deferred Tax Assets and Subordinated Debt” falls into which tier?
Please Note! Net deferred tax assets and subordinate debt falls into Tier 3
Please Note! Net deferred tax assets and subordinate debt falls into Tier 3
What does Risk Diversification do?
Please Note! Risk Diversification reduces a company’s need for risk-based capital. This is the key to both insurance and investments.
Please Note! Risk Diversification reduces a company’s need for risk-based capital. This is the key to both insurance and investments.
An investor’s utility function has the following properties
I. Increasingness (U/ > 0): the investor is satisfied when his wealth increases
II. Satiety (U/// > 0): The satisfaction the investor gets from receiving money is less when he is wealthy.
III. Concavity (U// < 0): the investor is risk-averse.
IV. Absolute risk aversion: ARA =−U// (ω)/U/ (ω)
Please Note! Absolute risk aversion is not a utility property rather than it is a utility function.
Please Note! Absolute risk aversion is not a utility property rather than it is a utility function.
Which are the major difference between distortion risk measures and the utility risk measures?
I. Distortion Risk Measures transform the probabilities
II. Distortion Risk Measures transform the amounts
III. Utility Risk Measures transform the probabilities.
IV. Utility Risk Measures transform the amounts.
Please Note! Distortion Risk measures transform the probabilities and Utility risk measure transform the amounts
Please Note! Distortion Risk measures transform the probabilities and Utility risk measure transform the amounts
What is the aim of Enterprise Risk Management?
I. A transparent account of the firm’s business model, including strategy, objectives, risk appetite and risk tolerances.
II. An open forum for discussing an organization’s risk capabilities, such as where it stands in terms of strategy, people, processes, technology and knowledge.
III. A set to identify inflation and interest rate relationship as compared to insurance
IV. A set of risk valuation models for typical risk dynamics
Please Note! Inflation and interest rate relationship is not the aim of Enterprise Risk Management
Please Note! Inflation and interest rate relationship is not the aim of Enterprise Risk Management
In legal wrong, what is the other name of an injured or harmed person?
I. Accuser
II. Defendant
III. Litigant
IV. Suer
Legal wrong In law, a wrong can be a legal injury, which is any damage resulting from a violation of a legal right. A legal wrong can also imply the state of being contrary to the principles of justice or law. It means that something is contrary to conscience or morality and results in treating others unjustly. In legal wrong, the other name of an injured or harmed person can also be called as accuser, litigant, suer, plaintiff or claimant in legal action.
Legal wrong In law, a wrong can be a legal injury, which is any damage resulting from a violation of a legal right. A legal wrong can also imply the state of being contrary to the principles of justice or law. It means that something is contrary to conscience or morality and results in treating others unjustly. In legal wrong, the other name of an injured or harmed person can also be called as accuser, litigant, suer, plaintiff or claimant in legal action.
In legal wrong, which are the three categories the torts can be classified?
I. Success
II. International torts
III. Absolute liability
IV. Inattention
A tort, in common law jurisdiction, is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits a tortious act. It can include the intentional infliction of emotional distress, negligence, financial losses, injuries, invasion of privacy and many other things. International torts, Absolute liability, Inattention the three categories of torts. Torts include all negligence cases as well as international wrongs which result in harm.
A tort, in common law jurisdiction, is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits a tortious act. It can include the intentional infliction of emotional distress, negligence, financial losses, injuries, invasion of privacy and many other things. International torts, Absolute liability, Inattention the three categories of torts. Torts include all negligence cases as well as international wrongs which result in harm.
In social insurance Which relationship is loose and disproportionate, but it does exist?
Employee benefits, also known as perks or fringe benefits, are provided to employees over and above salaries and wages. These employee benefits packages may include overtime, medical insurance, vacation, profit sharing and retirement benefits, to name just a few. The relationship between higher earnings and higher benefits is loose and disproportionate, but it does exist.
Employee benefits, also known as perks or fringe benefits, are provided to employees over and above salaries and wages. These employee benefits packages may include overtime, medical insurance, vacation, profit sharing and retirement benefits, to name just a few. The relationship between higher earnings and higher benefits is loose and disproportionate, but it does exist.
In Property and Casualty Insurance Marketing, How can we define the Exclusive Agency System?
In Property and Casualty Insurance Marketing, An insurance distribution system that allows agents to sell and service insurance contracts that limit representation to one insurer and reserve to the insurer the ownership, use and control of policy records and expiration date. It may also be defined as an insurance distribution system through which agents represent only one company or a group of companies under similar management.
In Property and Casualty Insurance Marketing, An insurance distribution system that allows agents to sell and service insurance contracts that limit representation to one insurer and reserve to the insurer the ownership, use and control of policy records and expiration date. It may also be defined as an insurance distribution system through which agents represent only one company or a group of companies under similar management.
In insurance company operations, which of the following is the price per unit of insurance?
An insurance rate is the amount of money necessary to cover losses, cover expenses, and provide a profit to the insurer for a single unit of exposure. Rates, as contrasted with loss costs, include provision for the insurer’s profit and expenses.
An insurance rate is the amount of money necessary to cover losses, cover expenses, and provide a profit to the insurer for a single unit of exposure. Rates, as contrasted with loss costs, include provision for the insurer’s profit and expenses.
Which of the following are the principles of the underwriting?
I. Attain an underwriting profit
II. Select prospective insureds according to the company’s underwriting standards
III. Provide an income statement to the shareholders
IV. Provide equity among the policyholders
They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. “Provide income statement to the shareholders” is not a principle of the underwriting
They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. “Provide income statement to the shareholders” is not a principle of the underwriting
Which of the following is the second step in Settlement of a Claim?
Steps in Settlement of a Claim are as follows:-
(A) Notice of loss must be given
(B) The claim is investigated
(C) Proof of loss may be required.
(D) A decision is made concerning payment
Steps in Settlement of a Claim are as follows:-
(A) Notice of loss must be given
(B) The claim is investigated
(C) Proof of loss may be required.
(D) A decision is made concerning payment
If FV stands for future value, PV stands for present value, i stands for interest rate, and n for a number of year than the formula to calculate FV is PV(1 + i)n. What will be FV if PV is $100, i is 0.06 and n is 2?
Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is “worth” at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. The formula for future value FV = PV(1 + i)n so
FV=100(1+0.06)2
FV=100(1.06)2
FV=100×0.11236
FV=112.36
Future value is the value of an asset at a specific date. It measures the nominal future sum of money that a given sum of money is “worth” at a specified time in the future assuming a certain interest rate, or more generally, rate of return; it is the present value multiplied by the accumulation function. The formula for future value FV = PV(1 + i)n so
FV=100(1+0.06)2
FV=100(1.06)2
FV=100×0.11236
FV=112.36
In Changing Corporate Structure of Mutual Insurers, What is the definition of the holding company?
A holding company is a company that owns the outstanding stock of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies to form a corporate group. The holding company is a company that directly or indirectly controls an authorized insurer
A holding company is a company that owns the outstanding stock of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies to form a corporate group. The holding company is a company that directly or indirectly controls an authorized insurer
In pooling of loss, a common measure of risk is the standard deviation. How can we define the standard deviation?
The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance. If the data points are further from the mean, there is a higher deviation within the data set; thus, the more spread out the data, the higher the standard deviation.
The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance. If the data points are further from the mean, there is a higher deviation within the data set; thus, the more spread out the data, the higher the standard deviation.
Flipping the coin only 20 times, it may get heads seventeen times. The observed probability is 16/20 X 100 is 0.8. What is the true probability of the coin getting heads?
Probability is a numerical description of how likely an event is to occur. The formula for probability is result divided by total no of possible outcomes. True probability is the (almost always) unknown actual probability that an event will occur in a given situation. So in the case of Coin, the probability of getting head is 1/2. True probability is a priori probability of getting “heads” is 0.5.
Probability is a numerical description of how likely an event is to occur. The formula for probability is result divided by total no of possible outcomes. True probability is the (almost always) unknown actual probability that an event will occur in a given situation. So in the case of Coin, the probability of getting head is 1/2. True probability is a priori probability of getting “heads” is 0.5.
Sexual harassment of employees, employment discrimination, wrongful termination, and failure to promote is an example of which of the following loss exposures?
Any condition or situation that presents the possibility of a claim alleging the legal responsibility of a person or business for injury or damage suffered by another party. A Liability Loss is a claim for monetary damages because of injury to another party or damage to another party’s property. Sexual harassment of employees, employment discrimination, wrongful termination, and failure to promote is an example of Liability loss exposures
Any condition or situation that presents the possibility of a claim alleging the legal responsibility of a person or business for injury or damage suffered by another party. A Liability Loss is a claim for monetary damages because of injury to another party or damage to another party’s property. Sexual harassment of employees, employment discrimination, wrongful termination, and failure to promote is an example of Liability loss exposures
In the risk management process, which of the following is the definition of reduction, a risk control technique?
Risk reduction measures are pre-event management activities designed to either directly enforce or empower local actors to contain local human vulnerability and hazard, and enhance adaptive capacity and actions in the long and short term.
Risk reduction measures are pre-event management activities designed to either directly enforce or empower local actors to contain local human vulnerability and hazard, and enhance adaptive capacity and actions in the long and short term.
Measures which are taken so that reduce truck accidents include driver training, zero tolerance for alcohol or drug abuse, and strict enforcement of safety rules are the examples of which of the following risk control techniques?
Loss prevention is a technique that limits, rather than eliminates, loss. Instead of avoiding a risk completely, this technique accepts a risk but attempts to minimize the loss as a result of it. Loss prevention refers to measures that reduce the frequency of a particular loss.
Loss prevention is a technique that limits, rather than eliminates, loss. Instead of avoiding a risk completely, this technique accepts a risk but attempts to minimize the loss as a result of it. Loss prevention refers to measures that reduce the frequency of a particular loss.
Why are the captive insurers formed?
I. A parent firm may have difficulty in obtaining insurance
II. Some captives are formed offshore to take advantage of a favourable regulatory environment
III. The parent’s insurance costs are much higher
IV. Captive insurer makes access to reinsurers easier
Please Note! The captive insurers are formed because the parent’s insurance costs may be lower.
Please Note! The captive insurers are formed because the parent’s insurance costs may be lower.
What are the major distribution system for marketing property and casualty insurance?
I. Direct response system
II. Independent agency system
III. Exclusive agency system
IV. Personal selling systems
Please Note! Personal selling systems is not the major distribution system for marketing property and casualty insurance
Please Note! Personal selling systems is not the major distribution system for marketing property and casualty insurance
Which of the following is a fundamental purpose of the principle of indemnity?
Please Note! The principle of indemnity has two fundamental purposes. The first purpose is to prevent the insured from profiting from a loss and the second purpose is to reduce moral hazard. If dishonest policy holders could profit from a loss.
Please Note! The principle of indemnity has two fundamental purposes. The first purpose is to prevent the insured from profiting from a loss and the second purpose is to reduce moral hazard. If dishonest policy holders could profit from a loss.
In The Risk-based capital (RBC), Business risk represents the wide range of general business risks that life insurers face. Which of the following are examples of Business risk?
I. Guaranty fund assessments
II. Insolvency because of bad management
III. A decline in the market value of assets supporting contractual obligations because of a rise in interest rates
IV. Liquidity problems caused by policyholders withdrawing funds because of changing interest rates
Please Note! Guaranty fund assessments and insolvency because of bad management are the examples of Business risk.
Please Note! Guaranty fund assessments and insolvency because of bad management are the examples of Business risk.
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