Development of Insurance Legislation in India and Insurance Act 1938 MCQs

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Development of Insurance Legislation in India and Insurance Act 1938 MCQs | Page 3 of 5

Discover more Topics under IC 14 Regulations of Insurance Business

Q21.
Under which Act was the General Insurance Corporation of India (GIC) formed as a Government company?

a.

Insurance Regulatory and Development Authority Act, 1999

b.

Companies Act, 1956

c.

General Insurance Business (Nationalisation) Act, 1972 (GIBNA)

d.

Indian Insurance Companies Act, 1928

Discuss
Answer: (c).General Insurance Business (Nationalisation) Act, 1972 (GIBNA) Explanation:GIC was formed under the General Insurance Business (Nationalisation) Act, 1972 (GIBNA).
Q22.
According to the General Insurance Business (Nationalisation) Act, 1972, what was the purpose of establishing GIC as a holding company?

a.

Providing direct customer service

b.

Superintending, controlling, and carrying on the business of general insurance

c.

Issuing guidelines for investment of funds

d.

Facilitating competition among subsidiary companies

Discuss
Answer: (b).Superintending, controlling, and carrying on the business of general insurance Explanation:The purpose was to superintend, control, and carry on the business of general insurance.
Q23.
What are the functions of GIC as stated in the General Insurance Business (Nationalisation) Act?

a.

Only carrying on general insurance business

b.

Advising acquiring companies on investment of funds

c.

Issuing directions to acquiring companies on general insurance business conduct

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The functions include carrying on general insurance, advising on conduct and practice, controlling expenses, advising on investments, and issuing directions.
Q24.
According to the Act, what role does GIC play in relation to competition among subsidiary companies?

a.

Discouraging competition

b.

Ignoring competition

c.

Encouraging competition

d.

Controlling competition

Discuss
Answer: (c).Encouraging competition Explanation:GIC is tasked with encouraging competition among subsidiary companies to make their services more efficient.
Q25.
How were the Indian insurance companies organized under GIBNA, 1972, after the formation of GIC?

a.

As independent entities

b.

As regional subsidiaries

c.

Through mergers into four companies

d.

Through partnerships with GIC

Discuss
Answer: (c).Through mergers into four companies Explanation:Indian insurance companies were merged into four entities, namely National Insurance, New India Assurance, Oriental Insurance, and United India Insurance.
Q26.
Why were the four General Insurance companies positioned to promote competition among them?

a.

To consolidate their services

b.

To facilitate mergers

c.

To encourage efficient services in general insurance across India

d.

To limit their operations to specific regions

Discuss
Answer: (c).To encourage efficient services in general insurance across India Explanation:The positioning of the four companies aimed to encourage efficient services in general insurance across all parts of India.
Q27.
What significant change did the Insurance Regulatory and Development Authority Act, 1999, bring to the Insurance Act, 1938?

a.

Introduction of a new clause on life insurance business

b.

Inclusion of a definition for "Indian re-insurer"

c.

Prohibition of reinsurance business

d.

Restriction on direct general insurance business

Discuss
Answer: (a).Introduction of a new clause on life insurance business Explanation:The IRDA Act, 1999, introduced a new sub-clause in section 2 of the Insurance Act, 1938, allowing Indian insurance companies to carry on life, general, or reinsurance business.
Q28.
What is the role of GIC as the Indian reinsurer according to GIBNA, 1972?

a.

To underwrite direct general insurance business

b.

To cede 20% of gross direct premium from domestic insurers

c.

To compete with foreign reinsurers

d.

To facilitate mergers among insurers

Discuss
Answer: (b).To cede 20% of gross direct premium from domestic insurers Explanation:GIC, as the Indian reinsurer, is obliged to cede 20% of gross direct premium from domestic insurers.
Q29.
How did the Central Government address the relationship between GIC and its subsidiaries in the context of general insurance business and reinsurance?

a.

By merging the subsidiaries with GIC

b.

By making GIC and its subsidiaries operate independently

c.

By delinking GIC from its subsidiaries

d.

By allowing GIC to control its subsidiaries

Discuss
Answer: (c).By delinking GIC from its subsidiaries Explanation:The Central Government delinked GIC from its subsidiaries by making necessary amendments in GIBNA, 1972.
Q30.
Why was GIC made to operate exclusively in the reinsurance arena?

a.

To encourage competition

b.

To prevent flight of capital from India

c.

To facilitate mergers with foreign reinsurers

d.

To promote direct general insurance business

Discuss
Answer: (b).To prevent flight of capital from India Explanation:GIC was made to operate exclusively in reinsurance to prevent the flight of capital from India and to retain risks within the country.
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