Regulations on Conduct of Business MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Regulations on Conduct of Business, a fundamental topic in the field of IC 14 Regulations of Insurance Business. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Regulations on Conduct of Business MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Regulations on Conduct of Business MCQs | Page 1 of 32

Discover more Topics under IC 14 Regulations of Insurance Business

Q1.
What does the term "Rural sector" mean according to IRDA (Obligations of Insurers to Rural Social Sectors) Regulations, 2002?

a.

Any area with a population of less than 10,000

b.

Places or areas classified as rural in the latest decennial population census

c.

Areas with primarily agricultural activities

d.

Geographical regions with limited urban development

Discuss
Answer: (b).Places or areas classified as rural in the latest decennial population census Explanation:"Rural sector" is defined as any place or areas classified as rural while conducting the latest decennial population census.
Q2.
What is included in the term "Social sector" as per the regulations?

a.

Only economically vulnerable or backward classes

b.

Only unorganised and informal sector workers

c.

Persons with disability and guardians

d.

Both economically vulnerable or backward classes and other categories of persons

Discuss
Answer: (d).Both economically vulnerable or backward classes and other categories of persons Explanation:"Social sector" includes unorganised sector, informal sector, economically vulnerable or backward classes, and other categories of persons, both in rural and urban areas.
Q3.
How does the insurance business compare to other participants in the financial sector in terms of vulnerability to money laundering?

a.

It is more vulnerable

b.

It is less vulnerable

c.

It is equally vulnerable

d.

It is immune to money laundering

Discuss
Answer: (b).It is less vulnerable Explanation:The insurance business is relatively less vulnerable to money laundering compared to other participants in the financial sector, such as banks. While it is not completely immune, certain enabling features of insurance contracts can be misused by money launderers, making it important for insurance companies to implement robust anti-money laundering (AML) measures.
Q4.
What are some enabling features of insurance contracts that can be misused for money laundering purposes?

a.

Free look period, single premiums, top-ups

b.

Premium payments, death benefits, policy loans

c.

Policyholder dividends, beneficiary designations, policy surrenders

d.

Underwriting, claims processing, policy issuance

Discuss
Answer: (a).Free look period, single premiums, top-ups Explanation:Enabling features of insurance contracts that can be misused for money laundering purposes include "free look period," "single premiums," and "top-ups." These features provide opportunities for money launderers to exploit insurance products for their illicit activities.
Q5.
What responsibility do insurance companies have regarding anti-money laundering (AML) programs according to IRDA guidelines?

a.

Responsibility lies with the government

b.

Responsibility lies with the policyholders

c.

Responsibility lies with the insurance companies

d.

Responsibility lies with the reinsurers

Discuss
Answer: (c).Responsibility lies with the insurance companies Explanation:According to IRDA guidelines, insurance companies have the responsibility for implementing robust anti-money laundering (AML) programs to guard against the misuse of insurance products for money laundering or financing terrorist acts.
Q6.
What is the role of the senior level officer appointed by insurance companies in implementing AML programs?

a.

To handle customer complaints

b.

To oversee claims processing

c.

To implement the AML program and monitor compliances

d.

To manage investment portfolios

Discuss
Answer: (c).To implement the AML program and monitor compliances Explanation:The senior level officer appointed by insurance companies, such as the Chief Risk Officer, is responsible for implementing the AML program and monitoring compliances. This includes ensuring adherence to AML guidelines, conducting periodic risk management reviews, and maintaining a strong ethical and control environment within the company.
Q7.
What is the meaning of "economically vulnerable or backward classes" in the context of these regulations?

a.

Persons below the age of 18

b.

Persons with disability

c.

Persons who live below the poverty line

d.

Persons engaged in agricultural pursuits

Discuss
Answer: (c).Persons who live below the poverty line Explanation:"Economically vulnerable or backward classes" means persons who live below the poverty line.
Q8.
What does the term "informal sector" include according to the regulations?

a.

Highly organized workers

b.

Workers engaged in large-scale industries

c.

Self-employed workers at a low level of organizational technology

d.

Only agricultural workers

Discuss
Answer: (c).Self-employed workers at a low level of organizational technology Explanation:"Informal sector" includes small scale, self-employed workers typically at a low level of organizational technology.
Q9.
What obligations must every insurer, who begins to carry on insurance business after the commencement of the Insurance Regulatory and Development Authority Act, 1999, ensure during the first five financial years?

a.

Provide coverage only to urban areas

b.

Comply with obligations only in the first three financial years

c.

Undertake obligations pertaining to the persons in rural and urban areas

d.

Only focus on economically vulnerable classes

Discuss
Answer: (c).Undertake obligations pertaining to the persons in rural and urban areas Explanation:Every insurer must ensure that they undertake obligations pertaining to the persons in rural and urban areas during the first five financial years.
Q10.
Why are restrictions placed on acceptance of cash beyond Rs. 50,000 in premium or proposal deposit remittances in the insurance sector?

a.

To encourage cash transactions

b.

To prevent money laundering processes

c.

To simplify transactions

d.

To promote transparency in financial dealings

Discuss
Answer: (b).To prevent money laundering processes Explanation:Restrictions are placed on acceptance of cash beyond Rs. 50,000 in premium or proposal deposit remittances in the insurance sector to prevent money laundering processes. Cash transactions are highly vulnerable to money laundering, as they leave no audit trail, making it essential to impose limits to mitigate this risk.
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