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.

In this section, you'll find a wide range of Regulations on Conduct of Business mcq questions that explore various aspects of Regulations on Conduct of Business problems. Each MCQ is crafted to challenge your understanding of Regulations on Conduct of Business principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 14 Regulations of Insurance Business tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Regulations on Conduct of Business MCQs are your pathway to success in mastering this essential IC 14 Regulations of Insurance Business topic.

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Regulations on Conduct of Business MCQs | Page 21 of 32

Discover more Topics under IC 14 Regulations of Insurance Business

Q201.
What legislative measures address the issue of customer identity verification in insurance?

a.

Prevention of Money Laundering Act (PMLA)

b.

Anti-Money Laundering (AML) guidelines

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:The Prevention of Money Laundering Act (PMLA) and Anti-Money Laundering (AML) guidelines provide legislative measures to address the issue of customer identity verification in insurance. These regulations stipulate appropriate measures for determining the true identity of customers, including obtaining identification details, verifying addresses, photographs, financial status, and the purpose of insurance contracts. Compliance with these regulations is essential for insurance companies to combat financial crimes effectively.
Q202.
How are KYC norms applied in risk management?

a.

Randomly

b.

In a risk-based approach

c.

Without any consideration of risk

d.

Only for certain customers

Discuss
Answer: (b).In a risk-based approach Explanation:KYC (Know Your Customer) norms are applied in a risk-based approach in risk management. This means that the extent of caution exercised in each proposal is decided based on the risks identified in both customer profiles and product profiles.
Q203.
What are examples of low-risk customers in insurance?

a.

Non-residents

b.

High net worth individuals

c.

Salaried employees with well-defined salary structures

d.

Politically exposed persons (PEPs)

Discuss
Answer: (c).Salaried employees with well-defined salary structures Explanation:Low-risk customers in insurance include individuals and entities whose identities and source of funds can be easily verified, such as salaried employees with well-defined salary structures, people from lower economic strata, government departments, and government-owned companies.
Q204.
Which category of customers poses an inherently higher than average risk to insurance companies?

a.

Low risk customers

b.

Medium risk customers

c.

High risk customers

d.

All customers pose the same level of risk

Discuss
Answer: (c).High risk customers Explanation:High-risk customers pose an inherently higher than average risk to insurance companies. Examples include non-residents, high net worth individuals, trusts, charities, politically exposed persons (PEPs), and companies with close family shareholding or beneficial ownership.
Q205.
Why does diligence in identification need to be of high order in the case of high-risk customers?

a.

Because they require more paperwork

b.

Because they are less likely to make a claim

c.

Because they pose an inherently higher risk to the insurance company

d.

Because they are easier to verify

Discuss
Answer: (c).Because they pose an inherently higher risk to the insurance company Explanation:Diligence in identification needs to be of high order in the case of high-risk customers because they pose an inherently higher risk to the insurance company. Due to factors such as non-residency, high net worth, or political exposure, these customers may present greater challenges in verifying their identities and sources of funds.
Q206.
Which types of insurance products are considered vulnerable in terms of risk?

a.

Term life insurance

b.

Whole life insurance

c.

Single premium products, ULIPs, and policy features like top-ups

d.

Health insurance

Discuss
Answer: (c).Single premium products, ULIPs, and policy features like top-ups Explanation:Vulnerable insurance products in terms of risk include single premium products, ULIPs (Unit Linked Insurance Plans), and policy features like top-ups and partial withdrawals. These products may pose higher risks due to factors such as complexity, volatility, or susceptibility to misuse.
Q207.
What calls for detailed due diligence according to KYC norms in insurance?

a.

Remittance beyond a premium threshold of Rs 1 lakh per annum

b.

Remittance beyond a premium threshold of Rs 50,000 per annum

c.

Remittance beyond a premium threshold of Rs 10 lakh per annum

d.

Remittance beyond a premium threshold of Rs 5 lakh per annum

Discuss
Answer: (a).Remittance beyond a premium threshold of Rs 1 lakh per annum Explanation:According to KYC norms in insurance, remittance beyond a premium threshold of Rs 1 lakh per annum calls for detailed due diligence. This requirement ensures that large premium transactions are thoroughly scrutinized to mitigate the risk of money laundering or fraudulent activities.
Q208.
When is it necessary to establish insurable interest according to KYC norms?

a.

When the insurance premium is paid by the person insured

b.

When the insurance premium is paid by persons other than the person insured

c.

When the insurance premium exceeds a certain threshold

d.

When the insurance policy is for a high-risk customer

Discuss
Answer: (b).When the insurance premium is paid by persons other than the person insured Explanation:KYC norms in insurance require establishing insurable interest when the insurance premium is paid by persons other than the person insured. This ensures that there is a legitimate reason for the insurance coverage and helps prevent fraudulent activities.
Q209.
How should payments be made according to KYC norms in insurance?

a.

Only through cash transactions

b.

Only through account payee cheques or e-payments

c.

Only through wire transfers

d.

Only through third-party payments

Discuss
Answer: (b).Only through account payee cheques or e-payments Explanation:According to KYC norms in insurance, all payments must be made after verification of the bona fide beneficiary through either account payee cheques or e-payments. This requirement helps ensure transparency and traceability of financial transactions.
Q210.
What should attract more attention and detailed checks from an Anti-Money Laundering (AML) perspective in insurance?

a.

Premium payments made by the person insured

b.

Frequent free-look cancellations and assignments to related parties

c.

Premium payments exceeding Rs 1 lakh per annum

d.

Payments to legal heirs in case of death benefits

Discuss
Answer: (b).Frequent free-look cancellations and assignments to related parties Explanation:Vulnerable areas like frequent free-look cancellations and assignments by the policyholder to a third party not related to him should attract more attention and detailed checks from an Anti-Money Laundering (AML) perspective in insurance. These activities may indicate attempts to misuse the insurance policy for illicit purposes.
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