C05 Underwriting and Rating MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on C05 Underwriting and Rating, a fundamental topic in the field of IC38 Life Insurance Agent Exam. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our C05 Underwriting and Rating 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 C05 Underwriting and Rating mcq questions that explore various aspects of C05 Underwriting and Rating problems. Each MCQ is crafted to challenge your understanding of C05 Underwriting and Rating principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC38 Life Insurance Agent Exam tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our C05 Underwriting and Rating MCQs are your pathway to success in mastering this essential IC38 Life Insurance Agent Exam topic.

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C05 Underwriting and Rating MCQs | Page 2 of 4

Discover more Topics under IC38 Life Insurance Agent Exam

Q11.
Why does every insurance product need to be filed with IRDAI for approval before being offered for sale?

a.

To receive a Unique Identification Number (UIN) for the product

b.

To determine the market demand for the product

c.

To ensure the insurer is willing to accept the risks and pay claims

d.

To withdraw the product from the market

Discuss
Answer: (a).To receive a Unique Identification Number (UIN) for the product Explanation:Insurance products need to be filed with IRDAI to receive a Unique Identification Number (UIN) and approval.
Q12.
What does the regulator ask the insurer to commit to when filing an insurance product?

a.

That the product will have the lowest premium in the market

b.

Fair policy wordings and scientific pricing

c.

That the insurer will not accept any risks

d.

A commitment to offer the product to prospective customers

Discuss
Answer: (b).Fair policy wordings and scientific pricing Explanation:The regulator asks the insurer to commit to fair policy wordings and scientific pricing.
Q13.
What should the insurer plan for when introducing a product into the market?

a.

Offering the product to all policyholders

b.

The withdrawal of the product in the future and policyholder options

c.

Charging the lowest premium possible

d.

Providing a high margin for profit

Discuss
Answer: (b).The withdrawal of the product in the future and policyholder options Explanation:The insurer should plan for the possibility of product withdrawal in the future and policyholder options.
Q14.
What is the main purpose of ratemaking in insurance?

a.

To reduce the impact of financial losses

b.

To transfer risk to the insurer

c.

To establish a margin for profit

d.

To calculate a price to cover future insurance claims and expenses

Discuss
Answer: (d).To calculate a price to cover future insurance claims and expenses Explanation:Ratemaking in insurance is the process of calculating a price to cover future insurance claims and expenses.
Q15.
How are rates and premiums related in insurance?

a.

Rates determine the probability of loss, while premiums cover the cost of claims.

b.

Rates and premiums are the same thing.

c.

Premiums are calculated by multiplying the sum insured by the rate.

d.

Rates are calculated based on policy wordings.

Discuss
Answer: (c).Premiums are calculated by multiplying the sum insured by the rate. Explanation:Premiums are calculated by multiplying the sum insured by the rate, where the rate is the price of a given unit of insurance.
Q16.
What is the principle referred to as 'the law of large numbers' in insurance?

a.

The more policies an insurance company sells, the less predictable the results become.

b.

As the sample size grows, the results come closer to the expected value.

c.

Small sample sizes are more accurate in predicting losses.

d.

Insurance companies need to sell fewer policies to minimize risk.

Discuss
Answer: (b).As the sample size grows, the results come closer to the expected value. Explanation:The principle known as 'the law of large numbers' states that as the sample size grows, the results become more predictable and closer to the expected value.
Q17.
How can an insurance company ensure that the pool is sufficient to compensate for incurred losses?

a.

By minimizing the number of policies sold

b.

By decreasing the diversity of risks in the pool

c.

By selling more policies to more people

d.

By not predicting any losses

Discuss
Answer: (c).By selling more policies to more people Explanation:Insurance companies can ensure that the pool is sufficient to compensate for incurred losses by selling more policies to more people, which aligns with the principle of 'the law of large numbers.'
Q18.
What does the 'law of large numbers' principle mean for insurance companies?

a.

They should predict fewer losses.

b.

They should only sell policies to a small, select group of people.

c.

The larger the number of policies sold, the more predictable the results become.

d.

They should minimize the diversity of risks in the pool.

Discuss
Answer: (c).The larger the number of policies sold, the more predictable the results become. Explanation:The 'law of large numbers' principle means that the larger the number of policies sold, the more predictable the results become for insurance companies.
Q19.
How does the 'law of large numbers' relate to the predictability of results in insurance?

a.

It makes the results less predictable as the sample size grows.

b.

It ensures that results are always exactly as predicted.

c.

It states that larger sample sizes lead to more predictable results.

d.

It only applies to policies with small sample sizes.

Discuss
Answer: (c).It states that larger sample sizes lead to more predictable results. Explanation:The 'law of large numbers' states that larger sample sizes in insurance lead to more predictable results.
Q20.
What does the 'law of large numbers' principle help insurance companies achieve?

a.

Increased unpredictability in results

b.

Higher profitability with fewer policies

c.

More diversity of risks in the pool

d.

Better predictability of results through selling more policies

Discuss
Answer: (d).Better predictability of results through selling more policies Explanation:The 'law of large numbers' principle helps insurance companies achieve better predictability of results by selling more policies.
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