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Pre-Contract Examination Workbook 1 Chapter 1 Introduction to Insurance 1. Which of the following roles are the best suited for a life insurance agent I bring financial relief to families met with untimely death II bring new business for the company’s profitability III bring financial relief in the event of property loss in fore, flood and storm etc IV maintain quota so that contract will not be terminated V inculcate discipline of saving amongst people A All of the above C I, II, III and IV B I and IV D I and V 2. _________ states that when there is an increase in number of loss exposure, the predicted loss tends to approach the actual loss: A Principle of utmost good faith C Law of large numbers B Law of similar numbers D Loss-sharing arrangement 3. In 1762 The Equitable Assurance introduced premium rates based on: A Increasing premium system C Level premium system B Variable premium system D New Mortality Tables 4. In the early 1960s, some local insurance companies went out of business mainly because of the following reasons: I Lack of capital II Lack of technical background III Lack of policyholders IV Not encouraged by the government A. II only C. II and III only B. I and IV only D. I and II only 5. Which of the following is not true? A. The earliest insurance was applied by merchants to protect themselves against loss of their property. B. Initially life insurance policies were sold as short term and long-term policies. C. The Amicable Society for a Perpetual Assurance adopted a member contribution scheme to compensate dependents of the members who had died. D. In 1762 the Equitable Assurance for the first time fixed premium rates based on the level premium system. 6. Life Insurance can be best defined as: A. A contract that covers risks such as premature death, marine and aviation and products sold. B. A contract which pays out money on the happening of all insured events. C. A contract which provides coverage against risks not directly involving human life. D. A contract which pays out money in the happening of all insured events dependent on human life.
Transcript

Pre-Contract Examination Workbook

1

Chapter 1 Introduction to Insurance

1. Which of the following roles are the best suited for a life insurance agent

I bring financial relief to families met with untimely deathII bring new business for the company’s profitabilityIII bring financial relief in the event of property loss in fore, flood and storm etcIV maintain quota so that contract will not be terminatedV inculcate discipline of saving amongst people

A All of the above C I, II, III and IVB I and IV D I and V

2. _________ states that when there is an increase in number of loss exposure, the predicted losstends to approach the actual loss:

A Principle of utmost good faith C Law of large numbersB Law of similar numbers D Loss-sharing arrangement

3. In 1762 The Equitable Assurance introduced premium rates based on:

A Increasing premium system C Level premium systemB Variable premium system D New Mortality Tables

4. In the early 1960s, some local insurance companies went out of business mainly because ofthe following reasons:

I Lack of capitalII Lack of technical backgroundIII Lack of policyholdersIV Not encouraged by the government

A. II only C. II and III onlyB. I and IV only D. I and II only

5. Which of the following is not true?

A. The earliest insurance was applied by merchants to protect themselves against loss oftheir property.

B. Initially life insurance policies were sold as short term and long-term policies.C. The Amicable Society for a Perpetual Assurance adopted a member contribution

scheme to compensate dependents of the members who had died.D. In 1762 the Equitable Assurance for the first time fixed premium rates based on the

level premium system.

6. Life Insurance can be best defined as:

A. A contract that covers risks such as premature death, marine and aviation andproducts sold.

B. A contract which pays out money on the happening of all insured events.C. A contract which provides coverage against risks not directly involving human life.D. A contract which pays out money in the happening of all insured events dependent on

human life.

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7. In insurance, the contributions made by individuals who face the same risk to compensate fortheir misfortunes against financial losses is called:

A. Remedies C. PremiumB. Aqad D. Takaful

8. In applying the concept of insurance, policyholders will contribute premiums to the insurancecompany. The insurer uses this amount of money to:

I pay for claimsII investIII pay for staff’s salariesIV pay income tax

A. I, III and IV C. I, II and IVB. I, II and III D. All of above

9. To be an effective agent, which of the following should NOT be done?

A. To recognize the insuring needs of the clientsB. To provide advice to the ClientC. Bring financial relief to aggrieved dependents of the insuredD. To ensure the products proposed is beyond the resources of the prospective

policyholder

10. The insurance industry in Malaysia had been largely patterned on

A. British-American System C. Local SystemB. British System D. American System

11. The need for insurance arises from the following circumstances:

I A person’s earning capacity is affected by old ageII A person’s investment may depreciate in valueIII The need for an continuous income to liveIV an individual might have to bear the financial losses alone

A. I and II C. I, II and IIIB. I, II and IV D. I, II, III and IV

12. Risk covered by general insurance include:

I sickness or disability due to accidentII motor vehiclesIII fidelity Guarantee and BondsIV death caused by infection

A. II and III C. I, II and IVB. I, II and III D. All of above

13. Which of the following is NOT the function of insurance?

A. Stimulates business enterprisesB. As a mean of savingC. For insured to make a profit out of his lossD. Sources of capital for insurer’s investment

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14. Insurance, as a device for spreading losses, can only work when

I premium collected is adequateII there is an independent occurrence of lossesIII the number of similar loss exposures increasesIV the occurrence of losses is unpredictable

A. II and III C. I, II and IIIB. I, II and IV D. All of above

15. Which of the following effect of misfortune cannot be compensated through insurance?

A. Loss of factory as a result of fireB. Loss of income due to disabilityC. Injury in an accidentD. Emotional trauma arising from death of a loved one

16. The earliest beginning of insurance were in the field of:

A. Marine insurance C. Equitable insuranceB. Life insurance D. Motor vehicle insurance

17. Insurance is:

A. A loss-sharing arrangement C. An economic institutionB. A pooling of risk D. All of the above

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Chapter 2 Nature of Risk and Its Management

1. Which of the following is determined on the basis of historical data?

A Empirical Probability C Priori ProbabilityB Judgemental Probability D Natural Probability

2. When a loss is accidental and unintentional it is known as:

A Catastrophic losses C Pure riskB Fortuitous losses D Insurable interest

3. Method of handling risk include:

I Avoid the person who produces the riskII Reduce the total amount of lossIII Plan to retain risksIV Transfer the risk to a third party

A. I, II and III C. I and IIB. I, II and IV D. All of above

4. Risk can be transferred when:

A. A person bought a fire insurance policy on his houseB. The manufacturer agreed to compensate defective products sold to the retailerC. A person bought a life insurance policy on the life of his childD. All of the above

5. Questionnaires, financial statements and personal inspection of facilities are sources for whichof the following step in risk management process?

A. Identification C. SelectionB. Evaluation D. Implementation

6. The following items are related to risk:

I The variation in outcomes in a given situationII The possibility of lossIII The subject matter of insuranceIV Uncertainty as to when loss-producing events will occur

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

7. Risk of property damage from earthquake, flood and typhoon is classified under:

A. Fundamental Risk C. Speculative RiskB. Particular Risk D. Social Risk

8. Peril is

A. A loss of properties and lives C. A cause of lossB. A financial loss D. The exposure to danger

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9. Which of the following is NOT true about the categories of risk?

A. Particular risks are the responsibility of the individuals themselvesB. Pure risk exists when there is the possibility of either loss or no lossC. Investment in the stock market is considered as speculative riskD. Pure risk and speculative risk can easily be handled by insurance technique

10. Which of the following describe the definition of risk?

A. An uncertainty regarding lossB. A condition that increases the chance of lossC. A reduction of economic valueD. All of the above

11. Which of the following is NOT true about measurement of risks?

A. The chance of loss in insurance practice can be determined by the probability theoryB. Priori probability is determined when the law of large numbers is appliedC. Empirical probability is determined on the basis of historical data.D. Judgemental probability is determined when there is lack of credible statistics

12. Risk is ever present in our lives and pure risks lead to financial losses. What are the solutionsto overcome risk problem?

I Undergo a risk management processII Practice of loss-sharing arrangementIII Select a risk handling techniqueIV Transfer of speculative risk through insurance

A. I, II and IV C. I, II and IIIB. II, III and IV D. All of above

13. There must be a large number of similar risks before any one of the risks is capable of beinginsured. The reasons for this are:

I To enable the insurer to predict losses more accuratelyII To enables the principle of losses of a few to be borne by many to be appliedIII To predict the adequate premium for paying lossesIV To ensure a large number of risks incur losses at the same time

A. I and II C. I, II and IIIB. II, III and IV D. All of above

14. Selection of risk handling techniques will base on the following criteria, except:

A. FinancialB. HumanitarianC. Legal requirementsD. Religious aspects

15. Which of the following is NOT true about the criteria of insurable risk?

A. Insurance risks must be capable of being financially measuredB. Insurable risks should have the possibility of profits, loss or no lossC. There must be a large number of similar risks involvedD. There must not be a large number of similar risks involved at the same time

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16. The characteristics of insurable risk is (are):

A. The loss should be heavy enough to be borne by insurerB. The object of insurance does not have to follow the public policyC. The risk that has a very high probability of loss might not be able to be insuredD. All of the above

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Chapter 3 The Basic Principles Of Insurance And An Introduction To Takaful

1. The Takaful companies provide various Takaful plans to cover risks. Which of the followingrisks are allowable by Syariah:

A Takaful by SyariahB Business risks & pure risksC Participant’s share of risksD Family Takaful & general Takaful risks

2. Which of the following best describes the concept of Tabaruk

A An aqad of helping. To donate all contributionsB An agreement of buying and sellingC An agreement to gain the benefit of investmentD An aqad (agreement) to deposit as donation a certain proportion of Takaful

contributions on installments into a risk fund

3. Insurance is quite different from gambling. What is this difference that makes it allowable inaccordance to Syariah:

I Principle of utmost good faithII Principle of indemnityIII Principle of contributionIV Principle of insurable interest

A All of the above C I and IIB IV only D I and IV

4. As regards to marine policies, they are freely assignable by statutory provision, MarineInsurance Act 1906. In practice which of the following is freely assignable

A Hull policies C Freight policiesB Cargo policies D Hull & Cargo policies

5. When a policy owner named a third party to receive the death benefit under his policy, it ismost appropriate to be referred to as:

A. Assignment of policy proceeds C. NovationB. Transfer by operation of law D. Automatic assignment of policy

6. When an insured fails to disclose a material fact intentionally, it is called

A. Non-disclosure C. MisrepresentationB. Concealment D. Fraudulent misrepresentation

7. To disclose fully and accurately all material facts relating to the proposed risk, whether askedor not, is the duty of

A. Caveat emptor C. DisclosureB. Utmost Good Faith D. Subrogation

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8. A thief cannot effect a valid insurance on goods stolen by him because:

A. There is no insurable interestB. He has no legitimate financial interest in the goodsC. He is in breach of the lawD. All of the above

9. What is (are) the difference(s) between an ordinary contract and the insurance contract?

A. In most ordinary contracts, there is a need for parties to disclose information notrequested in order for the customer to buy the best product

B. The legal principles governing the insurance contracts are caveat emptor anduberrimae fides

C. In insurance, the buyer will know more about the information material to the riskproposed for an insurance policy

D. All of the above

10. In general insurance (excluding marine insurance) insurable interest must exist

A. At the time of entering into the contractB. At the time of lossC. At the beginning and at time of lossD. When marine insurance is involved

11. Referring to the table below, P has an insurable interest on Q. Which one is NOT true?

P QA A wife Husband’s carB Trustee Property held in trustC A person Own lifeD Creditor Debtor

12. Under an absolute assignment of policy

A. The new insured has all the rights and liabilities which is greater than the originalinsured

B. Prior consent from the insurer is needed for an assignment of all marine policies to bevalid

C. Prior consent from the insurer is not required if the transfer is made by willD The assignor will continue to enjoy the policy proceeds

13. Which of the following is NOT a subject matter of insurance?

A. Ship C. GoodsB. Life D. None of the above

14. What is the difference between a subject matter of insurance and the subject matter ofinsurance contract?

A. If the life insured’s own life is the subject matter of insurance, his financial interesttowards his life is the subject matter of the insurance contract

B. A subject matter of insurance is the financial interest in the property, rights, life andlimbs insured

C. In general insurance business, the subject matter of insurance and the subject matterof the insurance contract is the same

D. None of the above

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15. The materiality of a fact under the duty of utmost good faith depends on the

I nature of the proposed insuranceII representations by the insurance companyIII circumstances surrounding a proposed riskIV status of the servicing agent

A. I and II C. I and IIIB. II and IV D. III and IV

16. The principle of indemnity states that

A. The insurer should restore the insured to the same financial position as before the lossB. The insurer should restore the insured to a better financial position as before the lossC. The insurer should restore the insured to a lesser financial position as before the lossD. The insured should enjoy indemnity which is less than his loss as a result of policy

limitations

17. Which of the following is (are) a contract of indemnity?

I Fire insuranceII Personal accidentIII AviationIV Endowment

A. II and IV C. III and IVB. I and III D. All of above

18. When an insured’s property valued at RM 1,000 has been destroyed by a negligent thirdparty, which of the following is NOT true about a claim under the principle of subrogation?

A. This type of subrogation is considered as arising put of tortB. In the absence of subrogation, the insured cannot get his claimC. In the presence of subrogation, the insured can either claim for the insurer or the

negligent partyD. The principle of subrogation applies to prevent the insured from making profit out of

his loss

19. Under which of the following conditions where subrogation may not arise?

A. The insured incurred a loss covered under a money policy and under a contractbetween the insured and the security company

B. Valuable lost in an hotel is covered under the Innkeepers Act 1952 and also under asall risks policy owned by the hotel guest

C. When insured’s property is totally destroyed and the insurer takes over the salvageafter payment to insured

D. None of the above

20. When a loss is covered by two or more policies, two or more insurers can contributeproportionately to the lost of indemnity. This is the principle of

A. Subrogation C. Loss-sharingB. Contribution D. Distribution

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21. The insurer may be liable for

A. Insured perils onlyB. Insured and uninsured perilsC. Uninsured perils and excluded perilsD. Insured, uninsured and excluded perils

22. When two or more perils including one insured peril occurred concurrently and the ensuingloss cannot be separated, the insurer will be liable for

A. The full amount provided there is no excluded perilB. The loss caused by the insured perilC. Nothing because the loss cannot be separatedD. The loss caused by the insured peril and the result uninsured peril

Questions 23 & 24 are based on the following case:

An electrical short-circuit sets fire to a building insured under a fire policy, the firemen manage tocontrol the fire within one hour later. The owner suffers fire and water damage to the building andcontents.

23. Referring to the above case, what is the proximate cause of the loss?

A. Fire C. Loss cannot be separatedB. Electrical short-circuits D. Water

24. The insurer is only liable for any loss caused by

A. Fire onlyB. Electrical short-circuit and fire onlyC. Water and fire onlyD. Water, electrical short-circuit and fire only

Questions 25 & 26 are based on the following case:

An insured has a personal accident policy and a life policy. While crossing a river the insuredaccidentally falls into the river. He suffers a heart attack and subsequently drowns.

25. The above case shows a broken chain of event because

I the proximate cause (drowning) is the one immediately following the last interruption(death)

II there is a break in chain of events between the heart attach and drowningIII the insurer will be liable to pay the benefits under the personal accident policyIV the insurer will be liable for the loss insured under the policy from the insured peril

onwards

A. I and II C. II and IVB. I and III D. I and IV

26. The insurer will be liable to pay benefits under

A. Personal accident policy C. Personal accident and health policyB. Health policy D. Personal accident and life policy

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27. Which of the following is NOT true about the information of takaful?

A. Takaful companies provide insurance based on system of operation in accordancewith Syariah

B. Part I of Takaful Act 1984 provides interpretation, classification and references totakaful business

C. The Syariah Supervisory Council is established in order to involve directly with themanagement of the takaful company

D. The Takaful operation is based on the concept of ‘Tabaruk’ and ‘Mudharabah’

28. One of the important aspects of takaful operation is

A. The takaful business assumes risks and is a contractual transfer of riskB. The takaful company covers business and pure risks, as in the conventional insuranceC. The agreement of contribution is based on mutual help, and not on buying and sellingD. The Tabaruk proportion defines the participant’s share of the risk computed using the

actuarial principle based on Syariah

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Chapter 4 The Insurance Industry In Malaysia

1. The main difference between insurance agents and insurance brokers is that

A Agents are not tied to any one insurer where else brokers are tied to one insurerB Brokers are not tied to any one insurer where else agents are tied to one insurerC Insurance agents sell insurance products where else insurance brokers sell shares of

insurance companyD There is no difference between agents and insurance brokers

2. Insurance companies in Malaysia are mostly organized on the basis of:

A Products sold C TerritoriesB Functions performed D Combination of A and B

3. Delayed quotation, slow service to the customers are examples when an insurance company’sdecision is:

A Decentralized C “Half-way”B Centralized D Invalid

4. Insurers transacting both life and general business are called

A. Life and general insurer C. Mutual insurerB. Composite insurer D. Co-operative insurer

5. Which of the following is NOT true about the insurance market?

A. An insurance market refers to the facilities of buying and selling insuranceB. A proprietary company is owned by shareholders and profits earned belong to themC. A co-operative society is owned by shareholders and policyholders which may be

termed as a mutual insurerD. The intermediaries in the insurance market are agents and brokers

6. A co-operative society transacting insurance business may be termed as

A. Co-operative company C. Mutual companyB. Proprietary company D. Composite company

7. Which of the following describe the insurance brokers?

I An insurance broker acts on behalf of the insuredII An insurance broker can tie to more than two insurersIII The broker may help to settle claimsIV All broker must be licensed by Bank Negara

A. I and III C. I, III and IVB. I, II and III D. All of above

8. They are independent parties appointed to investigate the cause and extent of the loss andreport to the insurer to decide whether the loss is covered

A. Marine and cargo surveyors C. AdjustersB. Doctors D. Assessors

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9. They are employed by the insured to calculate the extent of the damage or loss. They alsoassist the insured in preparation and negotiation of the claim

A. Adjusters C. AssessorsB. Investigators D. Brokers

10. The reinsures’ function is to

A. Reinsure the subject matter of insurance from the buyerB. Insure the risk underwritten by the insurersC. Extend the amount of sum insured restricted under the normal policyD. Underwrite reinsurance business and does not accept business direct from the general

public

11. Below are the insurance organization structure and their functions. Which department’sfunction is NOT described correctly?

A. Administration – responsible for matters relating to the company’s employeesB. Investment – responsible for company’s preparation of financial statements,

control of receipts and disbursementsC. Marketing – responsible for sales promotion programmes, literature and kitsD. Sales – responsible for identification of field officers, recruiting, agents

contract, motivating and supervising the agency force

12. Which of the following is NOT true about centralization?

A. The branches act as sales outletsB. The basic functions and decision-making is at the head officeC. Centralization results in prompt service rendered to customersD. It results in uniformity in practice and economies in administration

13. Below are institutions related to general insurance, except

A. IMB C. IBAMB. PIAM D. ASM

14. The main function of the Motor Insurers’ Bureau is to

A. Provide compensation to victims of motor accidentsB. Provide an alternative procedure to resolve disputes arising out of policies of personal

insuranceC. Provide insurance coverage at a reasonable cost to certain classes of vehicles as a

kind of social serviceD. Manage the Unplaced Motor Pool

15. The main function of Insurance Mediation Bureau is to

A. Provide compensation to victims of motor accidentsB. Provide an alternative procedure to resolve disputes arising out of policies of personal

insuranceC. Provide insurance coverage at a reasonable cost to certain classes of vehicles as a

kind of social serviceD. Manage the Unplaced Motor Pool

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16. PIAM’s main objectives include:

I to collect and circulate information and statistics relating to general insurancebusiness

II to provide an alternative procedure to resolve disputes arising out of personalinsurance policies

III to make rules and regulations in consultation with the Director General of Insurancefor implementation

IV to promote the study and research into the Actuarial subjects and allied aspects ofinsurance

A. I and III C. I, III and IVB. I, II and III D. all of above

17. Its main objective is to promote and establish a sound brokerage business in Malaysia in co-operation and consultation with the DGI

A. PIAM C. IMBB. IBAM D. AMLA

18. The following loss adjuster(s) do not need to hold a license granted by the DGI to carry outthe adjusting duties

A. Advocates who assist in adjusting insurance claims incidental to the practice of theirprofessions

B. Adjusters of maritime lossesC. Employees of insurance companies who act in adjusting insurance claimsD. All the above

19. It is responsible for the registration of life insurance agents in Malaysia

A. PIAM C. MIIB. LIAM D. NAMLIA

20 These are the objectives of MII, except

A. to encourage and assist in the study of subjects relating to insuranceB. To organise and conduct insurance coursesC. To register life and general insurance agentsD. To offer money or prizes for essay or research in any subject relating to insurance

21. Which of the following is NOT an organization related to Life Insurance?

A. LIAM C. ASMB. IMB D. NAMLIA

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Chapter 5 Consumer Protection And Statutory Regulation

1. The purpose of the Insurance Guarantee Scheme Fund (IGSF) is to:

A Make reinsurance arrangement consistentB Meet the liabilities of any insolvent insurerC Maintain an insurance fundD Enable an insurance company to transact insurance business

2. Insurance Act provides the following in order to control the financial solvency of insurers:

I Compulsory DepositII Insurance Fund and InvestmentIII Solvency MarginIV Registration of Insurers

A I and II C II and IIIB I, II and III D All of the above

3. Any person who wishes to act as an insurance broker must:

I be licensed by the DGIII produce satisfactory certificate of solvency from auditorsIII be a member of IBAMIV only engage with one insurance company

A I and II C I, II and IIIB II and III D All of the above

4. Every insurer must place a cash deposit of not less than ________ with the AccountantGeneral.

A. RM 300,000 C. RM 500,000B. RM 400,000 D. RM 600,000

5. Below are the advantages of Self-Regulation, except

A. Avoids the need to introduce legislation to regulate the industryB. Help to instil self-discipline among insurance companiesC. Measures can respond to changing needs faster than legislationD. Voluntary codes of practice do not have power of law

6. Any person who wish to act as an insurance broker must be licensed by

A. Insurance Broker Association of Malaysia (IBAM)B. Director General of Insurance (DGI)C. Life Insurance Association of Malaysia (LIAM)D. Life Insurance Marketing and Research Association (LIMRA)

7. Insurance Guarantee Scheme Fund (IGSF) has been established for

A. Life insurance business C. Composite businessB. General insurance business D. Policyholders

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8. Besides the Insurance Act 1963, other legislative control on insurance companies are

I Companies Act, 1963II Malaysia Income Tax Act, 1967III Civil Law Act, 1972IV Unclaimed Money Act, 1965

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

9. The code of Ethics and Conduct formulated by LIAM deals with the following aspects:

I Life insurance sellingII Life insurance claimsIII Life insurance PracticeIV Insurance product development

A. I and II C. I and IIIB. II and IV D. I, III and IV

10. To protect the policyholders’ interest, the Insurance Act 1963 focuses on the following areas:

I Registration of InsurersII Licensing of brokers and loss adjustersIII Fair trade practicesIV Insurers’ trade practices

A. I, II and III C. II, III and IVB. I, III and IV D. All of above

11. In accordance with the provision of the Insurance Act 1963, the powers of DGI includes

I to assume control over the property business and affairs of the insurerII to inspect books and other documents of the insurerIII to investigate into the business of the insurerIV present a petition to the court to wind up the insurer’s business

A. I and II C. I, II and IIIB. II and III D. All of above

12. According to the International Consumer Movement, consumers have some basic rightswhich include:

I right to informationII right to be redressIII right to chooseIV right to satisfaction

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

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13. Self-regulation has been introduced by the insurance industry with the objective to

I instil discipline and promote healthy competition in the industryII apply to court to appoint a receiver or manager to manage the business affairs of the

insurerIII provide some element of protection to insurance consumersIV present a petition to the court to wind up the insurer’s business

A. I and III C. I, II and IVB. I, II and III D. All of above

14. In Malaysia, the regulation of insurance business is achieved through the enforcement of theInsurance Act, 1963 by the

A. Life Insurance Association of Malaysia (LIAM)B. Life Insurance Marketing and Research Association (LIMRA)C. Director General of Insurance (DGI)D. Association of Malaysian Loss Adjusters (AMLA)

15. Every insurer is required at all times to maintain a surplus of assets over liabilities of not lessthan

A. RM 10 million for life insuranceB. RM 15 million for life insuranceC. RM 5 million or 20% of net premium income in the preceding financial year,

whichever is greater, for general insurance businessD. RM 10 million or 20% of net premium income in the preceding financial year,

whichever is greater, for insurance business

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Chapter 6 The Insurance Contract

1. __________ of the Insurance Act 1963 provides that a minor above age 16 can enter into alegally binding insurance contract:

A Section 23 C Section 14B Section 41 D Section 23(b)

2. Section 41 of the Insurance Act 1963, says that a minor aged 10 to 16 may enter intoinsurance contracts

A Only when they reach age 18B With the written consent of his parent / guardianC Without any consent of his parent / guardianD Cannot buy Insurance policies

3. The distinct difference between general insurance and life insurance is that:

A Policies may be enforced before premiums are paid in General Insurance Businesswhere else in life insurance the initial premium must be paid before the policy can beissued

B Policies may be enforced before premiums are paid in Life Insurance where else inGeneral Insurance the initial premium must be paid before the policy can be issued

C General Insurance contracts must be written legally where else general insurancecontracts needs no legality

D Life Insurance contracts must be written legally where else General Insurancecontracts needs no legality

4. Which is the best definition of contract?

A. A legally binding agreement made between two or more partiesB. A non-legally binding agreement made between two or more partiesC. An agreement made with the witness of a lawyerD. None of the above

5. Which of the statements below is NOT true about legality of agreement entered into inbusiness?

A. It is essential that parties to an agreement intend to be legally boundB. The law generally presume that agreement entered into a business environment are

intended to be legally bindingC. Insurance agreements are presumed to be legally binding on the insured and insurerD. The law generally will not presume that agreements entered into a business

environment ate intended to be legally binding

6. The offer and acceptance may be expressed in several ways, they are:

I WritingII OrallyIII Implied from ConductIV Voluntary

A. I and II C. II, III and IVB. I, II and III D. All of above

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7. In insurance, offer is usually made by __________ and accepted by __________

A. Proposer, beneficiary C. Beneficiary, beneficiaryB. Proposer, insurer D. Insurer, proposer

8. To form a legally binding insurance agreement, there is certain essential requirement to besatisfied. What are those essential requirements?

I (a) Intention to create legal relationship (b) Offer and AcceptanceII (a) Consensus ad Idem (b) Legally bind contractIII (a) Consideration (b) Consensus ad IdemIV (a) Legal capacity to contract (b) Legality of the contract

A. I and II C. I, III and IVB. II and III D. All of above

9. In some instance, the insurer may not accept a proposal on its original terms but may offer toprovide insurance on different terms. This transaction is called

A. Offer and acceptance C. Counter-offerB. Counter-acceptance D. Counter-check

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Chapter 7 Law of Agency

1. The legal maxim applies to agency is ___________ which means “he who acts throughanother is himself performing the act”

A Utmost good faithB Knowledge of the agent is knowledge of the insurerC Qui fact per alium fact per seD Caveat emptor

2. What is the primary purpose of the agency system

A Obtaining prospect regularlyB Continuously submitting new proposalsC Canvassing new businessD Maintaining agency quotas

3. An authority by estoppel, is an act that the principal is estopped from denying the existence ofthe agency. This authority is also known as

I Usual authorityII Implied authorityIII Express authorityIV Apparent authority

A I, II and III C IV onlyB I and IV D All of the above

4. The middlemen or intermediaries of the insurance market may be termed as

A. Agents C. PolicyholderB. Principal D. Agency

5. The authorities given to an agent include

I Express authorityII Implied authorityIII usual authorityIV apparent authority

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

6. “The knowledge of an authorized agent is deemed to be the knowledge of the insurer”. Thisrefers to:

A. The Civil Law Act, 9163 C. Section 16A, Insurance Act, 1963B. The Companies Act, 1965 D. Section 44A, Insurance Act, 1963

7. __________ can be defined as the relationship which arises when the agent is engaged by theprincipal

A. Employee C. Third partyB. Agency D. Company

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8. “Any person who mislead to induce another person to enter into any contract, will be liable toa fine not exceeding RM 5,000 or imprisonment for a term not exceeding 1 year or both”.This refers to

A. The Civil Law Act, 1963B. The Companies Act, 1965C. Section 16A, Insurance Act, 9163D. Section 44A, Insurance Act, 1963

9. The relationship of principal and agent may be terminated by

I notice of renunciation given to the principal by agentII notice of revocation given by the principal to the agentIII mutual agreementIV death, lunacy or bankruptcy of the principal or agent

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

10.. The relationship of insurer and agent may be created in the following ways:

I By implication of the lawII By express appointmentIII By section 44A, Insurance Act, 1963IV By section 23, Civil Law Act, 1972

A. I and II C. I, II and IVB. I, II and III D. All of above

11. Agents are classified to different classes in accordance with the authority provided to them:

I General agentII Special agentIII Senior agentIV Universal agent

A. I. II and III C. I, III and IVB. I, II and IV D. All of above

12. To pay remuneration and expenses as agreed to the agents is the duties of the

A. Principal C. PolicyholderB. Agency D. Beneficiary

13. The relationship which have connection with agency are:

I the relationship between principal and agentII the relationship between principal and a third partyIII the relationship between agent and a third party

A. I C. II and IIIB. I and II D. All of above

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14. An agent who has unlimited authority is classified into the following categories:

A. Special agent C. Universal agentB. General agent D. Senior agent

15. Any representation made by the principal which induces a third party reasonably to believethat a particular person is an agent of the principal and make the principal liable for thatparticular person’s action. This authority of agent refers to

A. Express authority C. Usual authorityB. Implied authority D. Apparent authority

16. An insurance agent is expressly NOT allowed to perform the following acts:

I to represent more than one life insurance companyII to represent more than three general insurance companiesIII to incur any forms of liability on behalf of the insurer

A. I and II C. II and IIIB. I and III D. All of above

17. According to Section 16A of Insurance Act, 1963, any person who misleads to induce anotherperson to enter into any contract shall be liable to

A. A fine C. ImprisonmentB. A fine and/or imprisonment D. None of the above

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Chapter 8 Marketing And After Sales Services

1. In a market-oriented insurance company, the role of sales and marketing department is to:

A. Sell the policies which the company has developedB. Determine the need of customers and satisfy them by distributing appropriate policiesC. Emphasis on salesD. Use hard sales techniques to stimulate customers’ interest in the company’s policies

2. An ___________ agent is one who distributes policies with the objective of satisfyingcustomers’ requirements

A. Task-oriented C. Market-orientedB. Sales-oriented D. Product-oriented

3. An agent who engage in personal selling requires to gain

I market knowledgeII product knowledgeIII selling knowledgeIV legal knowledge

A. I, II and III C. II, III and IVB. I, III and IV D. All of above

4. A successful agent needs knowledge on selling techniques, below are the different sellingtechniques used in insurance selling:

I Creative sellingII Order processingIII Alternative sellingIV Missionary selling

A. I, II and III C. I, III and IVB. I, II and IV D. II, III and IV

5. Which of the following does NOT describe mode of premium payment correctly?

A. Premium paid under modes other than yearly are slightly higher per yearB Monthly premium is higher because more administrative work is involved in the

collectionC. Home service scheme operates in connection with industrial life insurance which

usually provides coverage for the higher income group who can affordD. Payroll deduction scheme can only be applied after a written consent from the

employee

6. Which of the following are correct statements about home service insurance?

I Provide coverage to the low income workerII Premiums collected by company staff at the home of the policyholdersIII Classified as Industrial Life InsuranceIV The premiums can be paid weekly, fortnightly, monthly or quarterly

A. I and II C. I, III and IVB. I and III D. All of above

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7. Factors which may influence the consumers’ buying decision are

I reputation of the insurerII agent’s personality and professional capabilityIII premiumIV policy benefits

A. I, II and III C. II, III and IVB. I, II and IV D. All of above

8. Below are the methods of monthly premium payment:

I Bankers’ OrderII Payroll Deduction SchemeIII Home ServiceIV Cash

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

9. Every insurer shall maintain an up-to-date register of all policies. This refer to:

A. Section 16A, Insurance Act, 1963 C. Section 9, Insurance Act, 1963B. Section 44A, Insurance Act, 1963 D. The Company Act, 1965

10. Payments can be made within a specified number of days, usually 30 days from the due date.This period is known as

A. Critical period C. ‘Cooling off’ periodB. Grace period D. Specific period

11. Below is the statement about grace period.

I Usually 30 days from the due dateII Premium received within the grace period are accepted without any interest chargeIII If the insured dies during this period, the death claim will be paid by deducting any

out-standing premium or indebtednessIV Policyholders can pay premiums after the expiry of the grace period without

reinstatement

A. I, II and III C. I, II and IVB. II, III and IV D. All of above

12. ___________ will be sent to the policyholder 3 or 4 weeks before due date to ensure that thepolicyholder pays premiums on time.

A. Premium Notice C. Warning NoticeB. Premium Reminder D. Reminder Notice

13. This scheme provides coverage for lower income group and the premiums collected at thehomes of the policyholders.

A. Ordinary scheme C. Home service schemeB. Superannuation scheme D. Term scheme

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14. This is a selling technique where selling is done indirectly by establishing goodwill betweenthe agent and his customers.

A. Order processing C. Alternative sellingB. Missionary selling D. Creative selling

15. At this stage, the consumer becomes aware of the threat of risks and feels the need forinsurance to protect him from financial difficulties.

A. Problem recognition C. Evaluation of Alternative policiesB. Information search D. Purchase evaluation

16. This involves the selection of segments of the market, which have needs that can be met bythe policies developed by the company. This function of the Marketing Department refers to:

A. Planning and controlling C. Product DevelopmentB. Market Identification D. Selection of Distribution Channel

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Chapter 16 Life Insurance Preliminaries

1. The term “Uberrimae fides” is referring to _______.

A Insurable Interest C Utmost Good FaithB Claim D Moral Hazard

2. In life insurance, except Permanent Health Insurance policies, the settlement of a claim______ the contract.

A Renew C ExtendB Terminates D Revised

3. Which of the followings are the disadvantages of issuing life insurance policies on a shortterm basis when is was first introduced:

I cover was often denied when it was most neededII the insurer do not have to bear the risk for long timeIII the premiums tended to increase wit duration to reflect the increasing risk undertaken

A I and II C I and IIIB II and III D I, II and III

4. The first case of Life Insurance was sold in the year of 1583 and it was issued on the Life of

A Edmund Halley C William HalleyB William Gybbon D Edmund Gybbon

5. The long–term nature of the life insurance contract requires the insurer to adopt a cautiousview of the below factors which enter into the premium rate calculations

I MortalityII ExpensesIII Rate of Investment returnsIV Tax

A. I, II and III C. II, III and IVB. I, II and IV D. All of above

6. To have the existence of ____________, the purchase of a life insurance policy must stand tosuffer a financial loss on the death of the insured.

A. Uberrimae fides C. Utmost good faithB. Insurable interest D. Proximate cause

7. The risks covered by life insurance can be grouped under:

I Premature DeathII Temporary DisabilityIII Permanent DisabilityIV Retirement benefits

A. I, II and III C. II, III and IVB. I, II and IV D. All of above

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8. The risks covered by life insurance which is often referred to as economic death.

A. Premature Death C. Temporary DisabilityB. Permanent Disability D. Retirement Benefits

9. Below are the situations where insurable interest exists:

I A person on his or her own lifeII A parent on the child’s lifeIII A brother on his sister’s lifeIV A creditor on the debtor ‘s life

A. I, II and III C. II, III and IVB. I, II and IV D. All of above

10. For life insurance policies, the time when insurable interest needs to exist is:

A. Before inception of the insurance C. After the inception of the insuranceB. At the inception of the insurance D. At the time of claims

11. This section of Insurance Act specifically voids any policy effected without insurable interest.

A. Section 17 of the Insurance Act, 1963B. Section 44A of the Insurance Act, 1963C. Section 40 of the Insurance Act, 1963D. Section 16A of the Insurance Act, 1963

12. In 1762, Equitable Society issued life insurance policies based on the following principles:

I Once accepted for insurance, further proof of continuing good health was not neededII Level premiums were payable throughout the term of the contract to beIII Cover was available to anyone who satisfied the initial health requirements and

continued to pay the contractual premiumsIV Extra premiums were not charged for special occupational risk and sub-standard

health risk.

A. I, II and III C. I, III and IVB. I, II and IV D. All of above

13. In life insurance, the claim amount is determined at the very beginning of the contract. Suchcontracts are _____________ contracts.

A. Indemnity C. SubrogationB. Aleatory D. Proximate

14. The following insurance contracts are aleatory contracts, except

A. Life endowment plan C. Whole life non-participating policyB. Personal accident D. None of the above.

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Chapter 17 Life Insurance Products

1. Which of the following is true about a non-participating contract?

A. This is mainly used for savingB. Its main benefit is generally guaranteedC. Its main benefit is made up of regular bonuses and a final bonus depending on

insurer’s investmentD. It is the earliest and simplest form of a life insurance contract and is known as

temporary insurance

Questions 2-8 share the following answers:

A. Term InsuranceB. Whole Life InsuranceC. Endowment InsuranceD. Annuities

2. There is a limited period of protection. The sum assured is payable only in the event of death.This policy does not confer the benefits of cash value and paid-up value.

3. The sum assured decreases in amount at periodical intervals. It is generally issued asmortgage policies. Which kind of insurance does it belong to?

4. This policy give protection for the whole duration of life with the sum assured including anyaccrued bonuses, becoming payable only upon death of life insured.

5. This policy provides the payment of the full face amount at the end of the said term if the lifeassured is living. It serves as an effective means to save a specific sum of money with thebenefit of an insurance protection.

6. It provides instalment cash payment to the policyholders at regular intervals during the termof the policy. The full sum assured shall be payable upon death of life assured. Which type ofinsurance is this?

7. A periodic payment by the insurer during a fixed period of time or for the duration of survivalof a designated life or lives in return for a certain amount of money known as the purchaseprice.

8. The applicant pays a single premium at entry. If death should occur before the periodicpayment by insurer commences, the premiums paid are returned with or without interestaccording to the terms of the policy.

9. As a result of the principle of unilateral contract,

A. The insurer has no right to invalidate the contract before its termination even due tonon-payment of premium

B. The policyholder is under obligation to continue the payment of premiumsC. The insurer has the right to invalidate the insurance contract due to suppression of

material factsD. All of the above

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10. Which of the following describe endowment assurance?

I It is a decreasing term insuranceII It has an increasing investment componentIII In short-term endowments, the life insurance predominates and the investment

element is relatively unimportantIV Anticipated endowment insurance pays cash to the policyholder at regular intervals

A. I and II C. I, II and IIIB. I, II and IV D. All of above

11. Which of the following insurance has a guaranteed surrender value?

I Limited Payment Whole LifeII Anticipated Endowment InsuranceIII Renewable Term InsuranceIV Single Life Immediate Annuity

A. I and II C. I, II and IVB. I and IV D. I, II and III

12. ____________ is suitable for person with small incomes for the present, but with goodprospects for the development of a successful career.

A. Renewable Term Insurance C. Ordinary Life PolicyB. Decreasing Term Insurance D. Anticipated Endowment Insurance

Table 1: A 20-year life policy that provides cash payment

Life PolicyAnniversary

Instalment payment to policyholder(% of Sum assured)

4 108 1012 1016 2020 50

13. Which of the following is NOT true about Table 1?

A. This is a 20 year anticipated endowment policyB. This policy has guaranteed surrender value after 3 years from the effective dateC. If the life assured dies at any time during the term of the policy, only the balance full

sum assured will be payableD. This type of insurance provides a reasonable means of saving and fund for some

specific contingency within a specific time frame

14. This is not dependent on the life of an individual but a contract of a fixed term. The insurermakes payments to annuitant for a specified number of years in return for the annuitant’spurchase money in the beginning of the contract

A. Annuity Certain C. Guaranteed Immediate AnnuityB. Reversionary Annuity D. Deferred Annuity

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15. The differences between a term policy and a whole life policy are:

I Term policy provides temporary protectionII Term policy does not confer the benefit of cash surrender valueIII Whole life policy provides non-forfeiture provisionsIV Premium of whole life policy is higher than a term policy for a fixed sum assured on

the same life

A. I, II and III C. I, III and IVB. I, II and IV D. All of above

16. Which of the following is not true about different types of life policies?

A. There is no “forced saving” element in term insuranceB. Upon conversion of term insurance, the premium rate for the converted policy is

based on the original age or the attained age of the life assuredC. Annuities are mainly bought by older people, seeking to convert capital, e.g. from

gratuity fund, into an income for lifeD. None of the above

17. Permanent Health Insurance provides such benefit as:

A. Income during periods of sickness or disabilityB. A lump sum payment in the diagnosis of any specified diseases which effects health

of life assuredC. A lump sum payment on any sickness incurred on the life assuredD. Income equal to the insured’s earnings during periods of sickness or disability

18. Which of the following describes correctly about dread disease covers?

A. It pays out a lump sum on the diagnosis of dread diseaseB. It does not meet any specific need or indemnity the insured against any loss of

incomeC. The insured does not have to fulfill any criteria for disability upon diagnosis of

covered diseaseD. All of the above

19. What are the basic features of an investment-linked policy?

I The benefits on maturity depend on the return of investmentsII Some 95% of the premiums paid by policyholder are invested in approved

investmentsIII The insurer needs to maintain individual accounting records in respect of each

policyholderIV In consideration of the premiums paid, the insurer undertakes to make a periodical

payment for the reminder of the lifetime of a named life depending on the investmentreturns

A. I, II and III C. I, III and IVB. I. II and IV D. All of above

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20. To insure a group of lives without medical examination would result in the inclusion of anunduly high proportion of bad lives due to adverse mortality experience for the insurancecompany. However, selection against the insurer is avoided in the following ways, except:

A. The group of lives to be insured must exist for some purpose other than for theinsurance

B. A stipulated percentage of all the lives in the group must be included to enable theoffice to secure an average mortality experience

C. The lives assured must include permanent employees and casual employeesD. If medical examination is excluded, the group insured just consists of a minimum

number of lives

21. What are the features under a group insurance?

I The contract is between the insurance company, the employer and the employeesII If the plan is non-contributory 100% of all eligible employees must joinIII All full time and part time employees between the ages of 16 – 55 and actively at

work on the effective date of the plan are eligible to joinIV The group term life premium may be calculated according to age and/or sex

depending on the amount of employees to be covered

A. I and II C. II and IVB. III and IV D. II and III

22. Under a group insurance contract, the employer in the “Master Policy” is named as the:

A. Guarantor C. TrusteeB. Grantee D. Master

23. What are the various ways in which the amount of group insurance can be fixed?

A. Same amount for all employeesB. Classify employee according to SalaryC. Classify personnel by managerial, supervisory, clerical and non-clericalD. All of the above

24. This is applied for large group insurance schemes of 2000 lives or more. The premiumcharged during the first policy year is adjusted upwards and downwards for subsequent policyyears, on basis of the actual claim experience of the group. What type of rating is that?

A. Experience Rating C. Premium AdjustmentB. Net Premium Rating D. Claim Valuation

25. Which of the following is true about personal accident benefit?

A. Bodily injury does not include nervous shock, bruising or organic injuryB. Internal injury caused by external means is sufficient to give rise to a valid claimC. Accident caused by suicide, self-injury, drugs and alcoholism will only be eligible to

50% of the sum payableD. Air travel is excluded in the personal accident cover

26. Part of the takaful instalment made by participants and credited by the company into theParticipant’s Account (PA) is for:

A. Saving and tabaruk C. Investment and risk fundB. Saving and investments D. Investment and tabaruk

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27. The joint life policy

A. Can be issued under whole life, endowment and term policiesB. Only pays out when all the lives insured dieC. Can be issued on the lives of business partnersD. Continues following the first policy proceeds on the death of one of the joint lives

28. What are the supplementary benefits that a person can attached to his life insurance policy?

I Accidental IndemnityII Permanent DisabilityIII Waiver of premiumIV Hospitalization and surgical

A. I, II and III C. I, II and IVB. I, II and IV D. All of above

29. The Takaful Company provides the following types of family takaful plan:

I Takaful Mortgage PlansII Health and Medical Takaful PlanIII Family Takaful Term PlanIV Investment Linked Takaful

A. I and III C. II, III and IVB. I, II and III D. I, II and IV

30. Under an protection education policy,

I The policy is issued on the life of the parentII The child is designated as the beneficiaryIII If the child were to die before reaching a specified age only refund of premiums will

be allowedIV The policy premium may be eligible for relief under the Income Tax Act

A. I, II and III C. II, III and IVB. I, II and IV D. All of above

31. The advantage of the waiver of premium under a Children’s Deferred Policy is that:

A. Premiums are waived upon the death of the parentB. Premiums are waived when the child reaches vesting ageC. Premiums are waived upon the death of the parent and are payable again when the

child reaches vesting ageD. Premiums are waived if the child dies before reaching vesting age

32. If the takaful participant terminates the takaful contract, what benefits will the participant get?

A. The participant will not get any benefitB. The participant will get the accumulated amount of Participants AccountC. The participant will get the surplus from the Participants Special accountD. The participants will only entitle to 50% of the sum insured

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Chapter 18 Policy Condition

1. Policy conditions can be broadly classified under three groups except:

I those adding to the benefits of the assuranceII those limiting the scope of assuranceIII those explaining the nature of the contractIV those allowing the insurer to terminate the policy

A All of the above C II and IIIB IV only D II only

2. Which of the following clause is reflected under Section 15 (C) of the Insurance Act, 1963

A Non-avoidance clause C Suicide clauseB Incontestability clause D Misrepresentation clause

3. When a policy is enforced for __________ years or more, the ordinary policy becomesentitled to a surrender value.

A 6 C 3B 2 D 5

4. _______ regulates the basis of surrender values.

A Section 150, Insurance Act 1996 C Section 155, Insurance Act 1996B Section 150, Insurance Act 1963 D Section 155, Insurance Act 1963

5. What are the alternative solutions when a person cannot pay his future life policy premiumbut still can be covered under the policy?

I Conversation to a paid-up policyII Exchange the acquired cash value for a term insurance for the full sum assuredIII Apply for reinstatementIV Conversion to an extended grace period

A. I and II only C. I, II and III onlyB. I and III only D. I, III and IV only

6. The following documents are generally acceptable as proof of age, except

A. Government school leaving certificateB. Certified extract from Baptism RegisterC. International passportD. None of the above

7. The restrictive conditions under a life policy include

I suicide clauseII occupation and dangerous hobbiesIII 30 days grace periodIV reinstatement

A. I and II only C. I, II and IV onlyB. I, II and III only D. I, II, III and IV

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8. Which of the following describe an assignment of a life policy?

A. The assignment must be in writing and cannot be effected by an endorsementB. Under a conditional assignment, the assignee can receive the maturity benefitsC. The legal rights vested under a life insurance policy can be transferred by an

assignmentD. The assign or can revoke all rights after the payment of the policy proceeds if it is an

conditional assignment

9. ________ are not allowed as days of grace for the payment of yearly, half yearly, quarterlyand monthly premiums

A. 30 days C. 60 daysB. 10 days D. 45 days

10. When the insured fails to pay a premium, it provides for a continuation of the insurance coverto bring the policy to its original status

A. Policy conversion C. Maturity loanB. Automatic premium loan D. Limited payment endowment

11. The ________ enables a person to renew a lapsed policy, notwithstanding that the days ofgrace and the period of non-forfeiture have both expired

A. Lapsation provision C. Incontestable provisionB. Reinstatement provision D. Renewal provision

12. This is the value which attaches to a policy of life insurance after premiums have been paidfor a certain minimum number of years

A. Guarantee value C. Conditional valueB. Policy value D. Surrender value

13. Insurer cannot deny liability on a policy after two years of its issuance on the grounds ofmisrepresentation or non-disclosure. This is known as

A. Suicide Clause C. Incontestability ClauseB. Restrictive Clause D. Misrepresentation Clause

14. In terms of ________ of the Insurance Act 1963, a policy shall not be cancelled by reasononly of a misstatement of the age of the life assured

A. Section 15(C) C. Section 23B. Section 44 (A) D. Section 33

15. Under a standard case, the premiums change according to the age. The younger the age atentry of life insured, the premiums would be

A. Refunded C. HigherB. Lower D. Loaded with additional payment

16. _______ provides that the assignor can revoke all the rights even after the assignment ofpolicy

A. Absolute assignment C. ReassignmentB. Conditional assignment D. Policy assignment

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Chapter 19 Practice Of Life Insurance – New Business – Selection Of LivesAnd Other Issues

1. Below are various factors that influence mortality, except

I ageII sexIII marital statusIV occupation

A. I, II and IV only C. II, III and IV onlyB. I, II and III only D. I, II, III and IV

2. The following are the methods of premium payment, except

A. Banker’s order C. Payroll deduction schemeB. Home service D. Dividend

3. Chargeable income = _________ less _________

A. Allowable Deductions, Assessable IncomeB. Assessable Income, Allowable DeductionsC. Assessable Income, Income Tax RatesD. Allowable deductions, Income Tax Rates

4. In the case when there is an extra loading on a life insurance proposal, a letter indicating theloading is issued to the proposer as a (an)

A. Loading application C. OfferB. Consent letter D. Counter Offer

5. Taxable / assessable income constitutes such items as

I salaryII leave payIII gratuityIV commissions

A. I and II only C. I, III and IV onlyB. I and III only D. I, II, III and IV

6. Which of the following is NOT true about life insurance contracts?

A. Life insurance contracts are long-term contractsB. The premium for life insurance contracts cannot be revised during the term of the

contractC. The contracts cannot be cancelled unilaterally by the insurerD. None of the above

7. For morbidity only, females experience _______ rates, and accordingly, females are charged_______ premiums.

A. Lower, lower C. Higher, higherB. Lower, higher D. Higher, lower

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8. Which of the following suggests the possibility of a moral hazard?

A. An application by a parent for a Children’s Deferred Insurance for the sum of RM50,000.

B. An application by a married couple for a joint life policy for the sum of RM100 000C. An application by a businessman to insure the life of his business partner for RM

5,000,000D. An application by a wife to insure the life of her husband for RM60 000

9. Which of the following expenses will NOT be an allowable deduction under the Income TaxAct?

A. Entertainment bills of a businessmanB. Maintenance charges of a company’s vanC. Premium for a superannuation scheme for a company’s employeesD. Expenses on a holiday trip to Bangkok

10. If the proceeds from a life insurance policy is in the form of an employment benefit arisingfrom an employer’s insurance policy, the proceeds

A Are regarded as earned income and are taxableB Are not regarded as earned incomeC Will be considered as an allowable deduction for income taxD Are not regarded as earned income and therefore are taxable

11. Commencement of the policy may be back dated to an earlier date, usually up to a maximumof

A. 3 months C. 1 yearB. 6 months D. 2 years

12. Which of the following risks is always subject to medical examination?

A. A vocational risk C. Standard riskB. Occupational risk D. Sub-standard risk

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Chapter 20 Practice Of Life Insurance – New Business – Premium Rating

1. When there is a sub-standard life, the underwriter usually will decide to

A. Reduce the premium C. Increase the premiumB. Reduce the cash value in the policy D. Increase the cash value in the policy

2. The basic principle in insurance is when a group of people facing similar risks are combined,there will be less uncertainty about the amount of loss likely to be incurred within a certainperiod. This basic principle is called

A. Anti-selection C. Mortality RatesB. Law of large numbers D. Moral Hazards

3. Most of the individual insurance policies sold nowadays provide a payment of ______ over apredetermined term

A. Risk premiums C. Gross premiumsB. Level premiums D. Net premiums

4. The basic principle of the risk premium varying with _______ is behind the concept of thelevel premium

A. Sex C. AgeB. Investment returns D. Occupation

5. Gross premium = Net premium + Loading for ________

A. Expenses, Taxation C. Interest, Profits & ContingenciesB. Taxation, Profits & Contingencies D. Expenses, Profits & Contingencies

6. When the premium charge is computed after taking into account the elements of mortality andinterest, it is called the

A. Pure Premium C. Risk PremiumB. Net Premium D. Gross Premium

7. _________ policies enjoy the right to share in the profits of the operations of a life insurancecompany in the form of bonuses

A. Endowment C. Non-participatingB. Term D. Participating

8. The additional premium charged to the participating policies is known as

A. Bonus Loading C. Interest LoadingB. Expenses Loading D. Participating Loading

9. In calculating the tabular (gross) premiums for non-participating policies, the elementsnormally taken into account are the following except

A. Mortality C. ExpensesB. Interest D. Bonus loading

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10. Under this type of regular premiums, the premium payments cease on death and no deductionis made from the claim amount

A. True premiums C. Periodical premiumsB. Instalment premiums D. Regular premiums

11. In the event of death occurring before all the premium payments for that particular policy yearhave been paid, the remaining installments of that year are deducted from the claim amountpayable under the policy. This type of regular premium is called

A. Installment premiums C. Single premiumsB. True premiums D. Regular premiums

12. Additional premium will be charged in the following cases, except

A. Substandard healthB. Hazardous healthC. Sporting activities involved additional risk of death by accidentD. Change of beneficiary

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Chapter 21 Practice Of Life Insurance – Monitoring The Insurance Fund

1. Liability = the present value of the benefits payable _________. The present value ofexpenses ________. The present value of the future premiums receivable

A. Plus, less C. Plus, plusB. Less, plus D. Less, less

2. Some of the more common methods of assets valuation are the following, except

A. Cost price C. Book ValueB. Table value D. Market value

3. The portion of surplus passed to shareholders in the form of dividends is normally in theregion of _______ of the divisible surplus

A. 5% - 15% C. 15% - 30%B. 10% - 25% D. 20% - 35%

4. The following are the methods of distributing surplus, except

A. Compound Reversionary Bonus C. Cash BonusB. Simple Reversionary Bonus D. Loading Bonus

5. To ensure that the policyholders whose policies become claims between declaration of bonusdo not lose out, the insurers pay out

A. Interim Bonus C. Guaranteed BonusB. Cash Bonus D. Reversionary Bonus

6. This is a major source of surplus especially when market rates of interest are high

A. Mortality C. ExpensesB. Interest D. Surrenders

7. Under current conditions, the main sources of surplus are as the following, except

A. Excess interest (after tax) earned on the life fund over and above that assumed in thevaluation

B. Mortality surplus between the actual mortality experienced by the office and themortality basis assumed in the valuation

C. The excess of the allowance made for expenses in the valuation over the actualexpenses incurred

D. The present value of the liabilities under all policies in force greater than the presentvalue of the income and capable gains produced by the assets in the life fund

8. Which among the following is NOT a form of bonus?

A. Interim bonus C. Policy loan bonusB. Guaranteed bonus D. Compound reversionary bonus

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9. Which of the following methods of valuing assets and its explanation is NOT true?

A. Price at which the asset was acquired – Cost PriceB. Value placed on the assets in the company’s account books – Book ValueC. Value for which the assets can be sold in the open-market – Market PriceD. None of the above

10. Under this method, the bonus allotted is in proportion to the sum assured and the bonusesaccumulated under the policy

A. Simple Reversionary Bonus B. Compound Reversionary BonusC. Maturity of Terminal BonusD. Guaranteed Bonus

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Chapter 22 Practice Of Life Insurance – Policy Documents

1. The sources of information for Risk Assessment are as below, except

A. Proposal Form C. Agent’s ReportB. Medical Report D. Policy Contract

2. Which among the following is NOT a part of the proposal form?

A. Personal Particulars C. Details of insuranceB. Agent’s personal and family history D. Declaration and authorization

3. Endorsement after the issue of a policy mainly is to change the following, except

A. Mode of premium payment C. The servicing agentB. Alterations to the form of the contract D. Surrender of bonus

4. Besides recording the applicant’s answers concerning medical history, the reports byexamining doctor include

I height and weightII pulse and blood pressure readingsIII condition of the heart and nervous systemIV chest and abdomen measurements

A. I and II only C. I, II and IV onlyB. I, III and IV only D. I, II, III and IV only

5. Two main forms of policy in use are the

I narrative typeII conditions typeIII schedule typeIV operative type

A. I and II only C. II and IV onlyB. I and III only D. I and IV only

6. This section is the final portion of the policy and is signed by certain authorized officers ofthe company

A. The proviso C. The scheduleB. The preamble D. Attestation

7. The standard policy documents are often endorsed to take into account the differing aspects ofindividual circumstances and needs. Endorsements can be done at the

I time of issuance of policyII before issuance policyIII after issuance of policyIV one year after issuance of policy

A. I and II only C. II and IV onlyB. I and III only D. I and IV only

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8. This section includes a declaration that answers given in the proposal and medical reportforms shall form the basis of the contract. The conditions enclosed on the policy are deemedto be incorporated in the contract, and the contract is subject to those conditions.The above portions found in which section in the policy structure?

A. The Heading C. The Operative ClauseB. The Preamble D. The Proviso

9. In general, the following conditions need endorsement at the time of issue of policy:

I those affecting the sum insured or mode of paymentII those affecting the premium or frequency of paymentIII those alterations to the form of the contractIV those incorporating special restrictions

A. I, II and III only C. I, III and IV onlyB. I, II and IV only D. I, II, III and IV

10. Which of the following category (ries) is (are) the conditions of a life policy?

A. Conditions limiting the scope of contractB. Conditions enlarging the scope of the contractC. Conditions explaining the scope of the contractD. All of the above

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Chapter 23 Practice of Life Insurance – Claims

1. Which of the following statement is NOT true?

A The life insurance contract terminates when a claim is settledB The insured may make a claim upon the maturity of the insurance policyC The reputation of an insurer lies in the sum of claims to be settledD None of the above

2. When the claimant notify the insurance company that he want to make a death claim, he needto provide the insurer information on _________.

A The policyholder’s name C The doctor’s nameB The spouse’s date of death D All the above

3. The following documents are proof of title and ownership of an insurance policy EXCEPT______.

A A deed of assignmentB A probate of the will from a court of lawC A note from the insured’s familyD A letter of administration issued by a court of law

4. Which of the following is NOT relevant to the common settlement option for an endowmentplan?

A Convert the maturity proceeds into annuityB Continue deposit the maturity proceeds with the insurerC Withdraw 90% of the proceed without the letter of probateD Withdraw the proceed by installments

5. A claim can arise under any one of the following situations, except

A. Termination of an agent’s contractB. On death of the insuredC. On maturity of the insurance policyD. Sickness or disability benefits claims

6. In the event of death, the beneficiary or claimant should notify the life insurer and provide thefollowing details, except

A. Policyholder’s name and identity card numberB. Policy numberC. Date and cause of deathD. Agent’s address

7. To prove a death claim, which of the following documents would NOT be accepted?

A. A death certificateB. A coroner’s reportC. An agent’s reportD. A certificate showing that death had occurred at sea

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8. To ensure the claim proceeds on death are paid to the entitled person, the followingdocuments are required, except

A. A deed of assignmentB. An agent’s contractC. A probate of the will obtained from a court lawD. A letter of administration issued by account of law

9. Under Section 44 of the Insurance Companies Act, 1963, a claimant without letter of probateor administration, may receive the full amount if the policy proceeds are below

A. RM50 000 C. RM30 000B. RM40 000 D. RM20 000

10. When the policyholder is the life insured, the following are usually required in settlingmaturity claims:

I Proof of ageII Proof of survivalIII Medical reportIV Policy contract

A. I, II and III only C. I, III and IV onlyB. I, II and IV only D. II, III and IV only

11. Endowment insurance policies normally incorporate settlement options which can beexercised on their maturity. These options include:

I leaving the maturity proceed as a deposit with the insurer on agreed termsII cash maturity proceedsIII converting the maturity proceeds into an annuityIV drawing the cash by installments over a number of years

A. I, II and III only C. I, III and IV onlyB. I, II and IV only D. I, II, III and IV only

12. The doctrine of proximate cause is important for which type of claims?

A. Death claimsB. Maturity claimsC. Personal accident claimsD. Sickness and permanent health claims

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Chapter 24 Some Mathematics

1. Policies which accumulate ________ often carry the right to a policy loan

A Bonus C PremiumB Cash values D Surrender

2. In premium calculation, insurance companies adopt different bases for arriving at the age ofan individual. The most common (is) are

A. Age last birthday C. Age nearest birthdayB. Age next birthday D. All of the above

3. Age last birthday for a life insured born on March 12, 1965, date of the proposal submitted onDecember 31, 1996, is

A. 32 C. 30B. 31 D. 29

Question 4, 5 and 6 refer to Table 1 and 2

Table 1 : Premium Rates For A 25-year Endowment Insurance on Male Lives Treat Female Lives as 3Years Younger

Age (Next Birthday) Premium per RM1000 sum insured28 41.2529 42.0030 42.8031 43.60

Table 2 : Discount For Large Sum Assured For A 25-Year Endowment Insurance on Male Lives

Sum Assured (RM) Discount Per RM1000 Sum Assured10 000 – 24 999 RM1.0025 000 – 39 999 RM2.0040 000 – 54 999 RM3.0055 000 – 69 999 RM4.00Above 70 000 Special Quotation

Proposer’s Particulars and Policy Details

Sex : FemaleDate of Birth : 24/10/1965Cover to Commence : 18/3/96Policy Type : 25 years endowmentSum Assured : RM10 000

4. What is the insured’s age next birthday?

A. 30 C. 28B. 31 D. 29

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5. How much is the premium payable?

A. RM 402.50 C. RM426.00B. RM 412.50 D. RM436.00

Proposer’s Particulars and Policy Details

Sex : MaleDate of Birth : 24/3/67Cover to commence : 18/3/96Policy Type : 25 years endowmentSum Assured : RM50 000

6. How much is the premium payable?

A. RM 1 900.00 C. RM2 000.00B. RM 1,950.00 D. None of the above

7. A person born on March 21, 1965, date of the proposal submitted on December 31, 1996, hisage nearest birthday is

A. 30 C. 32B. 31 D. 29

8. The interest charges usually arise under the following circumstances:

I outstanding premium charges after grace periodII policy loan repaymentIII outstanding premium charges during grace periodIV reinstatement of policy

A. I and II only C. I, II and IV onlyB. I, II and III only D. I, II, III and IV

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Chapter 25 Practice Of Life Insurance – Ethics and Code of Conduct

1. The guidelines for Code of Conduct, which are abided by all employees of insurers operatingin Malaysia at all times, as formulated by _________.

A Life Insurance Association Malaysia (LIAM)B The Actuarial Society of Malaysia (ASM)C The Malaysian Insurance Institution (MII)D National Association of Malaysian Life Insurance Agents (NAMLIA)

2. Which of the following is NOT true for the statement of philosophy concerning the guidelineson the Code of Conduct?

A The life insurance business is efficient and prompt service to policy owners with theaim of promoting goodwill based on the philosophy of risk sharing

B The life insurance business is based on trust and honestyC Life insurer should manage their business soundly as to ensure the safety of the

agent’s savingsD Life insurers shall maintain a policy

3. The objective of the Code of Conduct is to provide a guide for _________.

A Promotion of proper standards of conductsB Maintaining ethical standardsC Upholding the trust and welfare of policyholdersD All of the above

4. Who is the supervisory authority for insurance companies?

A Bank Negara C Board of DirectorB Audit / Disciplinary Committee D Insurers

5. Which of the following are parts of the seven principles underlying the guidelines on Code ofConduct?

I To avoid conflict of interestII To ensure confidentiality of communication and transactions between the

policyholders and Bank NegaraIII To conduct business with the utmost good faith and integrity

A I only C I and IIIB I and II D` II and III

6. In explaining the contract, the life insurance intermediary shall:-

I explain only part of the essential provisions of the contract to the prospectivepolicyholder

II draw attention to any restrictions applying to the policyIII give advice on which company’s policy should the prospective policyholder bought

withIV draw attention to the consequent effects of early discontinuance

A. I and II only C. I and III onlyB. II and IV only D. II, III and IV only

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7. The _______ committee of the insurer is responsible for monitoring compliance of the lifeinsurance intermediaries and also responsible for submitting reports to Bank Negara on thebreaches and the corrective actions taken

A. Claim C. Audit / DisciplinaryB. Underwriting D. Policy service

8. The code of Ethics and Conduct applies to the following persons, except

A. Insurance agentsB. Employees of a life insurance companyC. Registered insurance brokersD. None of the above

9. To be a successful and professional agent, he must fulfill the following requirements:

I Professional attitudeII Proper selling attitudeIII SkillIV Knowledge

A. I, II and III only C. I, III and IV onlyB. II, III and IV only D. I, II, III and IV

10. In order to ensure the guidelines on the code of conduct is followed, the management of a lifeinsurance company is required to

A. Sign a declaration to observe the guidelinesB. Assign responsibility to the heads of department to ensure practice of guidelines on a

day to day basisC. Report breaches to an Audit committee which reports directly to the Board of

DirectorsD. All of the above

11. As an intermediary of life insurance business, an agent shall not

A. Give advice only on those matters in which he/she is competent withB. Treat all information supplied by the prospective policyholder as completely

confidential to himself and his principalC. Persuade a policyholder to cancel any existing policies unless it is clearly unsuited to

the policyholder’s needsD. All of the above

12. The term life insurance used in the Code of Ethics and Conduct covers the following types ofinsurance:

I Home serviceII Ordinary Life InsuranceIII AnnuitiesIV Permanent Health Insurance

A. I and II only C. II and IV onlyB. I, II and IV only D. I, II, III and IV

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13. The statement in the proposal form requires the disclosure of material facts. It should

I draw attention to the consequence of non-disclosure of all material factsII warn that if the prosper is in any doubt whether certain facts are material, then these

facts should be disclosedIII indicate whether there are rights to a surrender valueIV indicate the manner in which the benefits are paid

A. I and III only C. II and IV onlyB. I and II only D. III and IV only

14. The intermediary shall while obtaining the completed proposal form or any other material

I avoid influencing the proposerII make it clear that all answers or statements are the proposer’s own responsibilityIII ensure that the consequences of non-disclosure and inaccuracies are pointed out to the

proposerIV explaining the relevant statements in the proposal form to the proposer

A. I and II only C. II, III and IV onlyB. II and III only D. I, II, III and IV

15. In regards to claims, the guidelines on the Code of Ethics and Conducts requires the insurer

A. To delay the settlement of a claim after the claimant has proved the insured event andthe right to receive the claim

B. Not to set a time limit for notification of a claim in order for the claimant to send inreport at his/her convenience

C. To collect claim processing fees from the policyholderD. May not reject a claim on grounds of non-disclosure or innocent misrepresentation

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ANSWERS

PART A

Chapter

1 1.D 2.C 3.C 4.A 5.B 6.D 7.C 8.D 9.D 10.B

11.D 12.B 13.C 14.C 15.D 16.A 17.D

2 1.A 2.B 3.D 4.D 5.A 6.D 7.A 8.D 9.C 10.A

11.B 12.C 13.C 14.D 15.B 16.C

3 1.B 2.D 3.B 4.B 5.A 6.B 7.B 8.D 9.C 10.C

11.A 12.C 13.D 14.A 15.C 16.A 17.B 18.B 19.D 20.B

21.B 22.A 23.B 24.C 25.A 26.D 27.C 28.C

4 1.B 2.B 3.B 4.B 5.C 6.C 7.B 8.C 9.C 10.B

11.B 12.C 13.D 14.A 15.B 16.A 17.B 18.D 19.B 20.C

21.B

5 1.B 2.B 3.C 4.A 5.D 6.B 7.B 8.D 9.C 10.D

11.D 12.D 13.A 14.C 15.C

6 1.B 2.B 3.A 4.A 5.D 6.B 7.B 8.C 9.C

7 1.C 2.C 3.C 4.A 5.D 6.D 7.B 8.C 9.D 10.B

11.B 12.A 13.D 14.C 15.D 16.B 17.B

8 1.B 2.C 3.D 4.B 5.C 6.D 7.D 8.D 9.C 10.B

11.A 12.A 13.C 14.B 15.A 16.B

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ANSWERS

PART C

Chapter

16 1.C 2.B 3.C 4.B 5.D 6.B 7.D 8.B 9.B 10.B

11.C 12.A 13.B 14.D

17 1.B 2.A 3.A 4.B 5.C 6.C 7.D 8.D 9.C 10.B

11.A 12.A 13.C 14.A 15.D 16.D 17.A 18.D 19.A 20.C

21.C 22.B 23.D 24.A 25.B 26.D 27.B 28.B 29.C 30.C

31.B 32.B

18 1.B 2.B 3.C 4.B 5.A 6.D 7.A 8.C 9.A 10.B

11.B 12.D 13.C 14.A 15.B 16.B

19 1.D 2.D 3.B 4.D 5.D 6.D 7.C 8.C 9.D 10.A

11.B 12.D

20 1.C 2.B 3.B 4.C 5.D 6.B 7.D 8.A 9.D 10.A

11.A 12.D

21 1.A 2.B 3.B 4.D 5.A 6.B 7.D 8.C 9.B 10.D

22 1.D 2.B 3.C 4.D 5.B 6.D 7.B 8.D 9.B 10.D

23 1.C 2.A 3.C 4.C 5.A 6.D 7.C 8.B 9.D 10.B

11.D 12.C

24 1.B 2.D 3.B 4.B 5.A 6.B 7.C 8.C

25 1.A 2.C 3.D 4.A 5.C 6.B 7.C 8.D 9.D 10.D

11.C 12.D 13.B 14.D 15.D

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