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- Question 1 of 30
1. Question
In the duty of disclosure, which of the following is NOT included in the material facts?
CorrectA material fact is legally defined as ‘every circumstance which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will accept the risk’. It includes what to disclose, non-medical application, medical application, medical tests and beach of the duty on the part of the policyowner.
IncorrectA material fact is legally defined as ‘every circumstance which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will accept the risk’. It includes what to disclose, non-medical application, medical application, medical tests and beach of the duty on the part of the policyowner.
- Question 2 of 30
2. Question
Which of the following statements are TRUE about the medical result in the duty of disclosure?
I. The subject of the tests also has the right under that Ordinance to be told their results.
II. The insurer’s requests to supplement the information supplied verbally with reasonable medical examinations or tests are normally met.
III. If the insurance is arranged with a physical examination of the applicant, the insurer cannot hold against the applicant.
IV. A great care must be taken not to breach the Personal Data (Privacy) Ordinance, which has the effect of requiring insurers to explain the need for gathering information before any testing takes place.CorrectIn medical tests, the insurer’s requests to supplement the information supplied verbally with reasonable medical examinations or tests are normally met. Great care must be taken not to breach the Personal Data (Privacy) Ordinance, which has the effect of requiring insurers to explain the need for gathering information before any testing takes place. The subject of the tests also has the right under that Ordinance to be told their results.
IncorrectIn medical tests, the insurer’s requests to supplement the information supplied verbally with reasonable medical examinations or tests are normally met. Great care must be taken not to breach the Personal Data (Privacy) Ordinance, which has the effect of requiring insurers to explain the need for gathering information before any testing takes place. The subject of the tests also has the right under that Ordinance to be told their results.
- Question 3 of 30
3. Question
Which of the following circumstance best describes uninsured perils?
CorrectUninsured perils is the events for which insurance coverage is not available or for which insurers are unlikely to underwrite policies. Nonlife policies may specify the perils which are covered, and one of those must be the proximate cause of the loss or it is irrecoverable.
IncorrectUninsured perils is the events for which insurance coverage is not available or for which insurers are unlikely to underwrite policies. Nonlife policies may specify the perils which are covered, and one of those must be the proximate cause of the loss or it is irrecoverable.
- Question 4 of 30
4. Question
An endowment plan will pay the face amount when the life insured survives a specified term but upon death, in case he dies within the term. In connection to this, an endowment insurance plan is a combination of which of the following for equal months?
I. Flexible premiums
II. Adjustable death benefit
III. Term insurance
IV. Pure endowmentCorrectIn endowment insurance, the plan is a combination of term insurance and a pure endowment for equal amounts. (A pure endowment is a contract under which the death benefit is only payable if the life insured survives the term).
IncorrectIn endowment insurance, the plan is a combination of term insurance and a pure endowment for equal amounts. (A pure endowment is a contract under which the death benefit is only payable if the life insured survives the term).
- Question 5 of 30
5. Question
Which of the following statements best describes non-medical application?
CorrectNon-medical application
If the insurance is arranged without a physical examination of the applicant, the insurer will normally have great difficulty alleging non-disclosure of a material fact not covered by questions on the application or the personal physician’s form.IncorrectNon-medical application
If the insurance is arranged without a physical examination of the applicant, the insurer will normally have great difficulty alleging non-disclosure of a material fact not covered by questions on the application or the personal physician’s form. - Question 6 of 30
6. Question
Which of the following statements are TRUE about pure endowment?
I. The amount is paid on maturity of the policy in a single installment as a lump sum.
II. It is a type of life insurance policy in which an insurance company agrees to pay the insured a certain amount of money if the insured is still alive at the end of a specific time period.
III. An amount of money that is payable at the end of an endowment’s policy period if the insured is alive.
IV. It is designed so the estimated future growth rate will meet the target amount and pay a minimum death benefit.CorrectThe pure endowment is a type of life insurance policy in which an insurance company agrees to pay the insured a certain amount of money if the insured is still alive at the end of a specific time period. The amount is paid on maturity of the policy in a single installment as a lump sum. An amount of money that is payable at the end of an endowment’s policy period if the insured is alive.
IncorrectThe pure endowment is a type of life insurance policy in which an insurance company agrees to pay the insured a certain amount of money if the insured is still alive at the end of a specific time period. The amount is paid on maturity of the policy in a single installment as a lump sum. An amount of money that is payable at the end of an endowment’s policy period if the insured is alive.
- Question 7 of 30
7. Question
Which of the following statements best describes medical application?
CorrectIf the insurance is arranged with a physical examination of the applicant, the insurer cannot hold against the applicant negligent omissions or mis-diagnosing by the medically qualified person concerned.
IncorrectIf the insurance is arranged with a physical examination of the applicant, the insurer cannot hold against the applicant negligent omissions or mis-diagnosing by the medically qualified person concerned.
- Question 8 of 30
8. Question
“Life insurance provides a sum of money if the person who is insured dies whilst the policy is in effect.” Which of the following is TRUE about this quotation?
CorrectIn the first of an excellent series of textbooks produced by the U.S. Life Office Management Association Inc. (LOMA), life insurance (or ‘life assurance’ in British terminology) is defined as follows:
“Life insurance provides a sum of money if the person who is insured dies whilst the policy is in effect.”IncorrectIn the first of an excellent series of textbooks produced by the U.S. Life Office Management Association Inc. (LOMA), life insurance (or ‘life assurance’ in British terminology) is defined as follows:
“Life insurance provides a sum of money if the person who is insured dies whilst the policy is in effect.” - Question 9 of 30
9. Question
Which of the following are TRUE about incontestability provision in Hongkong?
I. It states that once the policy has been in force for a certain length of time the insurer cannot dispute the validity of the contract.
II. Under normal market practice plans cannot usually be contested once they have been in force for a period of 2 or more years.
III. A policyowner is capable of assigning a properly arranged life insurance contract to a third party even though the latter has no insurable interest in the life insured.
IV. It states that the insurer will not contest the policy after it has been in force for a specified period (contestable period) unless there is proof of fraud on the part of the policyowner.CorrectIncontestability Provision states that the insurer will not contest the policy after it has been in force for a specified period (contestable period) unless there is proof of fraud on the part of the policyowner. Once the policy has been in force for a certain length of time the insurer cannot dispute the validity of the contract. Under a normal market, practice plans cannot usually be contested once they have been in force for a period of 2 or more years.
IncorrectIncontestability Provision states that the insurer will not contest the policy after it has been in force for a specified period (contestable period) unless there is proof of fraud on the part of the policyowner. Once the policy has been in force for a certain length of time the insurer cannot dispute the validity of the contract. Under a normal market, practice plans cannot usually be contested once they have been in force for a period of 2 or more years.
- Question 10 of 30
10. Question
Which of the following statements best explains breach of the duty on the part of the policyowner?
CorrectBreach of the duty on the part of the policyowner
At law, a breach of utmost good faith renders the contract voidable by the insurer. But with most life policies in Hong Kong, regard has to be taken of a policy condition known as an Incontestability Provision, which states that the insurer will not contest the policy after it has been in force for a specified period (contestable period) unless there is proof of fraud on the part of the policyowner.IncorrectBreach of the duty on the part of the policyowner
At law, a breach of utmost good faith renders the contract voidable by the insurer. But with most life policies in Hong Kong, regard has to be taken of a policy condition known as an Incontestability Provision, which states that the insurer will not contest the policy after it has been in force for a specified period (contestable period) unless there is proof of fraud on the part of the policyowner. - Question 11 of 30
11. Question
Which of the following statements is TRUE about life insurance premium?
CorrectLife insurance premium
The life insurance premium is required for ensuring a given life may have to take into account individual features which make the risk better or worse than the average for a person of that age and sex.IncorrectLife insurance premium
The life insurance premium is required for ensuring a given life may have to take into account individual features which make the risk better or worse than the average for a person of that age and sex. - Question 12 of 30
12. Question
Which of the following is entitled to receive a varying share of the divisible surplus, if any, of the insurer, normally on the policy anniversary dates?
CorrectThe owner of a participating policy is entitled to receive a varying share of (or to participate in) the divisible surplus, if any, of the insurer, normally on the policy anniversary dates. Such proceeds are termed policy dividends or dividends. Though no policy dividends are guaranteed, participating policies are subject to higher premium rates than equivalent Non-Participating policies.
IncorrectThe owner of a participating policy is entitled to receive a varying share of (or to participate in) the divisible surplus, if any, of the insurer, normally on the policy anniversary dates. Such proceeds are termed policy dividends or dividends. Though no policy dividends are guaranteed, participating policies are subject to higher premium rates than equivalent Non-Participating policies.
- Question 13 of 30
13. Question
Longer-term consequences, in hindsight, were very predictable. Which of the following statements are included in this?
I. Increasing premiums with increasing age and, in later years, decreasing disposable resources or earning power of the policyowner, often presented real problems with the continuation of insurance.
II. It is individually calculated each year so that they reflected the natural risk position of the life insured at each policy anniversary.
III. With increasing age, there is increased mortality risk and premiums for existing policies, therefore, increased every year.
IV. The system was vulnerable to anti-selection, whereby the better risks – those in good health and with real prospects of a long life – dropped out of the scheme as it became more expensive, and the bad risks would normally decide to continue, for obvious reasons.CorrectLonger-term consequences, in hindsight, were very predictable. It includes:
Increasing premiums with increasing age and, in later years, decreasing disposable resources or earning power of the policyowner, often presented real problems with the continuation of insurance.
The system was vulnerable to anti-selection, whereby the better risks – those in good health and with real prospects of a long life – dropped out of the scheme as it became more expensive, and the bad risks would normally decide to continue, for obvious reasons.
IncorrectLonger-term consequences, in hindsight, were very predictable. It includes:
Increasing premiums with increasing age and, in later years, decreasing disposable resources or earning power of the policyowner, often presented real problems with the continuation of insurance.
The system was vulnerable to anti-selection, whereby the better risks – those in good health and with real prospects of a long life – dropped out of the scheme as it became more expensive, and the bad risks would normally decide to continue, for obvious reasons.
- Question 14 of 30
14. Question
What is the reason why life insurance premiums should be adequate?
CorrectLife insurance premiums should be adequate so that the insurer will have money to pay the benefit and meet other obligations under the contract.
IncorrectLife insurance premiums should be adequate so that the insurer will have money to pay the benefit and meet other obligations under the contract.
- Question 15 of 30
15. Question
To achieve the criteria, a number of factors must be taken into account in the course of rating. Which of the following are included in the three basic factors?
I. Mortality
II. Rates
III. Interest
IV. ExpensesCorrectTo achieve the criteria, a number of factors must be taken into account in the course of rating. The three basic factors includes mortality, interest, and expenses.
IncorrectTo achieve the criteria, a number of factors must be taken into account in the course of rating. The three basic factors includes mortality, interest, and expenses.
- Question 16 of 30
16. Question
What is the reason why life insurance premiums should be equitable (fair)?
CorrectLife insurance premiums should be equitable (fair) so that each policyowner is paying an amount in line with the risk and contracted benefits.
IncorrectLife insurance premiums should be equitable (fair) so that each policyowner is paying an amount in line with the risk and contracted benefits.
- Question 17 of 30
17. Question
Which of the statements following best describes mortality?
CorrectPerhaps more accurately phrased as the Rate of Mortality, this indicates the rate at which insured lives are expected to die. Whilst this sounds very morbid, it will be immediately obvious that this is absolutely at the heart of life insurance premium calculation. To know, on average, when the life to be insured may be expected to die is a crucial factor in determining the correct premium to charge.
IncorrectPerhaps more accurately phrased as the Rate of Mortality, this indicates the rate at which insured lives are expected to die. Whilst this sounds very morbid, it will be immediately obvious that this is absolutely at the heart of life insurance premium calculation. To know, on average, when the life to be insured may be expected to die is a crucial factor in determining the correct premium to charge.
- Question 18 of 30
18. Question
Which of the following statements are TRUE about pure premium?
I. It uses statistical models to estimate the number of losses it expects to incur from claims made against its policies.
II. It is determined by actuarial studies, consists of that part of the premium necessary to pay for losses and loss-related expenses.
III. It represents payments to cover claims made on the underwritten policies of insurance companies.
IV. It is the money required to be collected from the policyholders just to meet death claims arising in the future under normal statistical expectations.CorrectPure premium is the money required to be collected from the policyholders just to meet death claims arising in the future under normal statistical expectations. It is determined by actuarial studies, consists of that part of the premium necessary to pay for losses and loss-related expenses. It represents payments to cover claims made on the underwritten policies of insurance companies.
IncorrectPure premium is the money required to be collected from the policyholders just to meet death claims arising in the future under normal statistical expectations. It is determined by actuarial studies, consists of that part of the premium necessary to pay for losses and loss-related expenses. It represents payments to cover claims made on the underwritten policies of insurance companies.
- Question 19 of 30
19. Question
In life insurance premium, which of the following statements is TRUE about loading?
CorrectAccording to insurers, loading is an additional cost built into the insurance policy to cover losses that are higher than anticipated for the company arising from insuring a person who is prone to a form of risk. Loading is the part of the premium necessary to cover other expenses, particularly sales expenses, and to allow for a profit.
IncorrectAccording to insurers, loading is an additional cost built into the insurance policy to cover losses that are higher than anticipated for the company arising from insuring a person who is prone to a form of risk. Loading is the part of the premium necessary to cover other expenses, particularly sales expenses, and to allow for a profit.
- Question 20 of 30
20. Question
Which of the following statements are TRUE in the expenses which must be taken into account in the course of rating?
I. It includes all internal operating costs, commissions, tax, and overheads to which any business is subject.
II. The net premium has to be subject to a loading (surcharge or additional sum) to take care of all expected and probable expenses.
III. It involves collecting money now and at specified intervals, to provide for a benefit at some time or upon some event in the future.
IV. Loading the net premium will include an amount to cover that kind of contingency.CorrectIn the expenses, the net premium has to be subject to a loading (surcharge or additional sum) to take care of all expected and probable expenses. These will include all internal operating costs, commissions, tax and overheads to which any business is subject. Loading the net premium will include an amount to cover that kind of contingency.
IncorrectIn the expenses, the net premium has to be subject to a loading (surcharge or additional sum) to take care of all expected and probable expenses. These will include all internal operating costs, commissions, tax and overheads to which any business is subject. Loading the net premium will include an amount to cover that kind of contingency.
- Question 21 of 30
21. Question
The loading added to the net premium produces which of the following?
CorrectAccording to insurers, loading is an additional cost built into the insurance policy to cover losses that are higher than anticipated for the company arising from insuring a person who is prone to a form of risk. The loading added to the net premium produces the gross premium, which takes into account all three basic factors.
IncorrectAccording to insurers, loading is an additional cost built into the insurance policy to cover losses that are higher than anticipated for the company arising from insuring a person who is prone to a form of risk. The loading added to the net premium produces the gross premium, which takes into account all three basic factors.
- Question 22 of 30
22. Question
Other factors which may arise from time to time can only affect premiums for new policies. Some of the influences which might have an effect on life premium rating. Which of the following are included in this?
I. Public health
II. Competition
III. Economic changes
IV. CurrencyCorrectOther factors which may arise from time to time can only affect premiums for new policies. Some of the influences which might have an effect on life premium rating. It includes:
• PAR or NON-PAR
• Public health
• Competition
• Economic changes
• Fiscal changes
• Company objectives and marketing strategiesIncorrectOther factors which may arise from time to time can only affect premiums for new policies. Some of the influences which might have an effect on life premium rating. It includes:
• PAR or NON-PAR
• Public health
• Competition
• Economic changes
• Fiscal changes
• Company objectives and marketing strategies - Question 23 of 30
23. Question
Which of the following factors states that if a company is determined to increase its market share, the competitive premium rating is surely one of the possible marketing strategies?
CorrectCompany objectives and marketing strategies state that if a company is determined to increase its market share, the competitive premium rating is surely one of the possible marketing strategies.
IncorrectCompany objectives and marketing strategies state that if a company is determined to increase its market share, the competitive premium rating is surely one of the possible marketing strategies.
- Question 24 of 30
24. Question
Which of the following statements best explains competition as a factor that affects premiums for new policies?
CorrectOne of the factors that may arise from time to time that can only affect premiums for new policies is competition. In competition, no insurer enjoys a monopoly position and what the market is charging cannot be ignored.
IncorrectOne of the factors that may arise from time to time that can only affect premiums for new policies is competition. In competition, no insurer enjoys a monopoly position and what the market is charging cannot be ignored.
- Question 25 of 30
25. Question
Which of the following statements best explains economic changes as a factor that affect premiums for new policies?
CorrectIn economic changes, extended times of affluence or recession will doubtlessly have an impact on all product prices, including insurance.
IncorrectIn economic changes, extended times of affluence or recession will doubtlessly have an impact on all product prices, including insurance.
- Question 26 of 30
26. Question
Which of the following statements are TRUE about policy dividends?
I. Its amount often depends on the amount of money paid into the policy.
II. The amount it will receive will be based on the performance of the company’s financials, based on interest rates, investment returns, and new policies sold.
III. It can be distributed as cash, to purchase additional paid-up insurance, or to reduce premiums due.
IV. The portion of an insurance company’s earnings that is to be disbursed among the owners of the company’s policiesCorrectPolicy dividends or dividends amount often depends on the amount of money paid into the policy. The amount it will received will be based on the performance of the company’s financials, based on interest rates, investment returns, and new policies sold. It can be distributed as cash, to purchase additional paid-up insurance, or to reduce premiums due.
IncorrectPolicy dividends or dividends amount often depends on the amount of money paid into the policy. The amount it will received will be based on the performance of the company’s financials, based on interest rates, investment returns, and new policies sold. It can be distributed as cash, to purchase additional paid-up insurance, or to reduce premiums due.
- Question 27 of 30
27. Question
Which of the following factors refers to a lasting increase in tax levels must be reflected in higher premium rates?
CorrectFiscal changes
Fiscal changes refer to a lasting increase in tax levels that must be reflected in higher premium rates.IncorrectFiscal changes
Fiscal changes refer to a lasting increase in tax levels that must be reflected in higher premium rates. - Question 28 of 30
28. Question
Which of the following statements best describes term insurance?
CorrectTerm insurance
It is a type of life insurance policy that provides coverage for a certain period of time or a specified “term” of years.IncorrectTerm insurance
It is a type of life insurance policy that provides coverage for a certain period of time or a specified “term” of years. - Question 29 of 30
29. Question
Which of the following statements are TRUE about the natural premium system?
I. It is the amount required to meet the mortality cost of life insurance for each particular year and increase from year to year for any given unit of protection.
II. It was used by some life insurers in the early days of the business.
III. It was realized that it was possible to quote an annual premium that would remain level (unchanged) for the duration of the contract.
IV. It was very logical, but it was doomed to failure because of its built-in features which virtually guaranteed that it could not work long-term in practice.CorrectThe natural premium system is the amount required to meet the mortality cost of life insurance for each particular year and increases from year to year for any given unit of protection. It was used by some life insurers in the early days of the business. It was very logical, but it was doomed to failure because of its built-in features which virtually guaranteed that it could not work long-term in practice.
IncorrectThe natural premium system is the amount required to meet the mortality cost of life insurance for each particular year and increases from year to year for any given unit of protection. It was used by some life insurers in the early days of the business. It was very logical, but it was doomed to failure because of its built-in features which virtually guaranteed that it could not work long-term in practice.
- Question 30 of 30
30. Question
Which of the following are included in the features of the natural premium (pricing) system?
I. Regular
II. Premiums
III. Short-term consequences
IV. Longer-term consequencesCorrectThe natural premium system is the amount required to meet the mortality cost of life insurance for each particular year and increases from year to year for any given unit of protection. The features of natural premium (pricing) system includes premiums, short-term consequences, present-day, and longer-term consequences.
IncorrectThe natural premium system is the amount required to meet the mortality cost of life insurance for each particular year and increases from year to year for any given unit of protection. The features of natural premium (pricing) system includes premiums, short-term consequences, present-day, and longer-term consequences.