Practice Set — Insurance Awareness & GA Mock Test (50 MCQs)

Instructions

This practice set contains 50 multiple-choice questions covering the full insurance-awareness syllabus of this book — principles of insurance, LIC history and structure, IRDAI and key legislation, life and general insurance products, underwriting and claims, reinsurance, distribution channels, micro-insurance, financial statements, global bodies, sector reforms, and static GK. Attempt all questions before checking answers. Each question carries four options (a, b, c, d); the correct option is marked immediately after each question.

Questions 1-10: Principles and Foundations

1. Which principle of insurance requires both the insurer and the insured to disclose all material facts honestly?
a) Indemnity b) Subrogation c) Utmost Good Faith d) Contribution
Answer: c) Utmost Good Faith

2. The principle of indemnity applies primarily to which category of insurance?
a) Life insurance b) General insurance c) Pension plans d) ULIPs
Answer: b) General insurance

3. Which principle allows an insurer, after settling a claim, to recover the loss from a negligent third party?
a) Contribution b) Subrogation c) Insurable interest d) Proximate cause
Answer: b) Subrogation

4. A person must have __________ in the subject matter of insurance for a valid insurance contract.
a) prior claims history b) insurable interest c) a nominee d) a rider
Answer: b) insurable interest

5. The tendency of higher-risk individuals to seek insurance more than lower-risk individuals is known as:
a) Moral hazard b) Adverse selection c) Underwriting bias d) Contribution
Answer: b) Adverse selection

6. Which of the following is NOT one of the traditionally recognised core principles of insurance?
a) Utmost good faith b) Indemnity c) Compound interest d) Insurable interest
Answer: c) Compound interest

7. Life insurance is best described as a contract of:
a) Indemnity b) Guarantee c) Assurance d) Speculation
Answer: c) Assurance

8. The "proximate cause" doctrine is used to determine:
a) The premium amount b) The dominant cause of a loss for claim purposes c) The sum assured d) The agent's commission
Answer: b) The dominant cause of a loss for claim purposes

9. Which of these best distinguishes life insurance from general insurance?
a) Life insurance is always cheaper b) Life insurance pays a fixed sum assured regardless of actual financial loss, while general insurance indemnifies actual loss c) General insurance has no underwriting d) Life insurance has no premium
Answer: b) Life insurance pays a fixed sum assured regardless of actual financial loss, while general insurance indemnifies actual loss

10. "Uberrima fides" is a Latin term associated with which insurance principle?
a) Contribution b) Utmost good faith c) Subrogation d) Indemnity
Answer: b) Utmost good faith

Questions 11-20: LIC History and Structure

11. In which year was life insurance business in India nationalised, leading to the formation of LIC?
a) 1948 b) 1956 c) 1972 d) 1999
Answer: b) 1956

12. LIC was formed by merging and nationalising how many private life insurers and provident societies?
a) About 50 b) About 100 c) Over 200 d) Over 500
Answer: c) Over 200

13. Which company is widely regarded as the first life insurance company established in India?
a) Bombay Mutual Life Assurance Society b) Oriental Life Insurance Company c) LIC d) GIC
Answer: b) Oriental Life Insurance Company

14. LIC's headquarters is located in:
a) New Delhi b) Chennai c) Mumbai d) Kolkata
Answer: c) Mumbai

15. Under which Act was LIC established?
a) Insurance Act, 1938 b) LIC Act, 1956 c) IRDA Act, 1999 d) Insurance Amendment Act, 2021
Answer: b) LIC Act, 1956

16. Which of the following was the first Indian life insurance company to charge Indian lives the same premium rates as non-Indian lives, without discriminatory loading?
a) Oriental Life Insurance Company b) Bombay Mutual Life Assurance Society c) LIC d) National Insurance
Answer: b) Bombay Mutual Life Assurance Society

17. LIC's IPO, making it a listed company, took place in which year?
a) 2019 b) 2020 c) 2021 d) 2022
Answer: d) 2022

18. After its IPO, LIC's shares are listed on:
a) Only NSE b) Only BSE c) Both BSE and NSE d) Neither, LIC remains unlisted
Answer: c) Both BSE and NSE

19. LIC's Initial Public Offering was structured as:
a) A fresh issue of new shares by LIC b) An Offer for Sale by the Government of India c) A rights issue to existing shareholders d) A private placement
Answer: b) An Offer for Sale by the Government of India

20. Which of the following statements about LIC after its 2022 listing is correct?
a) The Government of India exited LIC completely b) The Government of India retained a majority stake c) LIC ceased to be regulated by IRDAI d) LIC merged with GIC
Answer: b) The Government of India retained a majority stake

Questions 21-30: Regulation, Acts, and IRDAI

21. IRDAI was established under which Act?
a) Insurance Act, 1938 b) LIC Act, 1956 c) IRDA Act, 1999 d) SEBI Act, 1992
Answer: c) IRDA Act, 1999

22. IRDAI is headquartered in:
a) Mumbai b) New Delhi c) Hyderabad d) Bengaluru
Answer: c) Hyderabad

23. Which Act is considered the primary, foundational statute governing the insurance industry in India, covering registration and conduct of insurers?
a) IRDA Act, 1999 b) Insurance Act, 1938 c) LIC Act, 1956 d) Companies Act, 2013
Answer: b) Insurance Act, 1938

24. The Malhotra Committee, whose recommendations led to major insurance sector reforms, was chaired by:
a) A former RBI Governor, R. N. Malhotra b) A former Finance Secretary c) A sitting Supreme Court judge d) The LIC Chairman
Answer: a) A former RBI Governor, R. N. Malhotra

25. The insurance sector was formally opened to private companies from which year?
a) 1994 b) 1999 c) 2000 d) 2015
Answer: c) 2000

26. The FDI cap in Indian insurance companies was raised from 26% to 49% through which legislation?
a) IRDA Act, 1999 b) Insurance Laws (Amendment) Act, 2015 c) Finance Act, 2021 d) Insurance (Amendment) Act, 2021
Answer: b) Insurance Laws (Amendment) Act, 2015

27. The FDI cap in Indian insurance companies was raised from 49% to 74% through which legislation, passed in 2021?
a) Insurance Laws (Amendment) Act, 2015 b) LIC Act Amendment c) Insurance (Amendment) Act, 2021 d) IRDA Act, 1999
Answer: c) Insurance (Amendment) Act, 2021

28. Which body handles individual policyholder grievances against insurers through a quasi-judicial, cost-free mechanism?
a) Consumer court b) Insurance Ombudsman c) IRDAI Chairman directly d) Reserve Bank of India
Answer: b) Insurance Ombudsman

29. Which of the following entities regulates deposit insurance for bank depositors in India, and is distinct from IRDAI?
a) DICGC b) GIC Re c) Insurance Institute of India d) IAIS
Answer: a) DICGC

30. General insurance business in India was nationalised in which year, with operations commencing on 1 January of the following year?
a) 1956 b) 1969 c) 1972 d) 1999
Answer: c) 1972

Questions 31-40: Products, Underwriting, and Claims

31. A life insurance policy that pays the sum assured only if death occurs during the policy term, with no maturity benefit on survival, is called:
a) Endowment policy b) Term insurance c) Money-back policy d) ULIP
Answer: b) Term insurance

32. A policy that pays the sum assured either on death during the term or on survival to maturity is called:
a) Term insurance b) Whole life policy c) Endowment policy d) Group insurance
Answer: c) Endowment policy

33. In a ULIP, who bears the investment risk on the fund portion?
a) The insurer b) The Government c) The policyholder d) IRDAI
Answer: c) The policyholder

34. The reduced sum assured payable on a policy where premiums have stopped after a minimum qualifying period is called:
a) Surrender value b) Paid-up value c) Bonus d) Rebate
Answer: b) Paid-up value

35. The short window after receiving a policy document during which a policyholder can cancel it for a refund is called the:
a) Grace period b) Waiting period c) Free-look period d) Lock-in period
Answer: c) Free-look period

36. Which of the following is an optional add-on benefit attached to a base life insurance policy for extra premium?
a) Endorsement b) Rider c) Bonus d) Nomination
Answer: b) Rider

37. The process by which an insurer assesses and classifies the risk of a proposer before accepting it is called:
a) Reinsurance b) Underwriting c) Subrogation d) Assignment
Answer: b) Underwriting

38. Claim Settlement Ratio measures:
a) The percentage of premium retained as profit b) The percentage of claims settled out of claims that fell due c) The percentage of agents who are active d) The percentage of policies that are ULIPs
Answer: b) The percentage of claims settled out of claims that fell due

39. In motor insurance, cover for damage to the insured's own vehicle is called:
a) Third-party cover b) Own damage cover c) No-claim bonus d) Floater cover
Answer: b) Own damage cover

40. Which type of motor insurance cover is compulsory by law in India?
a) Own damage cover b) Third-party liability cover c) Zero-depreciation cover d) Engine protection cover
Answer: b) Third-party liability cover

Questions 41-50: Reinsurance, Distribution, Micro-Insurance, and Static GK

41. India's national reinsurer, formed after the restructuring of the general insurance sector, is:
a) LIC b) GIC Re c) New India Assurance d) Oriental Insurance
Answer: b) GIC Re

42. Reinsurance purchased by a reinsurer from another reinsurer is called:
a) Facultative reinsurance b) Treaty reinsurance c) Retrocession d) Co-insurance
Answer: c) Retrocession

43. Distribution of insurance products through a bank's branch network is known as:
a) Bancassurance b) Micro-insurance c) Web aggregation d) Direct marketing
Answer: a) Bancassurance

44. Micro-insurance products are primarily designed to serve:
a) High-net-worth individuals b) Corporate clients c) Low-income groups, to promote financial inclusion d) Foreign nationals
Answer: c) Low-income groups, to promote financial inclusion

45. The global standard-setting body for insurance supervision, of which IRDAI is a member, is:
a) IAA b) IAIS c) FSB d) NAIC
Answer: b) IAIS

46. Insurance penetration is defined as:
a) Number of insurers in a country b) Total insurance premium as a percentage of GDP c) Number of policies sold per agent d) Claim settlement ratio of the industry
Answer: b) Total insurance premium as a percentage of GDP

47. The Appointed Actuary in an insurance company is primarily responsible for:
a) Selling policies b) Certifying reserve adequacy and recommending bonus rates c) Settling claims directly d) Marketing ULIPs
Answer: b) Certifying reserve adequacy and recommending bonus rates

48. The solvency ratio of an insurer is calculated as:
a) Total premium divided by total claims b) Available Solvency Margin divided by Required Solvency Margin c) Net profit divided by total assets d) Total agents divided by total policies
Answer: b) Available Solvency Margin divided by Required Solvency Margin

49. An intermediary who represents the policyholder's interest and can place business with multiple insurers is called an insurance:
a) Agent b) Broker c) Surveyor d) Underwriter
Answer: b) Broker

50. The Insurance Institute of India, the apex professional education body for insurance in the country, was established in:
a) 1938 b) 1955 c) 1972 d) 1999
Answer: b) 1955

Answer Key Summary

Q	Ans	Q	Ans	Q	Ans	Q	Ans	Q	Ans
1	c	11	b	21	c	31	b	41	b
2	b	12	c	22	c	32	c	42	c
3	b	13	b	23	b	33	c	43	a
4	b	14	c	24	a	34	b	44	c
5	b	15	b	25	c	35	c	45	b
6	c	16	b	26	b	36	b	46	b
7	c	17	d	27	c	37	b	47	b
8	b	18	c	28	b	38	b	48	b
9	b	19	b	29	a	39	b	49	b
10	b	20	b	30	c	40	b	50	b