Part 4: Core Functions of an Insurance Company

Paper I — Principles and Practice of Insurance · Part 4: Core Functions of an Insurance Company

Q1 Free

Which of the following best describes the product development function of an insurance company?

A. Only voluntary classes of insurance require product development
B. Once launched, a product does not need further updating
C. Product development is a never-ending process as competitors are eager to copy
D. Product development only involves setting premium levels

Show Answer

Correct Answer: C

Because competitors are eager to copy, product development is a never-ending process.
Even compulsory classes have flexibility in presentation.
The department develops new products, monitors trends, sets exclusions/conditions and determines policy wording.

Q2 Free

Which of the following is NOT a key factor considered by an underwriter when assessing a risk?

Show Answer

Correct Answer: D

Underwriting is the assessment of risk for insurance purposes.
Key factors include nature of risk, claims history and exposure.
The applicant's favourite colour is unrelated to risk assessment; outcomes may be acceptance, sub-standard terms, decline or referral to reinsurers.

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