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B Com Exam  >  B Com Tests  >  Test: Concept of Insurance - 3 - B Com MCQ

Test: Concept of Insurance - 3 - B Com MCQ


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10 Questions MCQ Test - Test: Concept of Insurance - 3

Test: Concept of Insurance - 3 for B Com 2024 is part of B Com preparation. The Test: Concept of Insurance - 3 questions and answers have been prepared according to the B Com exam syllabus.The Test: Concept of Insurance - 3 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Concept of Insurance - 3 below.
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Test: Concept of Insurance - 3 - Question 1
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What is the purpose of reinsurance?

Detailed Solution for Test: Concept of Insurance - 3 - Question 1
The main objective of reinsurance is to transfer a part of the risk from the original insurer to the reinsurer. This helps the original insurer to protect its financial capacity and avoid potential losses from large claims. By sharing the risk with the reinsurer, the original insurer can ensure that it is not solely responsible for the entire loss in case of a claim.
Test: Concept of Insurance - 3 - Question 2
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What is the difference between facultative and treaty reinsurance?

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Facultative reinsurance is a type of coverage that protects an insurance provider for individual risks or contracts. Each risk or contract must be negotiated separately, and the reinsurer has the right to accept or deny each proposal. On the other hand, treaty reinsurance is in effect for a specified period of time and covers all or a portion of the risks incurred by the insurance company during that period.
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Test: Concept of Insurance - 3 - Question 3
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What is proportional reinsurance?

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Proportional reinsurance is a type of coverage where the reinsurer receives a prorated share of the premiums of all the policies sold by the insurance company being covered. When claims are made, the reinsurer also bears a portion of the losses. The proportion of the premiums and losses shared by the reinsurer is based on an agreed percentage.
Test: Concept of Insurance - 3 - Question 4
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What is excess-of-loss reinsurance?
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Excess-of-loss reinsurance is a type of non-proportional coverage where the reinsurer only covers losses that exceed the insurance company's retained limit, also known as the priority or retention limit. This type of coverage is typically used for catastrophic events and can be applied on a per occurrence basis or for all cumulative losses within a specified period.
Test: Concept of Insurance - 3 - Question 5
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What is the difference between reinsurance and double insurance?
Detailed Solution for Test: Concept of Insurance - 3 - Question 5
Reinsurance is the process of an insurance company transferring a part of its risk to another insurance company. This is done to protect the original insurer's financial capacity and spread the risk over multiple insurers. On the other hand, double insurance refers to purchasing multiple policies for the same subject, such as multiple life insurance policies. In the case of double insurance, the insured can claim the amount of all the policies, but the total loss will be contributed by the insurance companies in proportion to the policies issued by them.
Test: Concept of Insurance - 3 - Question 6
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What is the significance of external customers for a business?
Detailed Solution for Test: Concept of Insurance - 3 - Question 6
External customers are essential to the success of any business as they provide the revenue stream through their purchases. Satisfied external customers not only make repeat purchases but also refer the business to others, which can further expand the customer base. Their positive experiences with the business can contribute to its growth and profitability.
Test: Concept of Insurance - 3 - Question 7
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What is the significance of internal customers for a business?
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Internal customers are members of an organization who rely on assistance from others to fulfill their job duties. They can include employees from different departments or teams who depend on each other for support and collaboration. By working well together and providing the necessary assistance, internal customers help ensure that the overall operations of the business run smoothly and efficiently.
Test: Concept of Insurance - 3 - Question 8
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How can improving internal customer relations benefit a business?
Detailed Solution for Test: Concept of Insurance - 3 - Question 8
Improving internal customer relations can have a positive impact on the overall work environment and company morale. When employees work well together, collaborate effectively, and provide support to each other, it creates a positive and harmonious atmosphere. This can lead to increased job satisfaction, higher employee engagement, and improved productivity. A healthy work environment can also contribute to employee retention and attract top talent to the organization.
Test: Concept of Insurance - 3 - Question 9
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What is the difference between risk-attaching reinsurance and loss-occurring coverage?
Detailed Solution for Test: Concept of Insurance - 3 - Question 9
Risk-attaching reinsurance is a type of contract where all claims that are established during the effective period of the reinsurance coverage will be covered, regardless of whether the losses occurred outside the coverage period. On the other hand, loss-occurring coverage is a treaty coverage where the insurance company can claim all losses that occur during the reinsurance contract period. The key difference is that risk-attaching reinsurance focuses on claims established, while loss-occurring coverage focuses on losses that occur.
Test: Concept of Insurance - 3 - Question 10
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What is retrocession?
Detailed Solution for Test: Concept of Insurance - 3 - Question 10
Retrocession refers to the reinsurance of reinsurance, where a reinsurer seeks further reinsurance to protect its interests. This can occur when a reinsurer wants to transfer a part of its risk to another reinsurer, effectively sharing the risk again. Retrocession enables reinsurers to manage their exposure to risk and ensure that they have adequate coverage in case of large claims.
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