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B Com Exam  >  B Com Tests  >  Test: Insurance Business And Market - 1 - B Com MCQ

Test: Insurance Business And Market - 1 - B Com MCQ


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10 Questions MCQ Test - Test: Insurance Business And Market - 1

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

Detailed Solution for Test: Insurance Business And Market - 1 - Question 1
Reinsurance serves the primary purpose of allowing an insurance company to increase its underwriting capacity. It enables the insurer to take on more policies and spread the risk, as a portion of the risk is transferred to the reinsurer. This helps the insurer write new business and potentially accept larger policies without bearing the full risk itself.
Test: Insurance Business And Market - 1 - Question 2
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What is facultative reinsurance?

Detailed Solution for Test: Insurance Business And Market - 1 - Question 2
Facultative reinsurance is an optional, case-by-case method of reinsurance. It is used when the ceding insurer receives an application for insurance that exceeds its retention limit. Unlike treaty reinsurance, which covers a broad portfolio of policies, facultative reinsurance is arranged for individual cases as needed.
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Test: Insurance Business And Market - 1 - Question 3
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What is the primary role of a Chief Risk Officer (CRO) in an insurance company?

Detailed Solution for Test: Insurance Business And Market - 1 - Question 3
The primary role of a Chief Risk Officer (CRO) in an insurance company is to facilitate risk management across the organization. The CRO ensures that risk management is centralized, provides risk-related inputs to decisions, and plays a key role in managing the overall risk framework of the company.
Test: Insurance Business And Market - 1 - Question 4
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Why do insurance companies use reinsurance?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 4
Insurance companies use reinsurance primarily to increase their underwriting capacity. Reinsurance allows them to accept more policies and write larger lines of insurance by sharing the risk with reinsurers, which helps them expand their business while managing risk exposure.
Test: Insurance Business And Market - 1 - Question 5
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What is the main objective of the three lines of defense model in risk management?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 5
The main objective of the three lines of defense model in risk management is to ensure independence in risk oversight. This model delineates specific responsibilities for different layers of defense to maintain independence and provide effective risk management throughout the organization.
Test: Insurance Business And Market - 1 - Question 6
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What is the purpose of a quota-share treaty in reinsurance?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 6
The purpose of a quota-share treaty in reinsurance is to increase the insurer's underwriting capacity. It allows the insurer to cede a portion of each policy to the reinsurer, thereby expanding its ability to underwrite new business and share the risk with the reinsurer.
Test: Insurance Business And Market - 1 - Question 7
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What is the primary function of the investment department in an insurance company?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 7
The primary function of the investment department in an insurance company is to invest premiums received from policyholders until they are needed to pay claims. This investment income is a crucial component of an insurance company's overall financial performance.
Test: Insurance Business And Market - 1 - Question 8
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What is the main objective of surplus share treaty reinsurance?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 8
The main objective of surplus share treaty reinsurance is to increase the insurer's underwriting capacity. This type of reinsurance allows the insurer to retain a portion of the risk while ceding a surplus or excess portion to the reinsurer, enabling the insurer to write more policies and accept larger risks.
Test: Insurance Business And Market - 1 - Question 9
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What is the primary purpose of loss control services provided by insurance companies?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 9
The primary purpose of loss control services provided by insurance companies is to prevent or minimize losses. These services offer advice and recommendations to policyholders on measures they can take to reduce the likelihood and severity of potential losses, ultimately benefiting both the insurer and the insured.
Test: Insurance Business And Market - 1 - Question 10
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What are the two primary streams of cash flows in an insurance company's operations?
Detailed Solution for Test: Insurance Business And Market - 1 - Question 10
In an insurance company's operations, the two primary streams of cash flows are inflows and outflows. Inflows include premiums, investment income, refunds, and other sources of funds coming into the company, while outflows consist of claim payments, reinsurance premiums, agent remuneration, salaries, interest, and dividends to investors, among other expenses.
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