PDI-01: The Nature of Insurance

Transcription

1 Semester Saturday 21 September 2013 Exam time 10.00am 12.00pm PDI-01: External Examiner Professor John Garvey Time Allowed: 2 hours Instructions for candidates The examination paper must be handed up at the end of the exam with the MCQ answer sheet 1. To be awarded a pass grade in this examination, you must achieve a mark of 40% or above hours are allowed for this paper which consists of 100 Multiple Choice Questions (MCQ). 3. There is only one correct answer to each question. 4. Please note the marking scheme for this paper is as follows: o Each correct answer will be awarded 3 marks (+3); o Each incorrect answer will be awarded a minus 1 mark (-1); o Each question which is NOT attempted will be awarded a zero mark (0). Use option E on the answer form to indicate any question(s) which you choose NOT to attempt. 5. Fill in the personal information required below and on the answer form supplied by the invigilator. 6. Read the instructions on the MCQ Answer Sheet carefully. Handle the MCQ Answer Sheet with care and do not write notes or any marks on it, apart from recording your answers to the questions. 7. Mobile phones, electronic devices, books, papers or other aids must not be in your possession at any time during the exam. Calculators may be used provided they are silent, non-programmable and incapable of storing text. 8. Hand this examination question paper, the MCQ Answer Sheet, and any additional sheets to the invigilator at the end of the exam. Failure to hand in the examination paper and the MCQ answer sheet may preclude the correction of the examination. By signing this examination paper you declare that you have read, understood and agree to be bound by the Examination Regulations of The Institute of Bankers School of Professional Finance. The Regulations are available online at or or CANDIDATE S NAME (Block Capitals) CANDIDATE S SIGNATURE. CANDIDATE NO..... DATE..

2 PDI-01 Candidate Instructions Please carefully read the instructions below before answering any questions The questions on this examination paper are numbered and four options follow the question. The options are labelled A, B, C and D. Only one of these options will be correct. When you have selected your answer, go to the answer form which has been provided to you and using a HB pencil, shade in the appropriate box (A, B, C, D) next to the corresponding question number. On the answer form, there is a further option (option E). You should select option E for any question(s) which you choose not to attempt or answer. Example: 1. In order to be insurable, the risk to be insured (as far as the insured is concerned) must be: A B C D avoidable fortuitous inevitable unavoidable In this example, the answer to this question is option B. So, to answer the question you would simply locate Question 1 on your answer form and shade in the box labelled B. You would be awarded 3 marks for correctly noting this. If you were to choose any of the three incorrect options (A; C; or D) on your answer form, you would be awarded a minus 1 mark (-1). If, however, you would prefer not to attempt this question you would use option E on the answer form to indicate this. You would be awarded a mark of zero (0) for this question as a result. PDI-01 Page 2 of 5

3 1. In relation to insurance, the term risk transfer mechanism means: A. the exchange of information between a Broker and an Insurer to help establish risk data B. the exchange of the uncertainty of future potential risk for a certain premium. C. the management of risk by an insurance company in exchange for a fee. D. the transfer of a premium from an intermediary to an insurer when the insurer has agreed to go on risk 2. A reinsurance company will cover risks: A. already insured by insurance companies. B. directly from individuals. C. from individuals via a broker. D. directly from commercial entities. 3. In terms of frequency and severity, how would the risk of subsidence under a household insurance policy be MOST likely to be classed? A. Low frequency, low severity. B. High frequency, low severity. C. High frequency, high severity. D. Low frequency, high severity. 4. In 2010, Keepsafe Storage, a warehouse company employing many people, suffered two major injuries in the workplace. Based on the Heinrich Triangle, how many minor injuries are they likely to have suffered in the same period? A. 20 B. 30 C. 50 D. 60 PDI-01 Page 3 of 5

4 5. Why do private medical insurers NOT benefit from the law of large numbers in the same way as a general insurer might? A. The wide variety of products in the market means there is never a large number of similar exposures. B. There are legislative restrictions on these products which do not allow discrimination between proposed risks. C. Aggregate claims differ significantly from year to year, making it difficult for insurers to predict the cost of claims in any one year. D. The potential hazards associated with these products vary too widely to produce homogeneous exposures. PDI-01 Page 4 of 5

5 Solutions 1. B 2. A 3. D 4. D 5. B PDI-01 Page 5 of 5