PCE Sample Exam_4

Pre-Contract Examination Workbook
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Chapter 1 Introduction to Insurance
1. Which of the following roles are the best suited for a life insurance agent
I bring financial relief to families met with untimely death
II bring new business for the company’s profitability
III bring financial relief in the event of property loss in fore, flood and storm etc
IV maintain quota so that contract will not be terminated
V inculcate discipline of saving amongst people
A All of the above C I, II, III and IV
B I and IV D I and V
2. _________ states that when there is an increase in number of loss exposure, the predicted loss
tends to approach the actual loss:
A Principle of utmost good faith C Law of large numbers
B Law of similar numbers D Loss-sharing arrangement
3. In 1762 The Equitable Assurance introduced premium rates based on:
A Increasing premium system C Level premium system
B Variable premium system D New Mortality Tables
4. In the early 1960s, some local insurance companies went out of business mainly because of
the following reasons:
I Lack of capital
II Lack of technical background
III Lack of policyholders
IV Not encouraged by the government
A. II only C. II and III only
B. I and IV only D. I and II only
5. Which of the following is not true?
A. The earliest insurance was applied by merchants to protect themselves against loss of
their property.
B. Initially life insurance policies were sold as short term and long-term policies.
C. The Amicable Society for a Perpetual Assurance adopted a member contribution
scheme to compensate dependents of the members who had died.
D. In 1762 the Equitable Assurance for the first time fixed premium rates based on the
level premium system.
6. Life Insurance can be best defined as:
A. A contract that covers risks such as premature death, marine and aviation and
products sold.
B. A contract which pays out money on the happening of all insured events.
C. A contract which provides coverage against risks not directly involving human life.
D. A contract which pays out money in the happening of all insured events dependent on
human life.

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7. In insurance, the contributions made by individuals who face the same risk to compensate for
their misfortunes against financial losses is called:
A. Remedies C. Premium
B. Aqad D. Takaful
8. In applying the concept of insurance, policyholders will contribute premiums to the insurance
company. The insurer uses this amount of money to:
I pay for claims
II invest
III pay for staff’s salaries
IV pay income tax
A. I, III and IV C. I, II and IV
B. I, II and III D. All of above
9. To be an effective agent, which of the following should NOT be done?
A. To recognize the insuring needs of the clients
B. To provide advice to the Client
C. Bring financial relief to aggrieved dependents of the insured
D. To ensure the products proposed is beyond the resources of the prospective
policyholder
10. The insurance industry in Malaysia had been largely patterned on
A. British-American System C. Local System
B. British System D. American System
11. The need for insurance arises from the following circumstances:
I A person’s earning capacity is affected by old age
II A person’s investment may depreciate in value
III The need for an continuous income to live
IV an individual might have to bear the financial losses alone
A. I and II C. I, II and III
B. I, II and IV D. I, II, III and IV
12. Risk covered by general insurance include:
I sickness or disability due to accident
II motor vehicles
III fidelity Guarantee and Bonds
IV death caused by infection
A. II and III C. I, II and IV
13. Which of the following is NOT the function of insurance?
A. Stimulates business enterprises
B. As a mean of saving
C. For insured to make a profit out of his loss
D. Sources of capital for insurer’s investment

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14. Insurance, as a device for spreading losses, can only work when
I premium collected is adequate
II there is an independent occurrence of losses
III the number of similar loss exposures increases
IV the occurrence of losses is unpredictable
A. II and III C. I, II and III
B. I, II and IV D. All of above
15. Which of the following effect of misfortune cannot be compensated through insurance?
A. Loss of factory as a result of fire
B. Loss of income due to disability
C. Injury in an accident
D. Emotional trauma arising from death of a loved one
16. The earliest beginning of insurance were in the field of:
A. Marine insurance C. Equitable insurance
B. Life insurance D. Motor vehicle insurance
17. Insurance is:
A. A loss-sharing arrangement C. An economic institution
B. A pooling of risk D. All of the above

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Chapter 2 Nature of Risk and Its Management
1. Which of the following is determined on the basis of historical data?
A Empirical Probability C Priori Probability
B Judgemental Probability D Natural Probability
2. When a loss is accidental and unintentional it is known as:
A Catastrophic losses C Pure risk
B Fortuitous losses D Insurable interest
3. Method of handling risk include:
I Avoid the person who produces the risk
II Reduce the total amount of loss
III Plan to retain risks
IV Transfer the risk to a third party
A. I, II and III C. I and II
4. Risk can be transferred when:
A. A person bought a fire insurance policy on his house
B. The manufacturer agreed to compensate defective products sold to the retailer
C. A person bought a life insurance policy on the life of his child
D. All of the above
5. Questionnaires, financial statements and personal inspection of facilities are sources for which
of the following step in risk management process?
A. Identification C. Selection
B. Evaluation D. Implementation
6. The following items are related to risk:
I The variation in outcomes in a given situation
II The possibility of loss
III The subject matter of insurance
IV Uncertainty as to when loss-producing events will occur
A. I, II and III C. I, II and IV
B. II, III and IV D. All of above
7. Risk of property damage from earthquake, flood and typhoon is classified under:
A. Fundamental Risk C. Speculative Risk
B. Particular Risk D. Social Risk
8. Peril is
A. A loss of properties and lives C. A cause of loss
B. A financial loss D. The exposure to danger

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9. Which of the following is NOT true about the categories of risk?
A. Particular risks are the responsibility of the individuals themselves
B. Pure risk exists when there is the possibility of either loss or no loss
C. Investment in the stock market is considered as speculative risk
D. Pure risk and speculative risk can easily be handled by insurance technique
10. Which of the following describe the definition of risk?
A. An uncertainty regarding loss
B. A condition that increases the chance of loss
C. A reduction of economic value
D. All of the above
11. Which of the following is NOT true about measurement of risks?
A. The chance of loss in insurance practice can be determined by the probability theory
B. Priori probability is determined when the law of large numbers is applied
C. Empirical probability is determined on the basis of historical data.
D. Judgemental probability is determined when there is lack of credible statistics
12. Risk is ever present in our lives and pure risks lead to financial losses. What are the solutions
to overcome risk problem?
I Undergo a risk management process
II Practice of loss-sharing arrangement
III Select a risk handling technique
IV Transfer of speculative risk through insurance
A. I, II and IV C. I, II and III
13. There must be a large number of similar risks before any one of the risks is capable of being
insured. The reasons for this are:
I To enable the insurer to predict losses more accurately
II To enables the principle of losses of a few to be borne by many to be applied
III To predict the adequate premium for paying losses
IV To ensure a large number of risks incur losses at the same time
14. Selection of risk handling techniques will base on the following criteria, except:
A. Financial
B. Humanitarian
C. Legal requirements
D. Religious aspects
15. Which of the following is NOT true about the criteria of insurable risk?
A. Insurance risks must be capable of being financially measured
B. Insurable risks should have the possibility of profits, loss or no loss
C. There must be a large number of similar risks involved
D. There must not be a large number of similar risks involved at the same time

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16. The characteristics of insurable risk is (are):
A. The loss should be heavy enough to be borne by insurer
B. The object of insurance does not have to follow the public policy
C. The risk that has a very high probability of loss might not be able to be insured
D. All of the above

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Chapter 3 The Basic Principles Of Insurance And An Introduction To Takaful
1. The Takaful companies provide various Takaful plans to cover risks. Which of the following
risks are allowable by Syariah:
A Takaful by Syariah
B Business risks & pure risks
C Participant’s share of risks
D Family Takaful & general Takaful risks
2. Which of the following best describes the concept of Tabaruk
A An aqad of helping. To donate all contributions
B An agreement of buying and selling
C An agreement to gain the benefit of investment
D An aqad (agreement) to deposit as donation a certain proportion of Takaful
contributions on installments into a risk fund
3. Insurance is quite different from gambling. What is this difference that makes it allowable in
accordance to Syariah:
I Principle of utmost good faith
II Principle of indemnity
III Principle of contribution
IV Principle of insurable interest
A All of the above C I and II
B IV only D I and IV
4. As regards to marine policies, they are freely assignable by statutory provision, Marine
Insurance Act 1906. In practice which of the following is freely assignable
A Hull policies C Freight policies
B Cargo policies D Hull & Cargo policies
5. When a policy owner named a third party to receive the death benefit under his policy, it is
most appropriate to be referred to as:
A. Assignment of policy proceeds C. Novation
B. Transfer by operation of law D. Automatic assignment of policy
6. When an insured fails to disclose a material fact intentionally, it is called
A. Non-disclosure C. Misrepresentation
B. Concealment D. Fraudulent misrepresentation
7. To disclose fully and accurately all material facts relating to the proposed risk, whether asked
or not, is the duty of
A. Caveat emptor C. Disclosure
B. Utmost Good Faith D. Subrogation

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8. A thief cannot effect a valid insurance on goods stolen by him because:
A. There is no insurable interest
B. He has no legitimate financial interest in the goods
C. He is in breach of the law
D. All of the above
9. What is (are) the difference(s) between an ordinary contract and the insurance contract?
A. In most ordinary contracts, there is a need for parties to disclose information not
requested in order for the customer to buy the best product
B. The legal principles governing the insurance contracts are caveat emptor and
uberrimae fides
C. In insurance, the buyer will know more about the information material to the risk
proposed for an insurance policy
D. All of the above
10. In general insurance (excluding marine insurance) insurable interest must exist
A. At the time of entering into the contract
B. At the time of loss
C. At the beginning and at time of loss
D. When marine insurance is involved
11. Referring to the table below, P has an insurable interest on Q. Which one is NOT true?
P Q
A A wife Husband’s car
B Trustee Property held in trust
C A person Own life
D Creditor Debtor
12. Under an absolute assignment of policy
A. The new insured has all the rights and liabilities which is greater than the original
insured
B. Prior consent from the insurer is needed for an assignment of all marine policies to be
valid
C. Prior consent from the insurer is not required if the transfer is made by will
D The assignor will continue to enjoy the policy proceeds
13. Which of the following is NOT a subject matter of insurance?
A. Ship C. Goods
B. Life D. None of the above
14. What is the difference between a subject matter of insurance and the subject matter of
insurance contract?
A. If the life insured’s own life is the subject matter of insurance, his financial interest
towards his life is the subject matter of the insurance contract
B. A subject matter of insurance is the financial interest in the property, rights, life and
limbs insured
C. In general insurance business, the subject matter of insurance and the subject matter
of the insurance contract is the same
D. None of the above

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15. The materiality of a fact under the duty of utmost good faith depends on the
I nature of the proposed insurance
II representations by the insurance company
III circumstances surrounding a proposed risk
IV status of the servicing agent
A. I and II C. I and III
B. II and IV D. III and IV
16. The principle of indemnity states that
A. The insurer should restore the insured to the same financial position as before the loss
B. The insurer should restore the insured to a better financial position as before the loss
C. The insurer should restore the insured to a lesser financial position as before the loss
D. The insured should enjoy indemnity which is less than his loss as a result of policy
limitations
17. Which of the following is (are) a contract of indemnity?
I Fire insurance
II Personal accident
III Aviation
IV Endowment
A. II and IV C. III and IV
B. I and III D. All of above
18. When an insured’s property valued at RM 1,000 has been destroyed by a negligent third
party, which of the following is NOT true about a claim under the principle of subrogation?
A. This type of subrogation is considered as arising put of tort
B. In the absence of subrogation, the insured cannot get his claim
C. In the presence of subrogation, the insured can either claim for the insurer or the
negligent party
D. The principle of subrogation applies to prevent the insured from making profit out of
his loss
19. Under which of the following conditions where subrogation may not arise?
A. The insured incurred a loss covered under a money policy and under a contract
between the insured and the security company
B. Valuable lost in an hotel is covered under the Innkeepers Act 1952 and also under as
all risks policy owned by the hotel guest
C. When insured’s property is totally destroyed and the insurer takes over the salvage
after payment to insured
20. When a loss is covered by two or more policies, two or more insurers can contribute
proportionately to the lost of indemnity. This is the principle of
A. Subrogation C. Loss-sharing
B. Contribution D. Distribution

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21. The insurer may be liable for
A. Insured perils only
B. Insured and uninsured perils
C. Uninsured perils and excluded perils
D. Insured, uninsured and excluded perils
22. When two or more perils including one insured peril occurred concurrently and the ensuing
loss cannot be separated, the insurer will be liable for
A. The full amount provided there is no excluded peril
B. The loss caused by the insured peril
C. Nothing because the loss cannot be separated
D. The loss caused by the insured peril and the result uninsured peril
Questions 23 & 24 are based on the following case:
An electrical short-circuit sets fire to a building insured under a fire policy, the firemen manage to
control the fire within one hour later. The owner suffers fire and water damage to the building and
contents.
23. Referring to the above case, what is the proximate cause of the loss?
A. Fire C. Loss cannot be separated
B. Electrical short-circuits D. Water
24. The insurer is only liable for any loss caused by
A. Fire only
B. Electrical short-circuit and fire only
C. Water and fire only
D. Water, electrical short-circuit and fire only
Questions 25 & 26 are based on the following case:
An insured has a personal accident policy and a life policy. While crossing a river the insured
accidentally falls into the river. He suffers a heart attack and subsequently drowns.
25. The above case shows a broken chain of event because
I the proximate cause (drowning) is the one immediately following the last interruption
(death)
II there is a break in chain of events between the heart attach and drowning
III the insurer will be liable to pay the benefits under the personal accident policy
IV the insurer will be liable for the loss insured under the policy from the insured peril
onwards
A. I and II C. II and IV
B. I and III D. I and IV
26. The insurer will be liable to pay benefits under
A. Personal accident policy C. Personal accident and health policy
B. Health policy D. Personal accident and life policy

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27. Which of the following is NOT true about the information of takaful?
A. Takaful companies provide insurance based on system of operation in accordance
with Syariah
B. Part I of Takaful Act 1984 provides interpretation, classification and references to
takaful business
C. The Syariah Supervisory Council is established in order to involve directly with the
management of the takaful company
D. The Takaful operation is based on the concept of ‘Tabaruk’ and ‘Mudharabah’
28. One of the important aspects of takaful operation is
A. The takaful business assumes risks and is a contractual transfer of risk
B. The takaful company covers business and pure risks, as in the conventional insurance
C. The agreement of contribution is based on mutual help, and not on buying and selling
D. The Tabaruk proportion defines the participant’s share of the risk computed using the
actuarial principle based on Syariah

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Chapter 4 The Insurance Industry In Malaysia
1. The main difference between insurance agents and insurance brokers is that
A Agents are not tied to any one insurer where else brokers are tied to one insurer
B Brokers are not tied to any one insurer where else agents are tied to one insurer
C Insurance agents sell insurance products where else insurance brokers sell shares of
insurance company
D There is no difference between agents and insurance brokers
2. Insurance companies in Malaysia are mostly organized on the basis of:
A Products sold C Territories
B Functions performed D Combination of A and B
3. Delayed quotation, slow service to the customers are examples when an insurance company’s
decision is:
A Decentralized C “Half-way”
B Centralized D Invalid
4. Insurers transacting both life and general business are called
A. Life and general insurer C. Mutual insurer
B. Composite insurer D. Co-operative insurer
5. Which of the following is NOT true about the insurance market?
A. An insurance market refers to the facilities of buying and selling insurance
B. A proprietary company is owned by shareholders and profits earned belong to them
C. A co-operative society is owned by shareholders and policyholders which may be
termed as a mutual insurer
D. The intermediaries in the insurance market are agents and brokers
6. A co-operative society transacting insurance business may be termed as
A. Co-operative company C. Mutual company
B. Proprietary company D. Composite company
7. Which of the following describe the insurance brokers?
I An insurance broker acts on behalf of the insured
II An insurance broker can tie to more than two insurers
III The broker may help to settle claims
IV All broker must be licensed by Bank Negara
A. I and III C. I, III and IV
8. They are independent parties appointed to investigate the cause and extent of the loss and
report to the insurer to decide whether the loss is covered
A. Marine and cargo surveyors C. Adjusters
B. Doctors D. Assessors

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9. They are employed by the insured to calculate the extent of the damage or loss. They also
assist the insured in preparation and negotiation of the claim
A. Adjusters C. Assessors
B. Investigators D. Brokers
10. The reinsures’ function is to
A. Reinsure the subject matter of insurance from the buyer
B. Insure the risk underwritten by the insurers
C. Extend the amount of sum insured restricted under the normal policy
D. Underwrite reinsurance business and does not accept business direct from the general
public
11. Below are the insurance organization structure and their functions. Which department’s
function is NOT described correctly?
A. Administration – responsible for matters relating to the company’s employees
B. Investment – responsible for company’s preparation of financial statements,
control of receipts and disbursements
C. Marketing – responsible for sales promotion programmes, literature and kits
D. Sales – responsible for identification of field officers, recruiting, agents
contract, motivating and supervising the agency force
12. Which of the following is NOT true about centralization?
A. The branches act as sales outlets
B. The basic functions and decision-making is at the head office
C. Centralization results in prompt service rendered to customers
D. It results in uniformity in practice and economies in administration
13. Below are institutions related to general insurance, except
A. IMB C. IBAM
B. PIAM D. ASM
14. The main function of the Motor Insurers’ Bureau is to
A. Provide compensation to victims of motor accidents
B. Provide an alternative procedure to resolve disputes arising out of policies of personal
insurance
C. Provide insurance coverage at a reasonable cost to certain classes of vehicles as a
kind of social service
D. Manage the Unplaced Motor Pool
15. The main function of Insurance Mediation Bureau is to
A. Provide compensation to victims of motor accidents
B. Provide an alternative procedure to resolve disputes arising out of policies of personal
insurance
C. Provide insurance coverage at a reasonable cost to certain classes of vehicles as a
kind of social service
D. Manage the Unplaced Motor Pool

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16. PIAM’s main objectives include:
I to collect and circulate information and statistics relating to general insurance
business
II to provide an alternative procedure to resolve disputes arising out of personal
insurance policies
III to make rules and regulations in consultation with the Director General of Insurance
for implementation
IV to promote the study and research into the Actuarial subjects and allied aspects of
insurance
A. I and III C. I, III and IV
B. I, II and III D. all of above
17. Its main objective is to promote and establish a sound brokerage business in Malaysia in co-
operation and consultation with the DGI
A. PIAM C. IMB
B. IBAM D. AMLA
18. The following loss adjuster(s) do not need to hold a license granted by the DGI to carry out
the adjusting duties
A. Advocates who assist in adjusting insurance claims incidental to the practice of their
professions
B. Adjusters of maritime losses
C. Employees of insurance companies who act in adjusting insurance claims
D. All the above
19. It is responsible for the registration of life insurance agents in Malaysia
A. PIAM C. MII
B. LIAM D. NAMLIA
20 These are the objectives of MII, except
A. to encourage and assist in the study of subjects relating to insurance
B. To organise and conduct insurance courses
C. To register life and general insurance agents
D. To offer money or prizes for essay or research in any subject relating to insurance
21. Which of the following is NOT an organization related to Life Insurance?
A. LIAM C. ASM
B. IMB D. NAMLIA

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Chapter 5 Consumer Protection And Statutory Regulation
1. The purpose of the Insurance Guarantee Scheme Fund (IGSF) is to:
A Make reinsurance arrangement consistent
B Meet the liabilities of any insolvent insurer
C Maintain an insurance fund
D Enable an insurance company to transact insurance business
2. Insurance Act provides the following in order to control the financial solvency of insurers:
I Compulsory Deposit
II Insurance Fund and Investment
III Solvency Margin
IV Registration of Insurers
A I and II C II and III
B I, II and III D All of the above
3. Any person who wishes to act as an insurance broker must:
I be licensed by the DGI
II produce satisfactory certificate of solvency from auditors
III be a member of IBAM
IV only engage with one insurance company
A I and II C I, II and III
B II and III D All of the above
4. Every insurer must place a cash deposit of not less than ________ with the Accountant
General.
A. RM 300,000 C. RM 500,000
B. RM 400,000 D. RM 600,000
5. Below are the advantages of Self-Regulation, except
A. Avoids the need to introduce legislation to regulate the industry
B. Help to instil self-discipline among insurance companies
C. Measures can respond to changing needs faster than legislation
D. Voluntary codes of practice do not have power of law
6. Any person who wish to act as an insurance broker must be licensed by
A. Insurance Broker Association of Malaysia (IBAM)
B. Director General of Insurance (DGI)
C. Life Insurance Association of Malaysia (LIAM)
D. Life Insurance Marketing and Research Association (LIMRA)
7. Insurance Guarantee Scheme Fund (IGSF) has been established for
A. Life insurance business C. Composite business
B. General insurance business D. Policyholders

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8. Besides the Insurance Act 1963, other legislative control on insurance companies are
I Companies Act, 1963
II Malaysia Income Tax Act, 1967
III Civil Law Act, 1972
IV Unclaimed Money Act, 1965
9. The code of Ethics and Conduct formulated by LIAM deals with the following aspects:
I Life insurance selling
II Life insurance claims
III Life insurance Practice
IV Insurance product development
A. I and II C. I and III
B. II and IV D. I, III and IV
10. To protect the policyholders’ interest, the Insurance Act 1963 focuses on the following areas:
I Registration of Insurers
II Licensing of brokers and loss adjusters
III Fair trade practices
IV Insurers’ trade practices
A. I, II and III C. II, III and IV
B. I, III and IV D. All of above
11. In accordance with the provision of the Insurance Act 1963, the powers of DGI includes
I to assume control over the property business and affairs of the insurer
II to inspect books and other documents of the insurer
III to investigate into the business of the insurer
IV present a petition to the court to wind up the insurer’s business
B. II and III D. All of above
12. According to the International Consumer Movement, consumers have some basic rights
which include:
I right to information
II right to be redress
III right to choose
IV right to satisfaction

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13. Self-regulation has been introduced by the insurance industry with the objective to
I instil discipline and promote healthy competition in the industry
II apply to court to appoint a receiver or manager to manage the business affairs of the
insurer
III provide some element of protection to insurance consumers
IV present a petition to the court to wind up the insurer’s business
A. I and III C. I, II and IV
14. In Malaysia, the regulation of insurance business is achieved through the enforcement of the
Insurance Act, 1963 by the
A. Life Insurance Association of Malaysia (LIAM)
B. Life Insurance Marketing and Research Association (LIMRA)
C. Director General of Insurance (DGI)
D. Association of Malaysian Loss Adjusters (AMLA)
15. Every insurer is required at all times to maintain a surplus of assets over liabilities of not less
than
A. RM 10 million for life insurance
B. RM 15 million for life insurance
C. RM 5 million or 20% of net premium income in the preceding financial year,
whichever is greater, for general insurance business
D. RM 10 million or 20% of net premium income in the preceding financial year,
whichever is greater, for insurance business

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Chapter 6 The Insurance Contract
1. __________ of the Insurance Act 1963 provides that a minor above age 16 can enter into a
legally binding insurance contract:
A Section 23 C Section 14
B Section 41 D Section 23(b)
2. Section 41 of the Insurance Act 1963, says that a minor aged 10 to 16 may enter into
insurance contracts
A Only when they reach age 18
B With the written consent of his parent / guardian
C Without any consent of his parent / guardian
D Cannot buy Insurance policies
3. The distinct difference between general insurance and life insurance is that:
A Policies may be enforced before premiums are paid in General Insurance Business
where else in life insurance the initial premium must be paid before the policy can be
issued
B Policies may be enforced before premiums are paid in Life Insurance where else in
General Insurance the initial premium must be paid before the policy can be issued
C General Insurance contracts must be written legally where else general insurance
contracts needs no legality
D Life Insurance contracts must be written legally where else General Insurance
contracts needs no legality
4. Which is the best definition of contract?
A. A legally binding agreement made between two or more parties
B. A non-legally binding agreement made between two or more parties
C. An agreement made with the witness of a lawyer
5. Which of the statements below is NOT true about legality of agreement entered into in
business?
A. It is essential that parties to an agreement intend to be legally bound
B. The law generally presume that agreement entered into a business environment are
intended to be legally binding
C. Insurance agreements are presumed to be legally binding on the insured and insurer
D. The law generally will not presume that agreements entered into a business
environment ate intended to be legally binding
6. The offer and acceptance may be expressed in several ways, they are:
I Writing
II Orally
III Implied from Conduct
IV Voluntary
A. I and II C. II, III and IV

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7. In insurance, offer is usually made by __________ and accepted by __________
A. Proposer, beneficiary C. Beneficiary, beneficiary
B. Proposer, insurer D. Insurer, proposer
8. To form a legally binding insurance agreement, there is certain essential requirement to be
satisfied. What are those essential requirements?
I (a) Intention to create legal relationship (b) Offer and Acceptance
II (a) Consensus ad Idem (b) Legally bind contract
III (a) Consideration (b) Consensus ad Idem
IV (a) Legal capacity to contract (b) Legality of the contract
A. I and II C. I, III and IV
B. II and III D. All of above
9. In some instance, the insurer may not accept a proposal on its original terms but may offer to
provide insurance on different terms. This transaction is called
A. Offer and acceptance C. Counter-offer
B. Counter-acceptance D. Counter-check

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Chapter 7 Law of Agency
1. The legal maxim applies to agency is ___________ which means “he who acts through
another is himself performing the act”
A Utmost good faith
B Knowledge of the agent is knowledge of the insurer
C Qui fact per alium fact per se
D Caveat emptor
2. What is the primary purpose of the agency system
A Obtaining prospect regularly
B Continuously submitting new proposals
C Canvassing new business
D Maintaining agency quotas
3. An authority by estoppel, is an act that the principal is estopped from denying the existence of
the agency. This authority is also known as
I Usual authority
II Implied authority
III Express authority
IV Apparent authority
A I, II and III C IV only
B I and IV D All of the above
4. The middlemen or intermediaries of the insurance market may be termed as
A. Agents C. Policyholder
B. Principal D. Agency
5. The authorities given to an agent include
I Express authority
II Implied authority
III usual authority
IV apparent authority
6. “The knowledge of an authorized agent is deemed to be the knowledge of the insurer”. This
refers to:
A. The Civil Law Act, 9163 C. Section 16A, Insurance Act, 1963
B. The Companies Act, 1965 D. Section 44A, Insurance Act, 1963
7. __________ can be defined as the relationship which arises when the agent is engaged by the
principal
A. Employee C. Third party
B. Agency D. Company

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8. “Any person who mislead to induce another person to enter into any contract, will be liable to
a fine not exceeding RM 5,000 or imprisonment for a term not exceeding 1 year or both”.
This refers to
A. The Civil Law Act, 1963
B. The Companies Act, 1965
C. Section 16A, Insurance Act, 9163
D. Section 44A, Insurance Act, 1963
9. The relationship of principal and agent may be terminated by
I notice of renunciation given to the principal by agent
II notice of revocation given by the principal to the agent
III mutual agreement
IV death, lunacy or bankruptcy of the principal or agent
10.. The relationship of insurer and agent may be created in the following ways:
I By implication of the law
II By express appointment
III By section 44A, Insurance Act, 1963
IV By section 23, Civil Law Act, 1972
A. I and II C. I, II and IV
11. Agents are classified to different classes in accordance with the authority provided to them:
I General agent
II Special agent
III Senior agent
IV Universal agent
A. I. II and III C. I, III and IV
12. To pay remuneration and expenses as agreed to the agents is the duties of the
A. Principal C. Policyholder
B. Agency D. Beneficiary
13. The relationship which have connection with agency are:
I the relationship between principal and agent
II the relationship between principal and a third party
III the relationship between agent and a third party
A. I C. II and III
B. I and II D. All of above

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14. An agent who has unlimited authority is classified into the following categories:
A. Special agent C. Universal agent
B. General agent D. Senior agent
15. Any representation made by the principal which induces a third party reasonably to believe
that a particular person is an agent of the principal and make the principal liable for that
particular person’s action. This authority of agent refers to
A. Express authority C. Usual authority
B. Implied authority D. Apparent authority
16. An insurance agent is expressly NOT allowed to perform the following acts:
I to represent more than one life insurance company
II to represent more than three general insurance companies
III to incur any forms of liability on behalf of the insurer
A. I and II C. II and III
17. According to Section 16A of Insurance Act, 1963, any person who misleads to induce another
person to enter into any contract shall be liable to
A. A fine C. Imprisonment
B. A fine and/or imprisonment D. None of the above

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Chapter 8 Marketing And After Sales Services
1. In a market-oriented insurance company, the role of sales and marketing department is to:
A. Sell the policies which the company has developed
B. Determine the need of customers and satisfy them by distributing appropriate policies
C. Emphasis on sales
D. Use hard sales techniques to stimulate customers’ interest in the company’s policies
2. An ___________ agent is one who distributes policies with the objective of satisfying
customers’ requirements
A. Task-oriented C. Market-oriented
B. Sales-oriented D. Product-oriented
3. An agent who engage in personal selling requires to gain
I market knowledge
II product knowledge
III selling knowledge
IV legal knowledge
B. I, III and IV D. All of above
4. A successful agent needs knowledge on selling techniques, below are the different selling
techniques used in insurance selling:
I Creative selling
II Order processing
III Alternative selling
IV Missionary selling
A. I, II and III C. I, III and IV
B. I, II and IV D. II, III and IV
5. Which of the following does NOT describe mode of premium payment correctly?
A. Premium paid under modes other than yearly are slightly higher per year
B Monthly premium is higher because more administrative work is involved in the
collection
C. Home service scheme operates in connection with industrial life insurance which
usually provides coverage for the higher income group who can afford
D. Payroll deduction scheme can only be applied after a written consent from the
employee
6. Which of the following are correct statements about home service insurance?
I Provide coverage to the low income worker
II Premiums collected by company staff at the home of the policyholders
III Classified as Industrial Life Insurance
IV The premiums can be paid weekly, fortnightly, monthly or quarterly
A. I and II C. I, III and IV

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7. Factors which may influence the consumers’ buying decision are
I reputation of the insurer
II agent’s personality and professional capability
III premium
IV policy benefits
8. Below are the methods of monthly premium payment:
I Bankers’ Order
II Payroll Deduction Scheme
III Home Service
IV Cash
9. Every insurer shall maintain an up-to-date register of all policies. This refer to:
A. Section 16A, Insurance Act, 1963 C. Section 9, Insurance Act, 1963
B. Section 44A, Insurance Act, 1963 D. The Company Act, 1965
10. Payments can be made within a specified number of days, usually 30 days from the due date.
This period is known as
A. Critical period C. ‘Cooling off’ period
B. Grace period D. Specific period
11. Below is the statement about grace period.
I Usually 30 days from the due date
II Premium received within the grace period are accepted without any interest charge
III If the insured dies during this period, the death claim will be paid by deducting any
out-standing premium or indebtedness
IV Policyholders can pay premiums after the expiry of the grace period without
reinstatement
12. ___________ will be sent to the policyholder 3 or 4 weeks before due date to ensure that the
policyholder pays premiums on time.
A. Premium Notice C. Warning Notice
B. Premium Reminder D. Reminder Notice
13. This scheme provides coverage for lower income group and the premiums collected at the
homes of the policyholders.
A. Ordinary scheme C. Home service scheme
B. Superannuation scheme D. Term scheme

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14. This is a selling technique where selling is done indirectly by establishing goodwill between
the agent and his customers.
A. Order processing C. Alternative selling
B. Missionary selling D. Creative selling
15. At this stage, the consumer becomes aware of the threat of risks and feels the need for
insurance to protect him from financial difficulties.
A. Problem recognition C. Evaluation of Alternative policies
B. Information search D. Purchase evaluation
16. This involves the selection of segments of the market, which have needs that can be met by
the policies developed by the company. This function of the Marketing Department refers to:
A. Planning and controlling C. Product Development
B. Market Identification D. Selection of Distribution Channel

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Chapter 16 Life Insurance Preliminaries
1. The term “Uberrimae fides” is referring to _______.
A Insurable Interest C Utmost Good Faith
B Claim D Moral Hazard
2. In life insurance, except Permanent Health Insurance policies, the settlement of a claim
______ the contract.
A Renew C Extend
B Terminates D Revised
3. Which of the followings are the disadvantages of issuing life insurance policies on a short
term basis when is was first introduced:
I cover was often denied when it was most needed
II the insurer do not have to bear the risk for long time
III the premiums tended to increase wit duration to reflect the increasing risk undertaken
A I and II C I and III
B II and III D I, II and III
4. The first case of Life Insurance was sold in the year of 1583 and it was issued on the Life of
A Edmund Halley C William Halley
B William Gybbon D Edmund Gybbon
5. The long–term nature of the life insurance contract requires the insurer to adopt a cautious
view of the below factors which enter into the premium rate calculations
I Mortality
II Expenses
III Rate of Investment returns
IV Tax
6. To have the existence of ____________, the purchase of a life insurance policy must stand to
suffer a financial loss on the death of the insured.
A. Uberrimae fides C. Utmost good faith
B. Insurable interest D. Proximate cause
7. The risks covered by life insurance can be grouped under:
I Premature Death
II Temporary Disability
III Permanent Disability
IV Retirement benefits

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8. The risks covered by life insurance which is often referred to as economic death.
A. Premature Death C. Temporary Disability
B. Permanent Disability D. Retirement Benefits
9. Below are the situations where insurable interest exists:
I A person on his or her own life
II A parent on the child’s life
III A brother on his sister’s life
IV A creditor on the debtor ‘s life
10. For life insurance policies, the time when insurable interest needs to exist is:
A. Before inception of the insurance C. After the inception of the insurance
B. At the inception of the insurance D. At the time of claims
11. This section of Insurance Act specifically voids any policy effected without insurable interest.
A. Section 17 of the Insurance Act, 1963
B. Section 44A of the Insurance Act, 1963
C. Section 40 of the Insurance Act, 1963
D. Section 16A of the Insurance Act, 1963
12. In 1762, Equitable Society issued life insurance policies based on the following principles:
I Once accepted for insurance, further proof of continuing good health was not needed
II Level premiums were payable throughout the term of the contract to be
III Cover was available to anyone who satisfied the initial health requirements and
continued to pay the contractual premiums
IV Extra premiums were not charged for special occupational risk and sub-standard
health risk.
13. In life insurance, the claim amount is determined at the very beginning of the contract. Such
contracts are _____________ contracts.
A. Indemnity C. Subrogation
B. Aleatory D. Proximate
14. The following insurance contracts are aleatory contracts, except
A. Life endowment plan C. Whole life non-participating policy
B. Personal accident D. None of the above.

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Chapter 17 Life Insurance Products
1. Which of the following is true about a non-participating contract?
A. This is mainly used for saving
B. Its main benefit is generally guaranteed
C. Its main benefit is made up of regular bonuses and a final bonus depending on
insurer’s investment
D. It is the earliest and simplest form of a life insurance contract and is known as
temporary insurance
Questions 2-8 share the following answers:
A. Term Insurance
B. Whole Life Insurance
C. Endowment Insurance
D. Annuities
2. There is a limited period of protection. The sum assured is payable only in the event of death.
This policy does not confer the benefits of cash value and paid-up value.
3. The sum assured decreases in amount at periodical intervals. It is generally issued as
mortgage policies. Which kind of insurance does it belong to?
4. This policy give protection for the whole duration of life with the sum assured including any
accrued bonuses, becoming payable only upon death of life insured.
5. This policy provides the payment of the full face amount at the end of the said term if the life
assured is living. It serves as an effective means to save a specific sum of money with the
benefit of an insurance protection.
6. It provides instalment cash payment to the policyholders at regular intervals during the term
of the policy. The full sum assured shall be payable upon death of life assured. Which type of
insurance is this?
7. A periodic payment by the insurer during a fixed period of time or for the duration of survival
of a designated life or lives in return for a certain amount of money known as the purchase
price.
8. The applicant pays a single premium at entry. If death should occur before the periodic
payment by insurer commences, the premiums paid are returned with or without interest
according to the terms of the policy.
9. As a result of the principle of unilateral contract,
A. The insurer has no right to invalidate the contract before its termination even due to
non-payment of premium
B. The policyholder is under obligation to continue the payment of premiums
C. The insurer has the right to invalidate the insurance contract due to suppression of
material facts
D. All of the above

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10. Which of the following describe endowment assurance?
I It is a decreasing term insurance
II It has an increasing investment component
III In short-term endowments, the life insurance predominates and the investment
element is relatively unimportant
IV Anticipated endowment insurance pays cash to the policyholder at regular intervals
11. Which of the following insurance has a guaranteed surrender value?
I Limited Payment Whole Life
II Anticipated Endowment Insurance
III Renewable Term Insurance
IV Single Life Immediate Annuity
A. I and II C. I, II and IV
B. I and IV D. I, II and III
12. ____________ is suitable for person with small incomes for the present, but with good
prospects for the development of a successful career.
A. Renewable Term Insurance C. Ordinary Life Policy
B. Decreasing Term Insurance D. Anticipated Endowment Insurance
Table 1: A 20-year life policy that provides cash payment
Life Policy
Anniversary
Instalment payment to policyholder
(% of Sum assured)
4 10
8 10
12 10
16 20
20 50
13. Which of the following is NOT true about Table 1?
A. This is a 20 year anticipated endowment policy
B. This policy has guaranteed surrender value after 3 years from the effective date
C. If the life assured dies at any time during the term of the policy, only the balance full
sum assured will be payable
D. This type of insurance provides a reasonable means of saving and fund for some
specific contingency within a specific time frame
14. This is not dependent on the life of an individual but a contract of a fixed term. The insurer
makes payments to annuitant for a specified number of years in return for the annuitant’s
purchase money in the beginning of the contract
A. Annuity Certain C. Guaranteed Immediate Annuity
B. Reversionary Annuity D. Deferred Annuity

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15. The differences between a term policy and a whole life policy are:
I Term policy provides temporary protection
II Term policy does not confer the benefit of cash surrender value
III Whole life policy provides non-forfeiture provisions
IV Premium of whole life policy is higher than a term policy for a fixed sum assured on
the same life
16. Which of the following is not true about different types of life policies?
A. There is no “forced saving” element in term insurance
B. Upon conversion of term insurance, the premium rate for the converted policy is
based on the original age or the attained age of the life assured
C. Annuities are mainly bought by older people, seeking to convert capital, e.g. from
gratuity fund, into an income for life
17. Permanent Health Insurance provides such benefit as:
A. Income during periods of sickness or disability
B. A lump sum payment in the diagnosis of any specified diseases which effects health
of life assured
C. A lump sum payment on any sickness incurred on the life assured
D. Income equal to the insured’s earnings during periods of sickness or disability
18. Which of the following describes correctly about dread disease covers?
A. It pays out a lump sum on the diagnosis of dread disease
B. It does not meet any specific need or indemnity the insured against any loss of
income
C. The insured does not have to fulfill any criteria for disability upon diagnosis of
covered disease
D. All of the above
19. What are the basic features of an investment-linked policy?
I The benefits on maturity depend on the return of investments
II Some 95% of the premiums paid by policyholder are invested in approved
investments
III The insurer needs to maintain individual accounting records in respect of each
policyholder
IV In consideration of the premiums paid, the insurer undertakes to make a periodical
payment for the reminder of the lifetime of a named life depending on the investment
returns
B. I. II and IV D. All of above

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20. To insure a group of lives without medical examination would result in the inclusion of an
unduly high proportion of bad lives due to adverse mortality experience for the insurance
company. However, selection against the insurer is avoided in the following ways, except:
A. The group of lives to be insured must exist for some purpose other than for the
insurance
B. A stipulated percentage of all the lives in the group must be included to enable the
office to secure an average mortality experience
C. The lives assured must include permanent employees and casual employees
D. If medical examination is excluded, the group insured just consists of a minimum
number of lives
21. What are the features under a group insurance?
I The contract is between the insurance company, the employer and the employees
II If the plan is non-contributory 100% of all eligible employees must join
III All full time and part time employees between the ages of 16 – 55 and actively at
work on the effective date of the plan are eligible to join
IV The group term life premium may be calculated according to age and/or sex
depending on the amount of employees to be covered
A. I and II C. II and IV
B. III and IV D. II and III
22. Under a group insurance contract, the employer in the “Master Policy” is named as the:
A. Guarantor C. Trustee
B. Grantee D. Master
23. What are the various ways in which the amount of group insurance can be fixed?
A. Same amount for all employees
B. Classify employee according to Salary
C. Classify personnel by managerial, supervisory, clerical and non-clerical
D. All of the above
24. This is applied for large group insurance schemes of 2000 lives or more. The premium
charged during the first policy year is adjusted upwards and downwards for subsequent policy
years, on basis of the actual claim experience of the group. What type of rating is that?
A. Experience Rating C. Premium Adjustment
B. Net Premium Rating D. Claim Valuation
25. Which of the following is true about personal accident benefit?
A. Bodily injury does not include nervous shock, bruising or organic injury
B. Internal injury caused by external means is sufficient to give rise to a valid claim
C. Accident caused by suicide, self-injury, drugs and alcoholism will only be eligible to
50% of the sum payable
D. Air travel is excluded in the personal accident cover
26. Part of the takaful instalment made by participants and credited by the company into the
Participant’s Account (PA) is for:
A. Saving and tabaruk C. Investment and risk fund
B. Saving and investments D. Investment and tabaruk

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27. The joint life policy
A. Can be issued under whole life, endowment and term policies
B. Only pays out when all the lives insured die
C. Can be issued on the lives of business partners
D. Continues following the first policy proceeds on the death of one of the joint lives
28. What are the supplementary benefits that a person can attached to his life insurance policy?
I Accidental Indemnity
II Permanent Disability
III Waiver of premium
IV Hospitalization and surgical
29. The Takaful Company provides the following types of family takaful plan:
I Takaful Mortgage Plans
II Health and Medical Takaful Plan
III Family Takaful Term Plan
IV Investment Linked Takaful
A. I and III C. II, III and IV
B. I, II and III D. I, II and IV
30. Under an protection education policy,
I The policy is issued on the life of the parent
II The child is designated as the beneficiary
III If the child were to die before reaching a specified age only refund of premiums will
be allowed
IV The policy premium may be eligible for relief under the Income Tax Act
31. The advantage of the waiver of premium under a Children’s Deferred Policy is that:
A. Premiums are waived upon the death of the parent
B. Premiums are waived when the child reaches vesting age
C. Premiums are waived upon the death of the parent and are payable again when the
child reaches vesting age
D. Premiums are waived if the child dies before reaching vesting age
32. If the takaful participant terminates the takaful contract, what benefits will the participant get?
A. The participant will not get any benefit
B. The participant will get the accumulated amount of Participants Account
C. The participant will get the surplus from the Participants Special account
D. The participants will only entitle to 50% of the sum insured

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Chapter 18 Policy Condition
1. Policy conditions can be broadly classified under three groups except:
I those adding to the benefits of the assurance
II those limiting the scope of assurance
III those explaining the nature of the contract
IV those allowing the insurer to terminate the policy
A All of the above C II and III
B IV only D II only
2. Which of the following clause is reflected under Section 15 (C) of the Insurance Act, 1963
A Non-avoidance clause C Suicide clause
B Incontestability clause D Misrepresentation clause
3. When a policy is enforced for __________ years or more, the ordinary policy becomes
entitled to a surrender value.
A 6 C 3
B 2 D 5
4. _______ regulates the basis of surrender values.
A Section 150, Insurance Act 1996 C Section 155, Insurance Act 1996
B Section 150, Insurance Act 1963 D Section 155, Insurance Act 1963
5. What are the alternative solutions when a person cannot pay his future life policy premium
but still can be covered under the policy?
I Conversation to a paid-up policy
II Exchange the acquired cash value for a term insurance for the full sum assured
III Apply for reinstatement
IV Conversion to an extended grace period
A. I and II only C. I, II and III only
B. I and III only D. I, III and IV only
6. The following documents are generally acceptable as proof of age, except
A. Government school leaving certificate
B. Certified extract from Baptism Register
C. International passport
7. The restrictive conditions under a life policy include
I suicide clause
II occupation and dangerous hobbies
III 30 days grace period
IV reinstatement
A. I and II only C. I, II and IV only
B. I, II and III only D. I, II, III and IV

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8. Which of the following describe an assignment of a life policy?
A. The assignment must be in writing and cannot be effected by an endorsement
B. Under a conditional assignment, the assignee can receive the maturity benefits
C. The legal rights vested under a life insurance policy can be transferred by an
assignment
D. The assign or can revoke all rights after the payment of the policy proceeds if it is an
conditional assignment
9. ________ are not allowed as days of grace for the payment of yearly, half yearly, quarterly
and monthly premiums
A. 30 days C. 60 days
B. 10 days D. 45 days
10. When the insured fails to pay a premium, it provides for a continuation of the insurance cover
to bring the policy to its original status
A. Policy conversion C. Maturity loan
B. Automatic premium loan D. Limited payment endowment
11. The ________ enables a person to renew a lapsed policy, notwithstanding that the days of
grace and the period of non-forfeiture have both expired
A. Lapsation provision C. Incontestable provision
B. Reinstatement provision D. Renewal provision
12. This is the value which attaches to a policy of life insurance after premiums have been paid
for a certain minimum number of years
A. Guarantee value C. Conditional value
B. Policy value D. Surrender value
13. Insurer cannot deny liability on a policy after two years of its issuance on the grounds of
misrepresentation or non-disclosure. This is known as
A. Suicide Clause C. Incontestability Clause
B. Restrictive Clause D. Misrepresentation Clause
14. In terms of ________ of the Insurance Act 1963, a policy shall not be cancelled by reason
only of a misstatement of the age of the life assured
A. Section 15(C) C. Section 23
B. Section 44 (A) D. Section 33
15. Under a standard case, the premiums change according to the age. The younger the age at
entry of life insured, the premiums would be
A. Refunded C. Higher
B. Lower D. Loaded with additional payment
16. _______ provides that the assignor can revoke all the rights even after the assignment of
policy
A. Absolute assignment C. Reassignment
B. Conditional assignment D. Policy assignment

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Chapter 19 Practice Of Life Insurance – New Business – Selection Of Lives
And Other Issues
1. Below are various factors that influence mortality, except
I age
II sex
III marital status
IV occupation
A. I, II and IV only C. II, III and IV only
2. The following are the methods of premium payment, except
A. Banker’s order C. Payroll deduction scheme
B. Home service D. Dividend
3. Chargeable income = _________ less _________
A. Allowable Deductions, Assessable Income
B. Assessable Income, Allowable Deductions
C. Assessable Income, Income Tax Rates
D. Allowable deductions, Income Tax Rates
4. In the case when there is an extra loading on a life insurance proposal, a letter indicating the
loading is issued to the proposer as a (an)
A. Loading application C. Offer
B. Consent letter D. Counter Offer
5. Taxable / assessable income constitutes such items as
I salary
II leave pay
III gratuity
IV commissions
A. I and II only C. I, III and IV only
B. I and III only D. I, II, III and IV
6. Which of the following is NOT true about life insurance contracts?
A. Life insurance contracts are long-term contracts
B. The premium for life insurance contracts cannot be revised during the term of the
contract
C. The contracts cannot be cancelled unilaterally by the insurer
7. For morbidity only, females experience _______ rates, and accordingly, females are charged
_______ premiums.
A. Lower, lower C. Higher, higher
B. Lower, higher D. Higher, lower

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8. Which of the following suggests the possibility of a moral hazard?
A. An application by a parent for a Children’s Deferred Insurance for the sum of RM
50,000.
B. An application by a married couple for a joint life policy for the sum of RM100 000
C. An application by a businessman to insure the life of his business partner for RM
5,000,000
D. An application by a wife to insure the life of her husband for RM60 000
9. Which of the following expenses will NOT be an allowable deduction under the Income Tax
Act?
A. Entertainment bills of a businessman
B. Maintenance charges of a company’s van
C. Premium for a superannuation scheme for a company’s employees
D. Expenses on a holiday trip to Bangkok
10. If the proceeds from a life insurance policy is in the form of an employment benefit arising
from an employer’s insurance policy, the proceeds
A Are regarded as earned income and are taxable
B Are not regarded as earned income
C Will be considered as an allowable deduction for income tax
D Are not regarded as earned income and therefore are taxable
11. Commencement of the policy may be back dated to an earlier date, usually up to a maximum
of
A. 3 months C. 1 year
B. 6 months D. 2 years
12. Which of the following risks is always subject to medical examination?
A. A vocational risk C. Standard risk
B. Occupational risk D. Sub-standard risk

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Chapter 20 Practice Of Life Insurance – New Business – Premium Rating
1. When there is a sub-standard life, the underwriter usually will decide to
A. Reduce the premium C. Increase the premium
B. Reduce the cash value in the policy D. Increase the cash value in the policy
2. The basic principle in insurance is when a group of people facing similar risks are combined,
there will be less uncertainty about the amount of loss likely to be incurred within a certain
period. This basic principle is called
A. Anti-selection C. Mortality Rates
B. Law of large numbers D. Moral Hazards
3. Most of the individual insurance policies sold nowadays provide a payment of ______ over a
predetermined term
A. Risk premiums C. Gross premiums
B. Level premiums D. Net premiums
4. The basic principle of the risk premium varying with _______ is behind the concept of the
level premium
A. Sex C. Age
B. Investment returns D. Occupation
5. Gross premium = Net premium + Loading for ________
A. Expenses, Taxation C. Interest, Profits & Contingencies
B. Taxation, Profits & Contingencies D. Expenses, Profits & Contingencies
6. When the premium charge is computed after taking into account the elements of mortality and
interest, it is called the
A. Pure Premium C. Risk Premium
B. Net Premium D. Gross Premium
7. _________ policies enjoy the right to share in the profits of the operations of a life insurance
company in the form of bonuses
A. Endowment C. Non-participating
B. Term D. Participating
8. The additional premium charged to the participating policies is known as
A. Bonus Loading C. Interest Loading
B. Expenses Loading D. Participating Loading
9. In calculating the tabular (gross) premiums for non-participating policies, the elements
normally taken into account are the following except
A. Mortality C. Expenses
B. Interest D. Bonus loading

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10. Under this type of regular premiums, the premium payments cease on death and no deduction
is made from the claim amount
A. True premiums C. Periodical premiums
B. Instalment premiums D. Regular premiums
11. In the event of death occurring before all the premium payments for that particular policy year
have been paid, the remaining installments of that year are deducted from the claim amount
payable under the policy. This type of regular premium is called
A. Installment premiums C. Single premiums
B. True premiums D. Regular premiums
12. Additional premium will be charged in the following cases, except
A. Substandard health
B. Hazardous health
C. Sporting activities involved additional risk of death by accident
D. Change of beneficiary

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Chapter 21 Practice Of Life Insurance – Monitoring The Insurance Fund
1. Liability = the present value of the benefits payable _________. The present value of
expenses ________. The present value of the future premiums receivable
A. Plus, less C. Plus, plus
B. Less, plus D. Less, less
2. Some of the more common methods of assets valuation are the following, except
A. Cost price C. Book Value
B. Table value D. Market value
3. The portion of surplus passed to shareholders in the form of dividends is normally in the
region of _______ of the divisible surplus
A. 5% - 15% C. 15% - 30%
B. 10% - 25% D. 20% - 35%
4. The following are the methods of distributing surplus, except
A. Compound Reversionary Bonus C. Cash Bonus
B. Simple Reversionary Bonus D. Loading Bonus
5. To ensure that the policyholders whose policies become claims between declaration of bonus
do not lose out, the insurers pay out
A. Interim Bonus C. Guaranteed Bonus
B. Cash Bonus D. Reversionary Bonus
6. This is a major source of surplus especially when market rates of interest are high
A. Mortality C. Expenses
B. Interest D. Surrenders
7. Under current conditions, the main sources of surplus are as the following, except
A. Excess interest (after tax) earned on the life fund over and above that assumed in the
valuation
B. Mortality surplus between the actual mortality experienced by the office and the
mortality basis assumed in the valuation
C. The excess of the allowance made for expenses in the valuation over the actual
expenses incurred
D. The present value of the liabilities under all policies in force greater than the present
value of the income and capable gains produced by the assets in the life fund
8. Which among the following is NOT a form of bonus?
A. Interim bonus C. Policy loan bonus
B. Guaranteed bonus D. Compound reversionary bonus

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9. Which of the following methods of valuing assets and its explanation is NOT true?
A. Price at which the asset was acquired – Cost Price
B. Value placed on the assets in the company’s account books – Book Value
C. Value for which the assets can be sold in the open-market – Market Price
10. Under this method, the bonus allotted is in proportion to the sum assured and the bonuses
accumulated under the policy
A. Simple Reversionary Bonus
B. Compound Reversionary Bonus
C. Maturity of Terminal Bonus
D. Guaranteed Bonus

41
Chapter 22 Practice Of Life Insurance – Policy Documents
1. The sources of information for Risk Assessment are as below, except
A. Proposal Form C. Agent’s Report
B. Medical Report D. Policy Contract
2. Which among the following is NOT a part of the proposal form?
A. Personal Particulars C. Details of insurance
B. Agent’s personal and family history D. Declaration and authorization
3. Endorsement after the issue of a policy mainly is to change the following, except
A. Mode of premium payment C. The servicing agent
B. Alterations to the form of the contract D. Surrender of bonus
4. Besides recording the applicant’s answers concerning medical history, the reports by
examining doctor include
I height and weight
II pulse and blood pressure readings
III condition of the heart and nervous system
IV chest and abdomen measurements
B. I, III and IV only D. I, II, III and IV only
5. Two main forms of policy in use are the
I narrative type
II conditions type
III schedule type
IV operative type
A. I and II only C. II and IV only
B. I and III only D. I and IV only
6. This section is the final portion of the policy and is signed by certain authorized officers of
the company
A. The proviso C. The schedule
B. The preamble D. Attestation
7. The standard policy documents are often endorsed to take into account the differing aspects of
individual circumstances and needs. Endorsements can be done at the
I time of issuance of policy
II before issuance policy
III after issuance of policy
IV one year after issuance of policy
B. I and III only D. I and IV only

42
8. This section includes a declaration that answers given in the proposal and medical report
forms shall form the basis of the contract. The conditions enclosed on the policy are deemed
to be incorporated in the contract, and the contract is subject to those conditions.
The above portions found in which section in the policy structure?
A. The Heading C. The Operative Clause
B. The Preamble D. The Proviso
9. In general, the following conditions need endorsement at the time of issue of policy:
I those affecting the sum insured or mode of payment
II those affecting the premium or frequency of payment
III those alterations to the form of the contract
IV those incorporating special restrictions
A. I, II and III only C. I, III and IV only
B. I, II and IV only D. I, II, III and IV
10. Which of the following category (ries) is (are) the conditions of a life policy?
A. Conditions limiting the scope of contract
B. Conditions enlarging the scope of the contract
C. Conditions explaining the scope of the contract
D. All of the above

43
Chapter 23 Practice of Life Insurance – Claims
1. Which of the following statement is NOT true?
A The life insurance contract terminates when a claim is settled
B The insured may make a claim upon the maturity of the insurance policy
C The reputation of an insurer lies in the sum of claims to be settled
D None of the above
2. When the claimant notify the insurance company that he want to make a death claim, he need
to provide the insurer information on _________.
A The policyholder’s name C The doctor’s name
B The spouse’s date of death D All the above
3. The following documents are proof of title and ownership of an insurance policy EXCEPT
______.
A A deed of assignment
B A probate of the will from a court of law
C A note from the insured’s family
D A letter of administration issued by a court of law
4. Which of the following is NOT relevant to the common settlement option for an endowment
plan?
A Convert the maturity proceeds into annuity
B Continue deposit the maturity proceeds with the insurer
C Withdraw 90% of the proceed without the letter of probate
D Withdraw the proceed by installments
5. A claim can arise under any one of the following situations, except
A. Termination of an agent’s contract
B. On death of the insured
C. On maturity of the insurance policy
D. Sickness or disability benefits claims
6. In the event of death, the beneficiary or claimant should notify the life insurer and provide the
following details, except
A. Policyholder’s name and identity card number
B. Policy number
C. Date and cause of death
D. Agent’s address
7. To prove a death claim, which of the following documents would NOT be accepted?
A. A death certificate
B. A coroner’s report
C. An agent’s report
D. A certificate showing that death had occurred at sea

44
8. To ensure the claim proceeds on death are paid to the entitled person, the following
documents are required, except
A. A deed of assignment
B. An agent’s contract
C. A probate of the will obtained from a court law
D. A letter of administration issued by account of law
9. Under Section 44 of the Insurance Companies Act, 1963, a claimant without letter of probate
or administration, may receive the full amount if the policy proceeds are below
A. RM50 000 C. RM30 000
B. RM40 000 D. RM20 000
10. When the policyholder is the life insured, the following are usually required in settling
maturity claims:
I Proof of age
II Proof of survival
III Medical report
IV Policy contract
B. I, II and IV only D. II, III and IV only
11. Endowment insurance policies normally incorporate settlement options which can be
exercised on their maturity. These options include:
I leaving the maturity proceed as a deposit with the insurer on agreed terms
II cash maturity proceeds
III converting the maturity proceeds into an annuity
IV drawing the cash by installments over a number of years
B. I, II and IV only D. I, II, III and IV only
12. The doctrine of proximate cause is important for which type of claims?
A. Death claims
B. Maturity claims
C. Personal accident claims
D. Sickness and permanent health claims

45
Chapter 24 Some Mathematics
1. Policies which accumulate ________ often carry the right to a policy loan
A Bonus C Premium
B Cash values D Surrender
2. In premium calculation, insurance companies adopt different bases for arriving at the age of
an individual. The most common (is) are
A. Age last birthday C. Age nearest birthday
B. Age next birthday D. All of the above
3. Age last birthday for a life insured born on March 12, 1965, date of the proposal submitted on
December 31, 1996, is
A. 32 C. 30
B. 31 D. 29
Question 4, 5 and 6 refer to Table 1 and 2
Table 1 : Premium Rates For A 25-year Endowment Insurance on Male Lives Treat Female Lives as 3
Years Younger
Age (Next Birthday) Premium per RM1000 sum insured
28 41.25
29 42.00
30 42.80
31 43.60
Table 2 : Discount For Large Sum Assured For A 25-Year Endowment Insurance on Male Lives
Sum Assured (RM) Discount Per RM1000 Sum Assured
10 000 – 24 999 RM1.00
25 000 – 39 999 RM2.00
40 000 – 54 999 RM3.00
55 000 – 69 999 RM4.00
Above 70 000 Special Quotation
Proposer’s Particulars and Policy Details
Sex : Female
Date of Birth : 24/10/1965
Cover to Commence : 18/3/96
Policy Type : 25 years endowment
Sum Assured : RM10 000
4. What is the insured’s age next birthday?
A. 30 C. 28
B. 31 D. 29

46
5. How much is the premium payable?
A. RM 402.50 C. RM426.00
B. RM 412.50 D. RM436.00
Proposer’s Particulars and Policy Details
Sex : Male
Date of Birth : 24/3/67
Cover to commence : 18/3/96
Policy Type : 25 years endowment
Sum Assured : RM50 000
6. How much is the premium payable?
A. RM 1 900.00 C. RM2 000.00
B. RM 1,950.00 D. None of the above
7. A person born on March 21, 1965, date of the proposal submitted on December 31, 1996, his
age nearest birthday is
A. 30 C. 32
B. 31 D. 29
8. The interest charges usually arise under the following circumstances:
I outstanding premium charges after grace period
II policy loan repayment
III outstanding premium charges during grace period
IV reinstatement of policy

47
Chapter 25 Practice Of Life Insurance – Ethics and Code of Conduct
1. The guidelines for Code of Conduct, which are abided by all employees of insurers operating
in Malaysia at all times, as formulated by _________.
A Life Insurance Association Malaysia (LIAM)
B The Actuarial Society of Malaysia (ASM)
C The Malaysian Insurance Institution (MII)
D National Association of Malaysian Life Insurance Agents (NAMLIA)
2. Which of the following is NOT true for the statement of philosophy concerning the guidelines
on the Code of Conduct?
A The life insurance business is efficient and prompt service to policy owners with the
aim of promoting goodwill based on the philosophy of risk sharing
B The life insurance business is based on trust and honesty
C Life insurer should manage their business soundly as to ensure the safety of the
agent’s savings
D Life insurers shall maintain a policy
3. The objective of the Code of Conduct is to provide a guide for _________.
A Promotion of proper standards of conducts
B Maintaining ethical standards
C Upholding the trust and welfare of policyholders
D All of the above
4. Who is the supervisory authority for insurance companies?
A Bank Negara C Board of Director
B Audit / Disciplinary Committee D Insurers
5. Which of the following are parts of the seven principles underlying the guidelines on Code of
Conduct?
I To avoid conflict of interest
II To ensure confidentiality of communication and transactions between the
policyholders and Bank Negara
III To conduct business with the utmost good faith and integrity
A I only C I and III
B I and II D` II and III
6. In explaining the contract, the life insurance intermediary shall:-
I explain only part of the essential provisions of the contract to the prospective
policyholder
II draw attention to any restrictions applying to the policy
III give advice on which company’s policy should the prospective policyholder bought
with
IV draw attention to the consequent effects of early discontinuance
A. I and II only C. I and III only
B. II and IV only D. II, III and IV only

48
7. The _______ committee of the insurer is responsible for monitoring compliance of the life
insurance intermediaries and also responsible for submitting reports to Bank Negara on the
breaches and the corrective actions taken
A. Claim C. Audit / Disciplinary
B. Underwriting D. Policy service
8. The code of Ethics and Conduct applies to the following persons, except
A. Insurance agents
B. Employees of a life insurance company
C. Registered insurance brokers
9. To be a successful and professional agent, he must fulfill the following requirements:
I Professional attitude
II Proper selling attitude
III Skill
IV Knowledge
B. II, III and IV only D. I, II, III and IV
10. In order to ensure the guidelines on the code of conduct is followed, the management of a life
insurance company is required to
A. Sign a declaration to observe the guidelines
B. Assign responsibility to the heads of department to ensure practice of guidelines on a
day to day basis
C. Report breaches to an Audit committee which reports directly to the Board of
Directors
D. All of the above
11. As an intermediary of life insurance business, an agent shall not
A. Give advice only on those matters in which he/she is competent with
B. Treat all information supplied by the prospective policyholder as completely
confidential to himself and his principal
C. Persuade a policyholder to cancel any existing policies unless it is clearly unsuited to
the policyholder’s needs
D. All of the above
12. The term life insurance used in the Code of Ethics and Conduct covers the following types of
insurance:
I Home service
II Ordinary Life Insurance
III Annuities
IV Permanent Health Insurance
B. I, II and IV only D. I, II, III and IV

49
13. The statement in the proposal form requires the disclosure of material facts. It should
I draw attention to the consequence of non-disclosure of all material facts
II warn that if the prosper is in any doubt whether certain facts are material, then these
facts should be disclosed
III indicate whether there are rights to a surrender value
IV indicate the manner in which the benefits are paid
A. I and III only C. II and IV only
B. I and II only D. III and IV only
14. The intermediary shall while obtaining the completed proposal form or any other material
I avoid influencing the proposer
II make it clear that all answers or statements are the proposer’s own responsibility
III ensure that the consequences of non-disclosure and inaccuracies are pointed out to the
proposer
IV explaining the relevant statements in the proposal form to the proposer
A. I and II only C. II, III and IV only
B. II and III only D. I, II, III and IV
15. In regards to claims, the guidelines on the Code of Ethics and Conducts requires the insurer
A. To delay the settlement of a claim after the claimant has proved the insured event and
the right to receive the claim
B. Not to set a time limit for notification of a claim in order for the claimant to send in
report at his/her convenience
C. To collect claim processing fees from the policyholder
D. May not reject a claim on grounds of non-disclosure or innocent misrepresentation

50
ANSWERS
PART A
Chapter
1 1.D 2.C 3.C 4.A 5.B 6.D 7.C 8.D 9.D 10.B
11.D 12.B 13.C 14.C 15.D 16.A 17.D
2 1.A 2.B 3.D 4.D 5.A 6.D 7.A 8.D 9.C 10.A
11.B 12.C 13.C 14.D 15.B 16.C
3 1.B 2.D 3.B 4.B 5.A 6.B 7.B 8.D 9.C 10.C
11.A 12.C 13.D 14.A 15.C 16.A 17.B 18.B 19.D 20.B
21.B 22.A 23.B 24.C 25.A 26.D 27.C 28.C
4 1.B 2.B 3.B 4.B 5.C 6.C 7.B 8.C 9.C 10.B
11.B 12.C 13.D 14.A 15.B 16.A 17.B 18.D 19.B 20.C
21.B
5 1.B 2.B 3.C 4.A 5.D 6.B 7.B 8.D 9.C 10.D
11.D 12.D 13.A 14.C 15.C
6 1.B 2.B 3.A 4.A 5.D 6.B 7.B 8.C 9.C
7 1.C 2.C 3.C 4.A 5.D 6.D 7.B 8.C 9.D 10.B
11.B 12.A 13.D 14.C 15.D 16.B 17.B
8 1.B 2.C 3.D 4.B 5.C 6.D 7.D 8.D 9.C 10.B
11.A 12.A 13.C 14.B 15.A 16.B

51
ANSWERS
PART C
Chapter
16 1.C 2.B 3.C 4.B 5.D 6.B 7.D 8.B 9.B 10.B
11.C 12.A 13.B 14.D
17 1.B 2.A 3.A 4.B 5.C 6.C 7.D 8.D 9.C 10.B
11.A 12.A 13.C 14.A 15.D 16.D 17.A 18.D 19.A 20.C
21.C 22.B 23.D 24.A 25.B 26.D 27.B 28.B 29.C 30.C
31.B 32.B
18 1.B 2.B 3.C 4.B 5.A 6.D 7.A 8.C 9.A 10.B
11.B 12.D 13.C 14.A 15.B 16.B
19 1.D 2.D 3.B 4.D 5.D 6.D 7.C 8.C 9.D 10.A
11.B 12.D
20 1.C 2.B 3.B 4.C 5.D 6.B 7.D 8.A 9.D 10.A
11.A 12.D
21 1.A 2.B 3.B 4.D 5.A 6.B 7.D 8.C 9.B 10.D
22 1.D 2.B 3.C 4.D 5.B 6.D 7.B 8.D 9.B 10.D
23 1.C 2.A 3.C 4.C 5.A 6.D 7.C 8.B 9.D 10.B
11.D 12.C
24 1.B 2.D 3.B 4.B 5.A 6.B 7.C 8.C
25 1.A 2.C 3.D 4.A 5.C 6.B 7.C 8.D 9.D 10.D
11.C 12.D 13.B 14.D 15.D

52

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