Semester 3 2013-14
Saturday 21 September 2013
Exam time 10.00am – 12.00pm
PDI-01: The Nature of Insurance
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.
2.
3.
4.
5.
6.
7.
8.
To be awarded a pass grade in this examination, you must achieve a mark of 40% or above.
2 hours are allowed for this paper which consists of 100 Multiple Choice Questions (MCQ).
There is only one correct answer to each question.
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.
Fill in the personal information required below and on the answer form supplied by the invigilator.
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.
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.
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 http://www.bankers.ie, or www.lia.ie, or www.iii.ie.
CANDIDATE’S NAME (Block Capitals) ………………………………………………………
CANDIDATE’S SIGNATURE ………………………………………………………………….
CANDIDATE NO. ……..…………………….. DATE ………………………………………..
PDI-01
PDI-01 – The Nature of Insurance
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
The Nature of Insurance
Page 2 of 5
PDI-01
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
The Nature of Insurance
Page 3 of 5
PDI-01
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
The Nature of Insurance
Page 4 of 5
PDI-01
Solutions
1.
B
2.
A
3.
D
4.
D
5.
B
PDI-01
The Nature of Insurance
Page 5 of 5