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Read the following passage
carefully and answer the questions given below it.
Insurance plays an important role in an economy and a strong pillar of
financial market. A well-developed insurance sector promotes economic growth by
encouraging more industrial activities through risk-taking. For economic
development investments are necessary. Investments are made out of savings.
Life Insurance Company is a major instrument for the mobilization of
savings of people, particularly from the middle and lower group. All good
life insurance companies have huge funds accumulated through the payments
of small amounts of premium of individuals. These funds are invested in ways
that contribute substantially for the economic development of the
countries in which they do business The system of insurance provides numerous
direct and indirect benefits to the individuals and his family as well as to
industry and commerce and to the community and the nation as a whole. Present
day organization of industry, commerce and trade depend entirely on insurance
for their operation, banks, and financial institutions lend money to industrial
and commercial undertakings only on the basis of the collateral security of
insurance.
Insurance is the only sector which garners long term savings. Insurers are
increasingly introducing innovative products to meet the specific needs of the
prospective policyholders. An evolving insurance sector is of vital importance
for economic growth. While encouraging savings habit. It also provides a safety
net to both enterprises and Individuals.
Insurance Companies receive, without much default, a steady cash stream of premium or contributions to pension plans. Various actuary studies and models enable them to predict, relatively accurately, their expected cash outflows.
Liabilities of Insurance companies being long-term or contingent in nature, liquidity is excellent and their investments are also long-term in nature. Since they offer more than the return on savings in the shape of life-cover to the investors, the rate of return guaranteed in their insurance policies is relatively low. Consequently, the need to seek high rates of returns on their investments is also low. The risk-return trade off is heavily titled in favour of risk.The insurance industry also provides crucial financial intermediary services, transferring funds from the insured to capital investment, critical for continued economic expansion and growth, simultaneously generating long-term funds for infrastructure development.
In fact infrastructure investments are ideal for asset-liability matching for life insurance companies given their long term liability profile. According to preliminary estimates published by the Reserve Bank of India, contribution of insurance funds to financial savings was 14.2 per cent in 2005-06, viz., 2.4 per cent of the GDP at current market prices. Development of the insurance sector is thus necessary to support continued economic transformation. Social security and pension reforms too benefit from a mature insurance industry.
Insurance reduces the capital
firms need to operate.it fosters investment and innovation by creating an
environment of greater certainty. Insurers are solid partners for the
development of a workable supplementary system of social protection, in
particular in the field of retirement and health provision. Insurance promotes
sensible risk-management measures through the price mechanism and other methods
and contributes to responsible and sustainable economic development. Insurance
fosters stable consumption throughout the consumer’s life.
Q.1. Which of the following statement/s is/are TRUE in context to the passage?
(A) In fact infrastructure investments are ideal for asset-liability matching for life insurance companies without given their long term liability profile.
(B) Development of the insurance sector is not necessary to support continued economic transformation.
(C) Liabilities of Insurance companies being long-term or contingent in nature, liquidity is excellent and their investments are also long-term in nature.
(1) Only A
(2) Only B
(3) Only C
(4) All A, B and C
(5) Only B and C
Q.2. Which of the following statement/s is/are FALSE in context to the passage?
(1) An annuity or a pension is type of settlement option where the insured gets regular stream of income after the completion of the maturity period when the insured reaches the vesting age.
(2) Insurance reduces the capital firms need to operate
(3) Insurers are solid partners for the development of a workable supplementary system of social protection, in particular in the field of retirement and health provision.
(4) Insurance plays an important role in an economy and a strong pillar of financial market.
(5) None of the above
Q.3. Insurance fosters investment and__________
(1) contribution of insurance funds
(2) innovation by creating an environment of greater certainty.
(3) economic expansion and growth
(4) industrial activities through risk-taking.
(5) the public at large and not merely from its shareholders or members
Q.4- What was the contribution of insurance funds to financial savings in 2005-06?
(1) 2.4 PER CENT
(2) 12.9 PER CENT
(3) 14.2 per cent
(4) 14.3 per cent
(5) 11.7 per cent
Q.5- Which of the following is possibly the most appropriate title for the passage?
(1) Contribution of Indian Economy
(2) Role of insurance sector in Economic Development
(3) The Unorganized Sector
(4) A Productive Sector
(5) None of the above
Q.6-8. Choose the word/group of words is most SIMILAR in meaning to the word/group of words printed in bold as used in the passage.
Q.6. ACCUMULATED
(1) collected
(2) estimated
(3) demanded
(4) donated
(5) decorated
Q.7- MOBILIZATION
(1) combination
(2) population
(3) store
(4) demand
(5) accumulation
Q.8- SUBSTANTIALLY
(1) popularly
(2) regularly
(3) enrichment
(4) significantly
(5) positive
Q.9-10. Choose the word/group of words is most OPPOSITE in meaning to the word/group of words printed in bold as used in the passage.
Q.9- CRUCIAL
(1) important
(2) precious
(3) thwart
(4) biased
(5) unimportant
Q.10- SIMULTANEOUSLY
(1) concurrently
(2) separately
(3) independent
(4) continue
(5) consequently
Answer-1. (3) 2. (1) 3. (2) 4. (3) 5. (2) 6. (1) 7. (5) 8. (4) 9. (5) 10. (2)
Answer-1. (3) 2. (1) 3. (2) 4. (3) 5. (2) 6. (1) 7. (5) 8. (4) 9. (5) 10. (2)
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