Insurance Chapter 2 Quiz

Questions and Answers

Which professional is commissioned to negotiate the settlement of a large and complex claim?

An actuary

A loss assessor

A loss adjuster (correct)

A risk manager

What is a key benefit of insurance as a risk transfer mechanism?

Financial profit

Financial protection (correct)

Elimination of all loss

Protection from prosecution

What essential feature must an insurable risk possess?

Intentional

Certain

Probable

Fortuitous (correct)

Which body is responsible for managing and supervising Lloyd's market?

The council of Lloyd’s Signup and view all the answers

If a policyholder cancels a trip due to injury, which policy can compensate for cancellation charges?

Travel insurance policy Signup and view all the answers

How can a surveyor assist an insurer in reducing fire impact?

By recommending improvements to policyholders' work practices Signup and view all the answers

What type of insurance policy typically covers cargo on an airplane?

An aviation insurance policy Signup and view all the answers

What is a primary advantage of using diagnostic tools in the general insurance industry?

Is less expensive than remedial tools Signup and view all the answers

How is significant misrepresentation by an insurance intermediary categorized?

Fraud Signup and view all the answers

Which area has become more important due to the regulatory shift towards a disclosure-based regime?

Data reporting Signup and view all the answers

Good Faith in insurance can be best defined as which of the following?

An absolute responsibility to disclose all relevant risk information Signup and view all the answers

What type of insurance specifically covers accountants facing allegations of negligent business advice?

Professional indemnity insurance Signup and view all the answers

Which of the following is NOT a characteristic of diagnostic tools in insurance supervision?

Relying heavily on external experts Signup and view all the answers

In a disclosure-based regulatory regime, which aspect is crucial for maintaining oversight?

Data reporting accuracy Signup and view all the answers

Which statement best describes the concept of Good Faith in the insurance context?

It requires full transparency about risks Signup and view all the answers

What information is indicated by the Memorandum of association obtained during customer due diligence?

The customer is a self-employed person Signup and view all the answers

What does the integration stage of money laundering refer to?

The attempt to obscure links between the entry point of funds and the end of the cycle Signup and view all the answers

Which organization published the 40+90 recommendations to combat money laundering?

The Financial Action Task Force Signup and view all the answers

What does prudential regulation issued by the regulator generally cover?

Ensuring the financial integrity of a company's operations Signup and view all the answers

What is the primary reason an insurer must maintain adequate capital?

To minimize the risk of financial failure Signup and view all the answers

What does the term 'discharged bankrupt' imply in the context of customer due diligence?

A person who has fully cleared their debts Signup and view all the answers

How does money laundering usually begin?

With the initial introduction of funds derived from criminal activity Signup and view all the answers

What is a characteristic of an incorporated company in relation to customer due diligence?

It is legally recognized as a separate entity from its owners Signup and view all the answers

What is one of the main reasons an insurer uses a reinsurer?

Spread risks more widely Signup and view all the answers

Why is the risk of being fined for a criminal offense considered uninsurable?

It is against public policy Signup and view all the answers

What distinguishes a peril from a hazard?

A peril gives rise to loss; a hazard influences the operations of perils. Signup and view all the answers

Which benefit is typically realized when a company takes out insurance?

Capital is freed up within the company. Signup and view all the answers

How is risk defined in the context of insurance?

Immeasurable Signup and view all the answers

What is it called when a Lloyd’s broker deducts an element of the premium as commission?

Brokerage Signup and view all the answers

What primarily differentiates the role of loss adjusters from loss assessors?

Interest they represent Signup and view all the answers

Which type of insurer is most likely to offer both life and general insurance products?

A composite insurer Signup and view all the answers

Who is responsible for setting up reinsurance arrangements?

Insurer Signup and view all the answers

When arranging cover through an aggregator, who does a person usually deal with first?

Broker Signup and view all the answers

What encompasses the role of a risk manager?

Identification, analysis and control of risk Signup and view all the answers

Which type of insurer is owned solely by its policyholders?

Mutual insurer Signup and view all the answers

Who can a private individual approach for independent advice on insurance?

An insurance intermediary Signup and view all the answers

Who provides the financial backing and bears the risks at Lloyd's?

Syndicates Signup and view all the answers

What is the primary function of an insurance broker?

Introduce business to a particular insurer Signup and view all the answers

What is a key financial advantage for a motor insurer operating directly?

No commission is paid to the intermediary Signup and view all the answers

Study Notes

Claim Negotiation

An external professional negotiating complex claims may be a loss adjuster, who represents the insurer.
Other roles include actuaries, loss assessors, and risk managers.

Insurance Purpose

Insurance serves as a financial protection mechanism for the insured, offering peace of mind against potential losses.

Insurable Risk Features

An insurable risk must be fortuitous, meaning unexpected or accidental, rather than intentional.

Lloyd's Structure

The overall management and supervision of Lloyd's market is the responsibility of the Council of Lloyd's.

Cancellation Charges

Travel insurance policies specifically compensate for cancellation charges due to unforeseen events.

Fire Risk Management

Surveyors can help reduce potential fire impacts by recommending improvements to policyholders' work practices.

Cargo Insurance

Aeroplane cargo is typically covered by aviation insurance policies.

Customer Due Diligence

A customer's Memorandum of Association indicates they are an incorporated company.

Money Laundering Integration

Integration in money laundering refers to criminals accessing laundered money, obscuring the origins of funds.

Anti-Money Laundering Recommendations

The Financial Action Task Force published the 40+90 recommendations to combat money laundering.

Prudential Regulation

Prudential regulation covers the financial integrity and soundness of a company's assets and liabilities.

Insurer Capital Maintenance

Adequate capital helps minimize the risk of financial failure for an insurer.

Regulatory Oversight Tools

Diagnostic tools are preferred for identifying potential issues before they arise in the general insurance industry.

Misrepresentation Consequences

Significant misrepresentation of insurance by an intermediary is classified as fraud.

Disclosure-Based Regime Impact

Increased importance of data reporting as part of a disclosure-based regulatory regime.

Good Faith in Insurance

Good Faith requires the voluntary, complete disclosure of all relevant risk information when proposing insurance.

Professional Indemnity Insurance

Coverage for accountants facing lawsuits due to alleged negligent business advice is provided by professional indemnity insurance.

Reinsurance Use

Insurers engage reinsurers to spread risks more widely.

Uninsurable Risks

Risks related to criminal offenses are uninsurable because they contradict public policy.

Perils vs Hazards

A peril causes a loss, while a hazard influences the likelihood of that loss occurring.

Insurance Benefits for Companies

Insurance provides a means for companies to free up capital by mitigating potential loss impacts.

Nature of Risk in Insurance

In insurance, risks are inherently unpredictable and must be managed effectively.

Broker Commission

When a Lloyd’s broker deducts commission from a premium, it is referred to as brokerage.

Loss Adjusters vs Assessors

Loss adjusters differ from loss assessors primarily in the interests they represent during claims negotiations.

Composite Insurer

Composite insurers offer both life and general insurance products.

Reinsurance Arrangements

Insurers set up reinsurance arrangements to manage risk exposure.

Aggregator Role

Consumers using aggregators first interact with a quote engine website for insurance options.

Risk Manager's Role

A risk manager is responsible for the identification, analysis, and control of risk within organizations.

Mutual Insurance Company

A mutual insurer is wholly and directly owned by its policyholders.

Independent Insurance Advice

A private individual seeking independent insurance advice should consult an insurance intermediary.

Financial Backing at Lloyd's

Underwriters provide the financial backing and assume risks within the Lloyd's market.

Function of Insurance Brokers

Insurance brokers primarily provide independent advice and assist clients in selecting appropriate coverage.

Advantages of Direct Motor Insurance

Direct motor insurers benefit financially as they avoid intermediary commissions and reduce marketing expenses.

Proprietary Insurer Ownership

A proprietary insurer is wholly owned by its shareholders.

Appointed Representative Services

An appointed representative of a large insurer likely offers tailored services to customers seeking to place insurance risk.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge on the roles within an insurer's claim department with this Insurance Chapter 2 quiz. Discover how different professionals contribute to negotiating settlements and the mechanics of risk transfer in insurance. Enhance your understanding of these concepts!