Podcast
Questions and Answers
Which type of risk arises from a cause outside the control of any one individual and affects a large number of people?
Which type of risk arises from a cause outside the control of any one individual and affects a large number of people?
- A pure risk
- A particular risk
- A speculative risk
- A fundamental risk (correct)
How does the law of large numbers benefit insurers when operating a pooling of risk system?
How does the law of large numbers benefit insurers when operating a pooling of risk system?
- Reliable claim payment predictions (correct)
- Reliable new business predictions
- Reliable sales income levels
- Reliable investment return predictions
In the context of insurance underwriting, what does a syndicate refer to?
In the context of insurance underwriting, what does a syndicate refer to?
- A government body regulating insurance practices
- A group of individuals insuring personal items
- An association of insurers pooling their resources (correct)
- A single insurer covering a large national risk
Which of the following best describes a pure risk?
Which of the following best describes a pure risk?
What is the role of an underwriter in insurance?
What is the role of an underwriter in insurance?
What is a characteristic of a speculative risk?
What is a characteristic of a speculative risk?
Which document provides detailed definitions and terms used in the field of insurance?
Which document provides detailed definitions and terms used in the field of insurance?
What does 'pooling of risk' imply in insurance?
What does 'pooling of risk' imply in insurance?
What best describes the presence of flammable composite panels in the construction of a factory building?
What best describes the presence of flammable composite panels in the construction of a factory building?
Why is insurance, as a means of risk transfer, considered attractive to policyholders?
Why is insurance, as a means of risk transfer, considered attractive to policyholders?
How does the provision of insurance assist in the cash flow management of a business?
How does the provision of insurance assist in the cash flow management of a business?
What is the primary benefit for an individual when insuring their home?
What is the primary benefit for an individual when insuring their home?
What term describes a large company that sets aside funds to cover frequent minor losses?
What term describes a large company that sets aside funds to cover frequent minor losses?
A comprehensive policy is typically classified under which type of insurance?
A comprehensive policy is typically classified under which type of insurance?
Which type of insurance policy is designed to cover theft of goods by an employee?
Which type of insurance policy is designed to cover theft of goods by an employee?
Which scenario represents a pure risk?
Which scenario represents a pure risk?
Which aspect of regulatory role does a fit and proper assessment primarily relate to?
Which aspect of regulatory role does a fit and proper assessment primarily relate to?
Who predominantly holds majority representation within the International Association of Insurance Supervisors?
Who predominantly holds majority representation within the International Association of Insurance Supervisors?
What is one of the objectives of the Financial Action Task Force aside from clarifying standards and implementing standards?
What is one of the objectives of the Financial Action Task Force aside from clarifying standards and implementing standards?
What type of regulation mandates that tasks must be completed within a specified maximum duration?
What type of regulation mandates that tasks must be completed within a specified maximum duration?
What are the two main objectives of market conduct regulations in general insurance?
What are the two main objectives of market conduct regulations in general insurance?
After an institution takes action due to the regulator's use of a remedial tool, what is typically the subsequent step?
After an institution takes action due to the regulator's use of a remedial tool, what is typically the subsequent step?
When a regulator inspects an intermediary's premises to identify issues, what is this type of action usually classified as?
When a regulator inspects an intermediary's premises to identify issues, what is this type of action usually classified as?
What is the maximum amount the insured will receive after a fire destroys £12,000 of stock valued at £20,000 and under a policy with £10,000 sum insured?
What is the maximum amount the insured will receive after a fire destroys £12,000 of stock valued at £20,000 and under a policy with £10,000 sum insured?
What insurance principle is illustrated when a claim is paid in full despite livestock feed being insured for only 80% of its market value?
What insurance principle is illustrated when a claim is paid in full despite livestock feed being insured for only 80% of its market value?
Which principle allows an insurer to call upon other insurers for cost-sharing regarding a claim?
Which principle allows an insurer to call upon other insurers for cost-sharing regarding a claim?
In a £55,000 loss for a jointly owned building valued at £250,000, with Company A insuring for £100,000 and Company B for £150,000, how much is each insurer liable for?
In a £55,000 loss for a jointly owned building valued at £250,000, with Company A insuring for £100,000 and Company B for £150,000, how much is each insurer liable for?
If a cottage is valued at £100,000 and has two fire insurance policies, one for £50,000 and another for £100,000, what is the total coverage against a loss?
If a cottage is valued at £100,000 and has two fire insurance policies, one for £50,000 and another for £100,000, what is the total coverage against a loss?
During a claim for livestock feed destruction, the insurer pays full compensation despite only partial insurance coverage. Which concept does this exemplify?
During a claim for livestock feed destruction, the insurer pays full compensation despite only partial insurance coverage. Which concept does this exemplify?
When a fire costs £12,000 in stock destruction and the insurance policy has a sum insured of £10,000, what concept does this exemplify?
When a fire costs £12,000 in stock destruction and the insurance policy has a sum insured of £10,000, what concept does this exemplify?
In the situation where two companies insure the same property for different amounts, which insurance principle is at play?
In the situation where two companies insure the same property for different amounts, which insurance principle is at play?
Which learning outcome corresponds to the answer given for question 10?
Which learning outcome corresponds to the answer given for question 10?
Identify the learning outcome for question 36.
Identify the learning outcome for question 36.
What is the answer for question 47?
What is the answer for question 47?
Which answer is associated with Learning Outcome 5 for question 99?
Which answer is associated with Learning Outcome 5 for question 99?
For question 73, which answer corresponds with Learning Outcome 3?
For question 73, which answer corresponds with Learning Outcome 3?
What answer was given for question 56, and which learning outcome does it represent?
What answer was given for question 56, and which learning outcome does it represent?
Which learning outcome corresponds to the answer given for question 100?
Which learning outcome corresponds to the answer given for question 100?
What was the answer given for question 25?
What was the answer given for question 25?
Identify the answer to question 62 and the learning outcome it corresponds to.
Identify the answer to question 62 and the learning outcome it corresponds to.
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Study Notes
Insurance Literature and Resources
- Various titles cover diverse areas of insurance, including theory, practice, regulation, and claims.
- "Handbook of Insurance" by Georges Dionne (2013) is a comprehensive resource for understanding insurance concepts.
- "Insurance Claims" (4th ed.) by Alison Padfield emphasizes claims handling in practice.
- "Insurance Theory and Practice" by Rob Thoyts explores foundational principles in insurance operations.
- "Insurance Law: An Introduction" by Robert Merkin provides insights into insurance-related legal frameworks.
- The "Research Handbook on International Insurance Law and Regulation" offers an overview of global insurance regulations, edited by Julian Burling and Kevin Lazarus.
- "World Insurance: The Evolution of a Global Risk Network" details the historical development of global insurance practices, authored by Peter Borscheid and Niels Viggo Haueter.
Periodicals and Reference Materials
- The Journal published by CII issues six editions a year, serving as a key periodical in the field.
- "Concise Encyclopedia of Insurance Terms" defines industry-specific terminology and concepts, edited by Laurence S. Silver et al.
- "Dictionary of Insurance" by C Bennett (2nd ed.) aids in clarifying insurance terms and definitions.
- Annual updates are provided in "The Insurance Manual," ensuring currency and relevance in industry practices.
Types of Risks and Insurance Principles
- Fundamental Risks: Originating from external causes, affecting many individuals (e.g. natural disasters).
- Law of Large Numbers: Enables insurers to predict claim payments reliably by pooling risks.
- Hazards vs. Perils: Hazards (like flammable materials) increase risk, while perils are specific risks causing loss.
Financial Aspects of Insurance
- Insurance transfers the unpredictability of loss into a manageable cost through premiums.
- Insurance enhances business cash flow by reducing the need for reserve capital against potential losses.
Types of Insurance and Coverage
- A comprehensive policy provides extensive protection across various risks.
- Specific policies exist to cover loss due to employee theft or misappropriation.
Claim Settlement and Underinsurance
- The principle of average impacts claim settlements when underinsurance exists, leading to partial payouts.
- Claims under policies with differing sums insured involve apportionment based on the respective insured amounts.
Regulatory Framework and Objectives
- Majority representation in the International Association of Insurance Supervisors is held by regulators.
- The Financial Action Task Force focuses on four major objectives, emphasizing standards and tackling financial threats.
- Market conduct regulations aim to protect policyholders and foster confidence in the insurance sector.
Inspections and Remedial Actions
- Inspections by regulators are diagnostic tools to identify issues within companies.
- Upon implementation of remedial measures, follow-up actions typically include progress reports.
Examination Guidance
- Familiarity with key industry terminology, principles, and application scenarios is crucial for success in examinations.
- Stakeholders in insurance need to understand claims processes, policy types, and regulatory obligations to effectively manage risks and ensure compliance.
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