Question bank -general insurance.pdf

1. The main reason for an insurer to carry out a risk-based internal audit at regular intervals is to (Chapter 2)  Ensure risks in the business are being well managed  Have a clear reporting line with teams  Identify any previous patterns in absenteeism  Prevent co...

1. The main reason for an insurer to carry out a risk-based internal audit at regular intervals is to (Chapter 2)  Ensure risks in the business are being well managed  Have a clear reporting line with teams  Identify any previous patterns in absenteeism  Prevent complaints from arising 2. What are the benefits for an insurer when using an effective complaints-handling procedure? (Chapter 10)  Improved customer loyalty and identification of weaknesses.  Reduction in credit risk and better corporate governance  Identification of challenges and reduction in credit risk  Enhanced corporate governance and a reduction in customer loyalty 3. At what stage of an insurance transaction could policy holder fraud be committed? (Chapter 9)  During inception only  At any stage in the policy and claims process  During renewal only  any stage of a claim 4. Where a function within an insurance company is susceptible to conflicts of interest, the recommended way of dealing with this to minimize the risk of internal fraud is to (Chapter 9)  To Divide the process into separate components  Ensure the job is prescriptive  Allowing a fast-track method of decision making  Addition off management reporting layer 5. What is the relationship between the prescribed capital requirement (PCR) and minimum capital requirement (MCR)? (Chapter 9 )  The are at Same level.  The PCR is lower  The PCR is higher   The PCR is variable 6. Which specific aspect of the regulator’s role initially involves careful consideration of the relevant institution’s solvency margins? (Chapter 9)  It is the Consumer Authorization  It Is the Consumer Education  Building Market Confidence  It is the consumer Compensation 7. Apart from the regulator, who is ultimately responsible for ensuring that an insurer maintains adequate capital resources? (Chapter 9)  The underwriters  Board of directors  The policyholders  The reinsurers 8. What is the main difference, if any, between capital adequacy and solvency control levels? (Chapter 9)  Capital adequacy levels are variable  There is no difference  The Solvency control levels are set lower  The Solvency control levels are set higher 9. Who is usually responsible for setting the legal minimum capital requirements for the insurers? (Chapter 10)  The Regulators  The Claims Managers  Actuaries  Shareholders 10. One of the three main objectives of the international association of insurance supervisors is to promote (Chapter 9)  Public education program  The Well-regulated insurance markets   Consistent rules of premium calculators  Cost effective products in the marketplace 11. Remedial action tools are primarily used by the regulator to (Chapter 9)  Making sure there is independence of the regulator  Imposing financial sanctions to act as a deterrent for non-complaint activities  Creating compliance rules and guidelines  Providing the basis of corrective action for the breaches of compliance rules and guidance. 12. When the rules set out by the regulator are worded in very general high-level terms and backed up by a set of desired outcomes, this is usually described generically as (chapter 9)  Principles-based regulation  Risk based regulation  Prudential based regulation  Prescriptive based regulation 13. What is normally considered to be the overriding function of an insurance regulator? (chapter 9)  To ensure value for money  To protect the public  To maximize the competition  To recommend new legislation 14. The function of maintain capital adequacy is to (Chapter 9)  Encourage the recruitment of new staff  Reduce the likelihood of company failure  Reduce the cost of claims  Encourage new policy holders 15. What is the Financial Action Task Force? (Chapter 9)  An industry body to compensate customers following insurer insolvency  The global money laundering and terrorist financing watchdog.  An industry body that investigates complaints from financial services customers   An industry body representing the interests of insurance companies. 16. At what level of an insurance company can internal fraud occur ? (Chapter 9)  Claims handling stage  All Levels  Management Level  Board of Directors only 17. A proposer is applying for medical expenses insurance. Under the duty of fair presentation , what is the proposer obliged to disclose to the insurer? (Chapter 5)  Full details of the exact cover required  Details of employer and annual salary  Health related or otherwise which could affect the premium  Whether similar policies have been taken out on normal terms. 18. On a livestock insurance policy, the principle of indemnity is used to settle claims based on what usual value? (Chapter 7)  Carcass value  local market price  The current replacement value , less the profit element  The retail price, less selling expenses 19. A warehouse fire has occurred, and the sprinkler system operated but could NOT save the building’s roof from destruction. There was a sudden storm which extinguished the fire but a combination of the sprinklers, rain water and blocked drains resulted in a flood with ensuing damage to the stock. What was the proximate cause of the damage? (Chapter 6)  The Flood  The Fire  The Storm  The Sprinkler System 20. When a plumber causes a flood in an insureds house damaging the ceiling and the insured notifies his household insurer of the incident. The insurer pays out 1,500$ and proceeds to recover its outlay from the plumber. This is an example of the application of which insurance principle? (Chapter 8)  Salvage   Contribution  Indemnity  Subrogation 21. Duty of fair representation under commercial property insurance policy requires the disclosure of what information, if any, between renewal dates? (Chapter 5)  insured does not need to disclose any information between renewal dates  information which his specifically requested by the insurer  information which could increase the risk insured  information which could help mitigate a loss 22. During the application for motor insurance, why was the proposer required to disclose to the insurer that he uses his car for business purposes? (Chapter 5)  regulatory requirement  satisfy the principle of indemnity  considered relevant information  preventing the creation of any subrogation rights. 23. In connection with a private motor insurance policy, to whom does the duty of fair presentation apply? (Chapter 5)  insured only  insurer only  insured and the insurer only  insured, the insurer and any third party claimant 24. An insurer has paid for repairs to an insured’s building following damage caused by a contractor working on an adjoining property. From whom, if anyone, can subrogate the repair costs? (Chapter 8)  Mainly the owner of the adjoining property  insurer cannot seek recovery  It will be the contractor who caused the damage  insurer which insures the contents of the building 25. One of the insurer has refused to pay a claim and voided the insurance policy from inception. In what circumstances is this action permitted? ( chapter 5)  claim was made during a temporary extension of the policy.  insurer discovered that the insured deliberately failed to disclose relevant information  claim results from a loss caused by a peril not covered under the policy.  insurer discovered that the insured is unknowingly substantially underinsured. 26. The main purpose of a feedback-loop as part of an insurer’s risk management framework ? (Chapter 10)  Compare its strategy with those operated by other insurers within the industry  Ensure all areas of the organization understand the importance of strategy  Check and update its approach in the light of changing circumstances  Incorporate market issues into future strategy 27. If an insurer is asked to cover the possibility of the shares in a company falling in value, what type of risk this be? (chapter 1)  A Pure risk  A speculative risk  A particular risk  A fundamental Risk 28. The main element of fundamental risk is (Chapter 1)  occurrence is inevitable  only relates to a natural event  can involve a gain  affects large number of people 29. Sameer does not wish to insure his flat, so his father has effected a policy in his own name instead. Which insurance principle does this contravene? (Chapter 4)  The Indemnity   The Subrogation  The Insurable Interest  The Good Faith 30. An Intermediary fails to carry out his principal’s instructions resulting in an uninsured exposure, who is responsible for indemnifying the principle when a loss occurs? (Chapter 3)  Service by Ombudsman  The principal  The independent intermediary  The regulator 31. Actions of an insurer’s agent will bind that insurer because the agent (Chapter 3)  And the insurer are classed as a single legal entity  Are classed as a partnership  Is acting with the implied authority of the insurer  Has assumed the insurer’s authority under the ombudsman’s rules 32. What happens if an intermediary acts for an insurer in connection with a business for which it has complete authority, this is known as agency by (Chapter 3)  Apparent authority  Necessity  Consent  Ratification 33. insurer makes an offer in respect of motor insurance. A court will regard the insured and the insurer as having entered into a legally binding contract when (chapter 3)  The Insured posts his acceptance of the offer  The Parties intend to create a legal relationship  The Insured completes a proposal form  The Insured receives the initial quote 34. By implementing the right of subrogation, an insurer, having paid a property claim, is able to (chapter 8)  Proceed and insist that the policyholder uses the payment to replace or repair the property for which the claim was made   Proceed and recover the payment from the policy holder if relevant information has not been disclosed  Proceed and recover the amount paid from a third party who is legally liable to compensate the policy holder  Proceed to request another insurer covering the same property for the same policyholder to contribute towards the loss 35. Miranda insures her house with two different insurers. Insurer A covers the buildings only with a sum insured of 75,000$ and insurer B covers the building for a sum insured of 75,000$ and also provides 25,000$ of contents cover. How much would insurer B pay if a storm causes 50,000$ of building damage and 25,000$ damage to contents? (Chapter 8)  25,000$  50,000$  75,000$  100,000$ 36. A travel insurance policy holder loses his camera which is covered under his travel insurance policy. His travel insurer finds out that the camera is also covered as an unspecified item under the personal section of the insured’s household contents insurance policy and asks his household insurer to bear a proportion of the claim. What is this practice known as? (Chapter 1)  Contribution  Subrogation  Coinsurance  Disclosure 37. One of the Household contents insurance policy offers new for old cover, which principle of insurance is modified? (chapter 7)  The Insurable Interest  Contribution  The Indemnity  Average 38. The agreed value approach to applying the principle of indemnity is designed to ignore the impact of (Chapter 7)  The Future premium increases  The Market price fluctuation   The Policy franchises and excesses  The Non-standard exclusions 39. The principle of indemnity is the (Chapter 7)  It is the Obligation of the insurer to provide a maximum sum insured or limit of liability  It is the Obligation of the insurer to pay all valid claims according to the terms and condition of the policy  It is to Place the insured, after a loss, in the same financial position as was enjoyed immediately before the loss  It is to Place the insured, at expiry of a policy, in the same financial position as was enjoyed at inception 40. An insurance manager for a large housing association has duties including hazard identification, control and elimination to assist the manager with these duties, he is most likely to study for professional qualification provided by the (Chapter 9)  The Institute of public loss assessors  The Association of the insurance and risk manager in industry and commerce  The Chartered institute of loss adjusters  The Faculty and institute of actuaries 41. The event which gives rise to a claim under an insurance policy is known as the (Chapter 1)  Cover  Hazard  Peril  Renewal 42. One of the underwriter informs the proposer that an investigation into her fire insurance proposal has led him to question the moral hazard. He therefore has concerns regarding the (Chapter 5)  The Construction of the risk address  The Length of time that the proposer has been in business  Proposer’s Honesty and integrity  Work carried out at the risk address 43. Which roofing material presents the greatest physical hazard in relation to the risk of fire? (Chapter 1)   The corrugated Iron  The Tile  The Thatch  The Timber 44. In addition to a risk NOT being against public policy, what other two features that needs to be present for a risk to be insurable (chapter 1)  The Insurable interest and the insured event must be fortuitous  The Insurable interest and the event is not fortuitous  The Insurable interest and proximate cause  The Proximate cause and contribution 45. A risk that is always insurable is a: (Chapter 1)  Fundamental risk  Speculative risk  Capital risk  Pure Risk 46. One of the main reasons for buying reinsurance is to reduce : (Chapter 2)  The risk Management requirements  The exposure to risk  The Underwriting cost  The Frequency of losses 47. One of the car crashed into a shop front, which causes the car to burst into flames. Smoke from the burning car triggers the shop’s sprinkler system, causing extensive water damage to stock. What is the proximate cause of the stock damage? (Chapter 6)  Smoke  Fire  Water  Car Crash 48. The Gas Pipes In the large factory are fractured during a hurricane which resulted in an explosion and damages the insured’s property. Which insurance principal in the below,  enables the insured to obtain indemnity for the damage caused by the explosion if the property is insured against the hurricane but NOT against explosion? (Chapter 6)  Subrogation  Contribution  Indemnity  Proximate Cause 49. In a chain of events, the proximate cause of a loss is always the (Chapter 6)  Only event contributing toward the loss  Dominant event directly leading to the loss  Only event which is not excluded in the terms of the policy  Last event before the loss occurs 50. Under which classes of general insurance is it NOT possible to apply the principle of indemnity? (Chapter 7)  The Life insurance  The Private and commercial motor insurance  The Public and employers liability insurance  Motor Insurance 51. How might a commercial property insurer modify the common law position of disclosure to ensure it is advised of material mid term changes to a risk? (Chapter 5)  By installing a customer helpline  By effecting a policy condition  The common law position cannot be amended  By imposing a policy warranty 52. Under a standard motor insurance policy, how is the common law position of the duty of fair presentation usually amended by policy medication? (Chapter 5)  It will cease to apply at renewal  It will be extended to apply at inception and renewal  It will cease to apply for the first year  It will be extended to apply continuously during the policy term. 53. When Alisha applied for a new household contents insurance policy, she was obliged to disclose her extensive claims history. Such details are normally known as (Chapter 5)  The Indemnity  The information which is relevant  The terms which are Contractual  Warranties 54. The insurance principle which oblige the proposer of an insurance policy to disclose relevant facts? (Chapter 5)  Fair presentation  Contribution  Subrogation  Insurable interest 55. Zeeshan is a owner of a motorcycle, which he insures comprehensively. He subsequently sells the motorcycle to Naely. Two months after the sale, the motorcycle is written off and Zeeshan submits a claim under his motor insurance policy. How will the insurer handle the claim? (Chapter 5)  It will settle the claim in full  It will repudiate the claim  It will seek Zeeshan’s authority to indemnify Naely  It will partially settle the claim 56. When must insurable interest exist in commercial motor insurance for a valid claim to be considered? (Chapter 4)  At policy inception and at the time of the loss  At the time of the loss only  At policy inception only  At the time when the vehicle is purchased 57. Agency agreement is being drafted in accordance to best practice. In what circumstances, if any should the actual commission rates payable be included within this agreement? (chapter 3)  In all circumstances  Only if they are based on non-standard scale   In no circumstances  Only if they are based on a standard scale 58. What remuneration is an agent owed by his principal in the absence of an expressly-stated amount in the agreement under the rules of agency? (Chapter 3)  Whatever is considered customary or appropriate  Amount which solely reflects expenses incurred  Nothing  Whatever the principal wishes to pay. 59. To whom if anyone, can an agent normally delegate the responsibility imposed on her under an agency agreement? (Chapter 3)  Agent will not be able to delegate her responsibility  To suitably experienced individuals only  To anyone able to fulfil the duties  To suitably qualified individuals only 60. One of the agent’s actions were outside his actual authority but he was deemed by the insured to have apparent authority, in what circumstances, if any, would this be considered binding on the principal? (Chapter 3)  In no circumstances  Only if the principal retrospectively agreed  Only if the principal was forewarned  Under all circumstances 61. Any agency set up by express appointment is also known as an agency by (Chapter 3)  Necessity  Consent  Ratification  Apparent Authority 62. When can a motor insurance policy be terminated automatically? (chapter 8)  When the insured vehicle becomes a total loss  When the insured is paying the premium by installment  After 90 days of cover   When the insured is convicted of speeding 63. One method of terminating the agency contact is through the process of fulfilment. This usually means that (Chapter 3)  That there has been a total loss of the subject matter  If the premium has been fully paid up  Policy has not run for the duration of the contact  Insured has unfairly represented the risk 64. The consideration of the insured in an insurance contact is to (chapter 3)  Disclose all relevant information  Comply with any contribution  Only make valid claims  Pay or promise to pay the premium 65. One of the prospect is approached for a household contents insurance quotation. The quotation is posted to the prospect and he sends a cheque to pay the premium. From when is the proposer’s acceptance of the insurer’s offer effective? (Chapter 3)  The time when he writes out the cheque  The time when the cheque is paid into the insurer’s bank account  The time when the cheque is received by the insurer  The time when he posts the cheque 66. During the application for motor insurance, the proposer forgets to advise the insurer about an unspent driving conviction, despite being asked. What duty is this a breach of? (Chapter 5)  Proximate cause  Duty of agent to principal  Buyer beware  Fair presentation 67. A loss adjuster acts on behalf of (Chapter 2)  A protection and indemnity club  An insurer   An intermediary  An insured 68. A company wishes to insure a large company with multiple employees. Who will decide upon the appropriate premium? (Chapter 2)  An intermediary  A risk manager  A Lloyd’s broker  An underwriter 69. A mutual insurance company is owned by its (Chapter 2)  Shareholders  Reinsurers  Employees  Policy holders 70. If an insurer is planning to accept a risk that is too large for its normal portfolio, the most common method of protecting its financial position is to (Chapter 2)  Increase its borrowing capacity  Increase its corporate capital  Get reinsurance  Use a captive insurance company 71. Which employees working in an insurance company normally acts as the point of contact between the insurer and its regulator? (Chapter 2)  The claims manager  The group accountant  The company lawyer  The compliance officer 72. Insurance may only be placed at Lloyd’s via a (Chapter 2)  Lloyd’s Name  Lloyd’s Broker  Captive Insurer   Reinsurer 73. What is a speculative risk? (Chapter 1)  A risk which affects society as a whole or a sizeable proportion of it  A risk which affects society as a whole or a sizeable proportion of it  A risk over which an individual has some degree of control  A risk from which there is the chance of a gain, a loss or of breaking even. 74. The primary function of insurance is as a means of risk (Chapter 1)  Identification  Assessment  Elimination  Transfer 75. A common pool for proprietary insurer is best described as a means by which (Chapter 1)  The losses of many are met by the contributions of the few  In the event that an insured risk does not occur, premiums paid are distributed to a number of policyholders.  In the event that an insured risk does occur, a number of policyholders are surcharged  The losses of the few are met by the contributions of the many 76. The uncertainty of loss is the definition of a (Chapter 1)  Physical hazard  Moral Hazard  Risk  Peril 77. A pure risk defined as a risk (Chapter 1)  Unique to a person, over which that person has some degree of control  From which there is the chance of gain or the possibility of loss  Which affects society as a whole, or a sizeable proportion of it and is controllable only by concerted efforts  From which it is only possible to break even or make a loss  78. In terms of common vehicle damage in car accidents, a motor insurer would usually rate its business on timely claim being (Chapter 1)  High frequency, low severity  High frequency, high severity  Low frequency, low severity  Low frequency, high severity 79. Which role involves examining a company’s historical claims in order to improve the control measure which are in place? (Chapter 2)  A loss adjuster  An actuary  A risk manager  A loss assessor 80. On whose behalf does a Lloyd’s underwriter business? (Chapter 2)  Captive insurer  Syndicate  Mutual Company  Friendly Society 81. Who in an insurance company uses statistics and industry analysis to predict trends? (Chapter 2)  A risk manager  An actuary  An underwriter  A loss assessor 82. Which department within an insurance company would handle and arrange the routine settlement of an insured loss? (chapter 2)  The risk control department  The customer services department  The claims department  The accounts department 83. Which key task is an underwriter NOT responsible for? (Chapter 1)   Deciding whether to accept a risk  Producing statistics to measure the future risk of claims  Deciding whether to apply conditions before accepting a risk  Agreeing the premium with the client 84. What is the main advantage of using a price comparison website when purchasing motor insurance? (Chapter 2)  A replacement hire car is always available in the event of a claim  Quotes and cover options can be obtained from a variety of firms  Insurance premium tax is not charged  Personal details are not required 85. The main distinguishing feature of a tied agent is that they (chapter 2)  Represents no more than six insurer  Represents only one insurer  Sells no more than six type of insurance  Sells only one type of insurance 86. A major benefit to an insurer who deals directly with the public is (chapter 2)  Guaranteed increase in business  Lower operating costs  Fewer claims  Fewer complaints 87. The profit made by a Lloyd’s syndicate belongs to (Chapter 2)  The corporation of Lloyd’s  Its members  Its policy holders  Lloyd’s Brokers 88. What is the term typically used to describe an insurer which underwrites both general and life risk? (Chapter 2)  A reinsurer  Proprietary insurer   Captive insurer  Composite insurer 89. An insurer is based in Bermuda and is owned by a non-insurance parent company’s risk. This indicates that the insurer is typically what type of company? (Chapter 2)  Composite insurer  Mutual insurer  Captive insurer  Reinsurer 90. A proprietary insurance company is owned by its (Chapter 2)  Management  Policy holders  Share holders  Board of directors 91. From whom do reinsurer usually accepts business? (Chapter 2)  The government  Large manufacturing companies  Individuals through Brokers  Insurance companies 92. Under contract law, the main function of an intermediary is to undertake what key legal role? (Chapter 3)  Agent  Third Party  Witness  Principal 93. An individuals role is to arrange insurance cover for his clients by recommending an appropriate product from a suitable insurer. What industry role does he perform in this capacity? (chapter 2)  Intermediary  Underwriter  Risk Manager   Actuary 94. A member of insurer’s claim department has commissioned the services of an external professional to negotiate the settlement of a large and complex claim. That person is (Chapter 2)  An actuary  A loss assessor  A loss adjuster  A risk manager 95. As a risk transfer mechanism, insurance provides the insured with peace of mind and (Chapter 1)  Financial protection  Financial profit  Protection from prosecution  Elimination of all loss 96. An essential feature of an insurable risk is that it must be (Chapter 1)  Fortuitous  Certain  Probable  Intentional 97. Within lloyd’s, which body is responsible for the overall management and supervision of the market  The lloyd’s franchise board  The council of lloyd’s  The lloyd’s market association  The coperation of lloyd’s 98. A policy holder has cancelled her trip to Italy as she has broken her leg. Which type of insurance policy is specifically designed to compensate her for any cancellation charges she has incurred? (Chapter 2)  A money insurance policy   Income protection insurance policy  Accident and sickness insurance policy  Travel insurance policy 99. In what main way can a surveyor working for an insurer help to reduce the impact of any potential fire? (Chapter 1)  By ensuring adequate reinsurance is in place  By encouraging realistic levels of sums insured  By checking on validity of submitted claims  By recommending improvements to policy holders work practices 100. Cargo on an aeroplane is normally covered by what type of insurance policy? (Chapter 2  An engineering insurance policy  A products liability insurance policy  A marine insurance policy  An aviation insurance policy 101. Under a professional indemnity insurance policy, the maximum risk to the insurer will be determined by the (Chapter 2)  Limit of indemnity  Amount claimed  Historical claims experience  Probability of a claim occurring 102. Why would Nehad not be able to insure against the potential loss of enjoyment on a future holiday? (Chapter 1)  It is against the public policy  It is a physical hazard  It is a non financial risk  It is a moral hazard 103. A particular risk is one which (Chapter 1)  Relates to a stated type of insurance  Relates to the stated peril   Affects a specific industry  Affects individuals or local communities 104. In relation to insurance, a peril is (Chapter 1)  The disclosure of relevant information  A specified event covered or excluded by the policy  Something always excluded by the policy  A proposition of the loss that is not covered 105. How do physical hazards differ from moral hazards? (Chapter 1)  Physical hazards relate to the nature of the insured item, whereas moral hazards relate to the insured  Physical hazard relate to immediate losses, whereas moral hazards relate to consequential losses.  Physical hazards are risk which have been disclosed, whereas moral hazards are risks which have not be disclosed  Physical hazards are risks which can be insured, whereas moral hazards are risks which cannot be insured 106. Large companies principally arrange a portfolio of insurance to protect their business because (Chapter 1)  It eliminates the need to control risk  The premium can offset against profits  The premium is certain, whereas claims are not  It is required by the law. 107. How would an employee benefits directly from his employer’s insurance arrangements if its factory was forced to close down temporarily due to flood damage? (Chapter 2)  By continuation of his wages  By compensation for loss of bonus  By payment of an early retirement pension   By payment of redundancy lump sum 108. The main value of an insurance policy to a business is that it (Chapter 1)  Prevents a risk from occurring  Reduces the frequency of a risk  Transfers the financial consequences to the insurer  Removes a risk 109. A company decides NOT to renew its good in transit insurance policy and instead makes an internal allocation of the equal premium. This is known as (Chapter 1)  Self-insurance  Dual insurance  Reinsurance  Coinsurance 110. A Car owner has a typical comprehensive motor insurance policy. She was involved in a car accident and incurred damage to her personal effects valued at 200 pounds, damage to her car valued at 700 pounds and liability cost of 2,000 pounds. Subject to any policy terms, what is the maximum amount of financial responsibility that can be transferred to her insurer? (Chapter 7)  900 pounds  2,200 Pounds  2,700 Pounds  2,900 Pounds 111. In accordance with best practice, the time horizion for the continuity analysis aspect of a risk and solvency assessment should be: (Chapter 10)  Shorter than the time horizon typically used to determine regulatory capital requirements  5 years in all cases  10 years in all cases  Longer than the time horizon typically used to determine regulatory capital requirements 112. In what circumstances is remedial action undertaken by the regulator? (Chapter 10)  When there have been substantial changes in the activities of a regulated institution  When a financial institution has undertaken a gap analysis of its system and controls  Following a complaint by a customer to the ombudsman  Following an inspection where weak governance controls were identified 113. According to the prescribed description given by the financial action task force, the money laundering process involves criminals doing what with their illegally obtained monies? (chapter 9)  Separating it  Consolidating it  Legitimizing it  Reclassifying it 114. What is the primary aim of the international association of insurance supervisors? (Chapter 9)  Develop policies to combat money laundering  Promote cooperation amongst insurance supervisors  Assess the compliance of companies with market conduct rules  Ensure companies have adequate capital resource 115. Insurers hold what status within the international association of insurance supervisors? (Chapter 9)  Executives  Observer   Honorary member  Associate member 116. What constitutes a fraudulent claim from the viewpoint of an insurer? (Chapter 3)  Unintentional misrepresentation by the policy holder  Deliberate intention of the policyholder to deceive the insurer  Innocent exaggeration of the loss notified by the policy holder  Negligent notification of a loss by the policy holder 117. Where claims fraud is committed in the general insurance market, who normally bears the cost? (chapter 3)  The chartered insurance institute  Both the insurer and the policy holder in varying proportions  The policyholder entirely  Both the insurer and the policyholder in equal proportions 118. As part of customer due diligence procedures, the insurer obtained a copy of Memorandum of association. This indicates that the customer concerned (chapter 9)  Has a spent conviction  Is a self employed person  Is a discharged bankrupt  Is an incorporated company 119. What is meant by integration as a stage of money laundering? (Chapter 9)  The initial introduction of funds derived from a criminal activity  The initial attempt to obscure the links between the entry point of funds and the end of the cycle  The stage when criminals get access to laundered money  A criminal act designed to generate a profit for whoever carries out the act. 120. Which organization published the 40+90 recommendations in an attempt to combat money laundering and other related activities? (chapter 9)  The international association of insurance supervisors  The financial ombudsman service  The financial action task force  The association of British insurers 121. In broad terms, what do prudential regulation issued by the regulator generally cover? (Chapter 9)  Accounting standards in relation to a company’s annual returns  The use of financial services products as a vehicle for money laundering activites  The provision of best possible advice and guidance to customers  Financial integrity and soundness of a company’s assets and liabilities 122. What is the main reason for an insurer maintaining adequate capital? (Chapter 9)  To improve its competitive position  To minimize the risk of financial failure  To maximise dividends to shareholders  To reduce the need for reinsurance 123. The main reason why it is preferable for the regulator to use diagnostic tools rather than remedial tools when supervising the general insurance industry, is because it (chapter 9)  Allows potential problems to be addressed before they arise  Is a quicker option  Is less dependent on third parties  Is a less expensive option 124. IF an insurance intermediary significantly misrepresents the nature of insurance in order to attract customers, this is best classed as (Chapter 9)   Voidable activity  A civil offence  Fraud  A communication breach 125. The regulatory shift towards a disclosure-based regime has increased the importance of the regulatory role in which specific key area? (Chapter 9)  Data reporting  Market competition  Taxation  Consumer education 126. Good Faith can be defined as (Chapter 5)  a positive duty to voluntarily disclose, accurately and fully, all information relevant to the risk being proposed, whether asked for or not  a responsibility on the part of an underwriter to allow a policy holder to cancel a policy without penalty  a duty that all customers must adhere to the insurance industry’s code of professional conduct  an absolute responsibility to disclose details of all risk management activities, risk improvements and risk transfer mechanism 127. An accountant is being sued for financial loss due to alleged negligent business advice. Which type of insurance is specifically designed to cover the accountant in these circumstances?  Employers’ liability insurance  Fidelity guarantee insurance  Professional indemnity insurance  Public liability insurance 128. One of the main reasons that an insurer uses a reinsurer is to  Prevent policy cancellation  Prevent losses occurring  Protect policy holders  Spread risks more widely 129. Why is the risk of being fined for criminal offense uninsurable  It is against the public policy  It is inevitable  It is predictable  It is not fortuitous 130. What is the difference between a peril and a hazard?  A peril is a factor which could cause financial loss and a hazard is a factor which could cause non financial loss  A peril is a factor which gives rise to a loss and a hazard is something which influences the operations of these factors  A peril is a risk which is deemed pure and a hazard is a risk which is deemed speculative  A peril is a risk which can be mitigated with the risk control measures and a hazard is a risk which cannot be mitigated with risk control measures. 131. When a company takes out insurance to its activities, one of the main benefits is that  A valuation of assets is always carried out  A disaster recovery plan is always prepared  Capital is freed up within the company  The profitability of the company is guaranteed 132. In the context of insurance, risk is  Uninsurable  Unpredictable   Uncontrollable  Immeasurable 133. When a Lloyd’s broker typically deducts an element of the premium as commission, this is known as  Net premium  Brokerage  Insurance Premium tax (IPX)  Gross Premium 134. The fundamental way in which the role of loss adjusters differ from the role of loss assessors relates to the  Type of claim they can negotiate  Maximum value of loss they can deal with  Binding nature of any settlement  Interest they represents 135. What type of insurer is most likely to offer both life and general insurance products?  A proprietary insurer  A reinsurer  A composite insurer  A captive insurer 136. Reinsurance arrangements are set up by the  Intermediary  Insurer  Insured  Regulator 137. A person who arranges cover through an aggregator will usually deal in the first instance with a  Claim assessors  Broker  Call center representative  Quote engine website 138. What is the scope of risk manager’s role  Identification, analysis and control of risk  Identification of risk only  Transfer of risk only  Identification and analysis of risk only 139. What type of insurer is wholly and directly owned by its policy holders?  A proprietary insurer  A captive insurer  A mutual insurer  A Lloyds syndicate 140. To whom could a private individual go for independent advice on an insurance policy?  A Lloyd’s name  A proprietary company  A mutual insurance company  An insurance intermediary 141. Who provides the financial backing and carries the risks at Lloyds?   Reinsurer  Underwriters  Syndicates  Member agents 142. The main function of an insurance broker to  Negotiate claims  Provide independent advice to clients  Introduce business to a particular insurer  Write the policy wording 143. The main financial advantage for a motor insurer which operates on a direct basis is that  Renewal costs are borne by the intermediary  No commission is paid to the intermediary  All policies are issued on comprehensive basis  Marketing costs are substantially reduced 144. What type of insurer is wholly and directly owned by its shareholders?  A mutual insurer  A Lloyds syndicate  A proprietary insurer  A captive insurer 145. As an appointed representative of a large insurer, an intermediary is approached by the customer who wants to place a risk. What service is appointed representative likely to offer?  Any product available on the market, irrespective of suitability  A product offered by the principal insurer which has the highest commission linked to it  A product offered by the principal insurer that satisfies the customer’s suitability needs  A product offered by the insurer which attracts the lowest rate of insurance premium tax. 146. Within lloyd’s, which body is responsible for the overall management and supervision of the market  The lloyd’s franchise board  The council of lloyd’s  The lloyd’s market association  The coperation of lloyd’s