Chapter 4

Question 1

What is the first step in the motor insurance new business process?
A. Issuing the certificate of insurance
B. Assessing risk and quoting a premium
C. Conducting a mid-term adjustment
D. Renewing the policy

Answer 1

B

Question 2

What is required for a mid-term policy alteration to take effect?
A. The insured must provide written consent.
B. The insurer must issue an updated certificate of insurance.
C. A claims adjuster must verify the change.
D. The premium must remain unchanged.

Answer 2

B

Question 3

When can an insurance policy be cancelled by the insurer?
A. Only at renewal
B. After providing reasonable notice
C. Without any notice
D. Only if the insured files a claim

Answer 3

B

Question 4

What is the main purpose of the renewal process in motor insurance?
A. To increase the premium
B. To ensure continuous cover
C. To modify the insured vehicle’s use
D. To transfer the policy to another insurer

Answer 4

B

Question 5

Which of these documents is mandatory for driving on UK roads?
A. Policy schedule
B. Proposal form
C. Certificate of motor insurance
D. Renewal invitation

Answer 5

C

Question 6

What is the purpose of the Motor Insurance Database (MID)?
A. To store vehicle registration information
B. To ensure all vehicles on UK roads are insured
C. To record claims details
D. To manage premium calculations

Answer 6

B

Question 7

What happens if a policyholder fails to pay the renewal premium?
A. The policy lapses automatically.
B. The policy remains active for 30 days.
C. The insurer must provide coverage for an additional 7 days.
D. The policy switches to basic third-party cover.

Answer 7

A

Question 8

What is the significance of an Electronic Data Interchange (EDI) system in motor insurance?
A. It automates policy documentation and updates.
B. It processes claims automatically.
C. It handles premium refunds.
D. It replaces the certificate of insurance.

Answer 8

A

Question 9

Which document provides details about the insured vehicle and risks covered?
A. Proposal form
B. Certificate of motor insurance
C. Policy schedule
D. Renewal notice

Answer 9

C

Question 10

What is a voidable policy?
A. A policy that is invalid from the start
B. A policy that can be cancelled due to misrepresentation
C. A policy with zero premium
D. A policy that cannot be cancelled by the insurer

Answer 10

B

Question 11

Which regulation governs the cancellation process for motor insurance policies?
A. Consumer Rights Act
B. Motor Vehicle Regulations
C. Insurance Conduct of Business Sourcebook (ICOBS)
D. Financial Ombudsman Guidelines

Answer 11

C

Question 12

What is the role of intermediaries in the motor insurance new business process?
A. They only collect premiums.
B. They underwrite the risks.
C. They act as a link between insurers and policyholders.
D. They settle claims.

Answer 12

C

Question 13

When must an insurer issue a new certificate of insurance?
A. At the time of claim settlement
B. When a policyholder requests a premium reduction
C. After a mid-term alteration affecting coverage
D. When the policyholder changes their address

Answer 13

C

Question 14

What is the cooling-off period for motor insurance policies under ICOBS?
A. 7 days
B. 14 days
C. 30 days
D. No cooling-off period applies

Answer 14

B

Question 15

What does “lapse of a policy” mean?
A. A policy is void due to misrepresentation.
B. A policy expires without renewal.
C. A policy is cancelled by the insurer.
D. A policy is transferred to another person.

Answer 15

B

Question 16

What does mid-term adjustment refer to?
A. Updating the policy at renewal
B. Modifying policy terms during the active period
C. Changing the insurer
D. Issuing claims during the policy period

Answer 16

B

Question 17

What does an insurance proposal form capture?
A. Only the insured vehicle details
B. The insured’s risk profile and requirements
C. The premium payment method
D. Information on previous claims

Answer 17

B

Question 18

How are electronically issued documents typically verified?
A. Via the Motor Insurance Database (MID)
B. Using a digital signature
C. By submitting a physical copy
D. Through a phone call to the insurer

Answer 18

B

Question 19

What happens if a certificate of insurance is not surrendered after policy cancellation?
A. The insurer must renew the policy automatically.
B. Legal action may be taken against the policyholder.
C. The policyholder must pay additional penalties.
D. The policy continues in force.

Answer 19

B

Question 20

What does a renewal invitation typically include?
A. Claim settlement history
B. Renewal premium and updated terms
C. A detailed accident record
D. A mandatory cancellation form

Answer 20

B

Question 21

A policyholder requests to add a new driver to their policy mid-term. What is the insurer’s next step?
A. Cancel the existing policy and issue a new one
B. Update the policy and issue a revised certificate of insurance
C. Refuse the request until renewal
D. Transfer the policy to the new driver

Answer 21

B

Question 22

A business uses a fleet of vehicles and wants to modify the policy mid-term to include additional vehicles. What does the insurer issue?
A. New policy documents only
B. A revised schedule and certificate of insurance
C. A voided certificate of insurance
D. A renewal invitation

Answer 22

B

Question 23

A policyholder fails to disclose a driving conviction during the proposal stage. How is the policy classified?
A. Cancelled automatically
B. A voidable policy
C. Invalid immediately
D. Converted to third-party cover only

Answer 23

B

Question 24

An insurer wants to cancel a policy mid-term. What must the insurer provide?
A. Immediate cancellation with no notice
B. At least 7 days’ notice in writing
C. No explanation for the cancellation
D. Compensation for the policyholder

Answer 24

B

Question 25

A vehicle owner sells their car and requests a refund of the premium. What happens next? A. The policy lapses automatically. B. The insurer may refund the premium after adjusting for the used period. C. The policy remains active until renewal. D. No refunds are issued.

Answer 25

B

Question 26

A policyholder updates their policy to include business use during the policy term. What is the insurer most likely to do? A. Issue a new policy B. Adjust the premium and issue updated documents C. Refuse the change until the renewal date D. Cancel the existing policy and start a new one

Answer 26

B

Question 27

An insured driver’s renewal notice includes a significantly higher premium than the previous year. What is the most likely reason? A. The insurer decided to increase premiums across all policies. B. The insured made multiple claims or presented higher risk factors during the year. C. The Motor Insurance Database flagged the policyholder as uninsured. D. The insured missed a payment during the policy term.

Answer 27

B

Question 28

A policyholder requests cancellation of their motor insurance policy during the cooling-off period. What is the insurer’s obligation? A. Provide a full refund of the premium minus any administrative fees. B. Refuse the refund due to the short coverage period. C. Issue a pro-rata refund based on the time the policy was active. D. Require the policyholder to pay an early termination fee.

Answer 28

A

Question 29

A motor insurance policy lapses due to non-payment of the renewal premium. What does this mean for the policyholder? A. The policy remains active for an additional 14 days. B. The policyholder is uninsured until a new policy is purchased. C. The insurer will reinstate the policy once payment is made. D. The policyholder can still make claims for incidents during the lapsed period.

Answer 29

B

Question 30

A vehicle owner notices an error in their certificate of insurance after the policy is issued. What should they do? A. Continue using the incorrect certificate until renewal. B. Notify the insurer immediately to issue a corrected certificate. C. Request a claim to cover the error. D. Cancel the policy and purchase a new one.

Answer 30

B

Question 31

What is a “cover note” in motor insurance? A. A permanent policy document summarizing coverage B. A temporary document issued pending the permanent certificate C. A record for claims management purposes D. An endorsement for international travel

Answer 31

B

Question 32

What must a certificate of motor insurance include? A. Advertising material of the insurer B. Details of the insured vehicle and policyholder C. Exceptions under Section 148 of the RTA D. A pro-rata premium breakdown

Answer 32

B

Question 33

What is a key function of the Motor Insurance Database (MID)? A. Generating quotes for new policies B. Tracking insured vehicles for regulatory compliance C. Automating premium adjustments D. Issuing renewal certificates

Answer 33

B

Question 34

What is required under the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)? A. Proposers must volunteer all material facts. B. Proposers must take reasonable care not to misrepresent facts. C. Insurers must avoid policies with any misrepresentation. D. Policyholders must update MID records directly.

Answer 34

B

Question 35

How are temporary vehicle substitutions typically handled in mid-term adjustments? A. By issuing a separate policy B. By applying pro-rata premium calculations C. By refusing coverage until renewal D. By suspending the existing policy

Answer 35

B

Question 36

A policyholder’s car is stolen, and they want to cancel their policy. What must the insurer consider? A. Whether a pro-rata refund is applicable B. Whether the MID record should show the theft C. If the cancellation is due to misrepresentation D. If temporary renewal cover is possible

Answer 36

A

Question 37

A business client makes multiple vehicle changes in a motor fleet policy. How are these typically handled? A. By issuing immediate new certificates for each vehicle B. Through periodic declarations and retroactive premium adjustments C. By requiring individual policies for each new vehicle D. By updating MID records after renewal

Answer 37

B