CII IF8 Flashcards
Which of these is an example of the application of the contribution condition?
Select one:
a. Clare has two policies covering the same risk and each insurer only pays part of the claim.
b. In line with his policy conditions, Jim notifies his packaged insurer that he has started selling designer clothing instead of budget wear.
c. David’s shop packaged insurer reduces the amount of his theft claim as he had not insured his contents for their full value.
d. Brian’s packaged insurer writes to the insurer of a lorry that backed into Brian’s property at an exhibition and claims reimbursement of the costs of repairs that they paid.
a. Clare has two policies covering the same risk and each insurer only pays part of the claim.
In the event of more than one policy of indemnity covering the same risk, the insurer limits its liability to its share of the loss using the contribution condition. The insured is usually obliged to claim proportionately from each insurer.
What primarily distinguishes a limited company from a sole trader?
Select one:
a. The owners of a limited liability company cannot work in the business.
b. Only a limited company can employ employees who are not relations.
c. A sole trader cannot employ staff.
d. A limited company is a separate legal entity from the shareholders who own it.
d. A limited company is a separate legal entity from the shareholders who own it. Limited liability companies are companies formed under the terms of the Companies Acts and are separate legal entities from the shareholders who own them.
Which of these is usually an optional extension rather than part of the standard cover offered under a hotels and guest houses commercial packaged policy?
Select one:
a. Loss of or damage to paintings and other works of art that are part of the hotel decor.
b. Breakdown cover for computer equipment at the hotel premises in the UK.
c. The insured’s liability for loss of or damage to employees’ personal property.
d. The insured’s liability for loss of or damage to guests’ personal effects and motor vehicles.
b. Breakdown cover for computer equipment at the hotel premises in the UK.
Computer breakdown is usually one of a number of optional extensions available to hotel and guest house policies to meet the needs of specific types of hotel and guest house risks.
Insurer P has a cancellation clause in its policies requiring them to give 7 days’ notice of cancellation. If they invoke this clause, on what day will any policy be cancelled?
Select one:
a. 7 days after the insured reads the notice of cancellation letter.
b. 7 days after the insured receives the notice of cancellation letter.
c. 7 days after the proportionate return of premium due is credited to the insured.
d. 7 days after the insurer sends the notice of cancellation letter.
d. 7 days after the insurer sends the notice of cancellation letter.
Any cancellation letter sent by insurers is usually sent by recorded delivery or registered post so there is a record of it having been received.
What is the main purpose of full cycle EDI?
Select one:
a. To provide an interface between insurer and intermediary that provides pricing information only.
b. To provide an interface between insured and intermediary that provides pricing information and effects policy renewals, alterations and issues policy documentation.
c. To provide an interface between insured and intermediary that provides pricing information only.
d. To provide an interface between insurer and intermediary that provides pricing information and effects policy renewals, alterations and issues policy documentation.
d. To provide an interface between insurer and intermediary that provides pricing information and effects policy renewals, alterations and issues policy documentation. EDI creates an interface between intermediaries and insurers that both provides pricing information and may also be used to effect policy renewals and alterations. This enables intermediaries and insurers to equal the service offered by direct insurance companies. Where such functionality includes issue of policy documentation it is termed ‘full cycle EDI’.
Which of these best describes what is incorporated in a condition?
Select one:
a. Specific details of what the policy covers.
b. Confirmation that the policy is a contract between the insurer and the insured.
c. Details of things which the insured must or must not do for cover to be valid.
d. Details of how the policy is made personal and specific to the individual insured.
c. Details of things which the insured must or must not do for cover to be valid.
General insurance policies contain a number of conditions, which are things which the insured must do, or must not do, for cover to be valid. Conditions can be classified as conditions precedent to the contract and conditions precedent to liability.
Which of these is a feature of the current commercial packaged insurance market?
Select one:
a. Insurers concentrate on price rather than product differentiation.
b. Product life cycles are reduced and many insurers do not expect their products to remain the same for longer than 18 months.
c. Regulation is voluntary.
d. Standards of customer service have been declining.
b. Product life cycles are reduced and many insurers do not expect their products to remain the same for longer than 18 months.
Changes in the financial services sector mean that nowadays insurance product life cycles are dramatically reduced and this affects marketing.
Some badly stacked tins of food fall on an employee at Hughes' greengrocers. The employee is quite badly injured and cannot work for several weeks. Which of these elements of cover under Hughes' commercial packaged policy will pay compensation for the employee's injuries? Select one: a. Public liability. b. Employers' liability. c. Products liability. d. Business interruption.
b. Employers’ liability.
The employers’ liability section covers the insured’s legal liability to pay compensation to employees injured at work, including the legal costs of both parties.
Under a hotel and guest house policy, what does the ‘loss of licence’ optional extension usually cover?
Select one:
a. The cost of the fall in bookings if the licence to stage outdoor events is withdrawn.
b. The cost of a chauffeur to transport guests in the event the insured losses his driving licence.
c. The reduction in bookings if the licence to hold weddings on site is withdrawn.
d. The reduction in the value of the premises or the business following a loss of a licence to sell liquor.
d. The reduction in the value of the premises or the business following a loss of a licence to sell liquor.
Cover is usually provided for the reduction in the value of the premises or the business following a loss of a licence to sell liquor, due to causes beyond the insured’s control. A sum insured of £100,000 - £200,000 applies. Some insurers only provide cover for the loss of gross profit resulting from the withdrawal of the licence, and only pay for the reduction in the value of the premises if the insured is unable to obtain a licence within 12 months and sells the premises.
Which of these businesses is most likely to have the premium they pay calculated solely on a rate per cent basis?
Select one:
a. White’s, who have no obvious exposure measure.
b. Parker’s, whose premium calculation gives a premium below a certain amount and this amount is charged instead.
c. Li’s, whose premium calculation involves applying a premium rate to a premium base.
d. Bates, whose insurer applies a premium rate to an estimated figure for turnover and asked Bates to submit a declaration at the end of the year, showing the actual amounts.
c. Li’s, whose premium calculation involves applying a premium rate to a premium base. Premium rates for commercial packaged policies are usually calculated by applying a premium rate to a premium base to obtain ‘a rate per cent’, applied to the contents sum insured. For example, a rate of 1.5% means that an insurer charges £1.50 premium for every £100 of contents sum insured.
Which of these businesses is most likely to arrange the business interruption element of their commercial packaged policy on a gross profit basis?
Select one:
a. Sam’s shop, which retails goods involving sales, purchases of goods and opening and closing stock.
b. Gordon’s accountants, whose income is created by charging clients for their services.
c. A & B Offices, who handle the administration and pay roll for another company.
d. Perkin’s solicitors, who charge fees for their services.
a. Sam’s shop, which retails goods involving sales, purchases of goods and opening and closing stock.
The gross profit basis is suitable for a business such as a shop, which is retailing goods involving sales, purchases of goods and opening and closing stock.
Which of these losses would automatically be covered under the property loss or damage section of a standard commercial packaged policy for a shop?
Select one:
a. Storm damage to a mobile advertising board which is placed on the pavement opposite the shop.
b. Theft by an employee.
c. Shoring up the damaged building following a fire.
d. Terrorism damage.
c. Shoring up the damaged building following a fire.
Specific exclusions to the property damage section of cover include terrorism, theft involving the principal, partners, directors or employees and damage to mobile property in the open by wind, theft, rain, sleet, snow, flood or dust.
Which of these statements about express duties and implied duties is correct?
Select one:
a. Implied duties reinforce express duties.
b. Express duties must be complied with even if they are not written into the policy wording.
c. Implied duties are the unwritten duties imposed at common law.
d. Express duties are duties which are specifically written into the contract, and are usually found in the general policy exclusions.
c. Implied duties are the unwritten duties imposed at common law.
Implied duties must be complied with even if they are not written into the policy wording. For example, common law requires that the insured should act as though uninsured, taking all reasonable steps to minimise the loss and should advise the appropriate authorities in the event of loss or damage. Express duties, usually found in the policy conditions, often reinforce implied duties.
When calculating the premium for a commercial packaged policy, who decides the premium base and premium rate?
Select one:
a. The insurer decides on the value of the premium base and the premium rate.
b. The proposer decides on the value of the premium base and the premium rate.
c. The proposer decides on the value of the premium base and the insurer decides on the premium rate.
d. The insurer decides on the value of the premium base and the proposer decides on the premium rate.
c. The proposer decides on the value of the premium base and the insurer decides on the premium rate.
The premium base is the measure of the exposure. So, for example, for office risks the premium base would be the contents sum insured - and this must be decided by the proposer. The premium rate is intended to reflect the hazards associated with the particular insured. The greater the risk to the insurer, the higher the rate, and vice versa - and so this must be set by the insurer.
Which of these statements about the commercial packaged insurance market is correct?
Select one:
a. Government tax incentives have increased demand for commercial packaged policies.
b. The commercial packaged insurance market is a niche market.
c. The small size of the small businesses insurance market makes this market unattractive for many insurers.
d. IT has streamlined the commercial packaged policy sales and administration process.
d. IT has streamlined the commercial packaged policy sales and administration process.
The small business market is very large and is of great value to commercial insurers. Through IT they have been able to put processes and systems in place to handle the business in a cost-effective way.
Sally has a standard salon packaged policy with no extensions of cover. Which of these losses is most likely to be covered under the policy?
Select one:
a. A sink is broken and needs replacing when Sally drops a heavy hair dryer in the salon.
b. Sally’s financial loss when a salon junior steals £300 of expensive lotions from the salon.
c. A customer’s claim for the cost of going to another salon to have the colour of her hair put right, following Sally mixing the customer’s hair colourant incorrectly.
d. A claim from Sally for a weekly benefit following her slipping in the salon and becoming temporarily disabled.
a. A sink is broken and needs replacing when Sally drops a heavy hair dryer in the salon. The salon packaged policy has an automatic extension of cover for accidental breakage of sanitary fittings.
Which of these statements about conditions is correct?
Select one:
a. Those events that will never form part of the cover provided by a policy are called conditions.
b. Conditions ensure that all risks meet a minimum underwriting standard. c. Conditions avoid the need for the insurer to request further details when underwriting, even if the insured is not able to confirm that the minimum standard is met.
d. All policy conditions must be complied at all times for any claim to be valid.
b. Conditions ensure that all risks meet a minimum underwriting standard.
Conditions avoid the need for the insurer to request further details, provided the insured can confirm that the minimum standard is met. For example, there may be a requirement to meet minimum security conditions. Policy conditions must be complied with for cover to be effective (although failing to comply with a condition not relevant to a claim would not invalid the particular claim).
Which of these statements about insurance policies is true?
Select one:
a. The onus is on the insured to prove that a policy exclusion does not apply.
b. A breach of warranty normally renders the policy void from inception.
c. Representations will always appear in the policy itself so there is a written record of them.
d. Some conditions do not appear in the policy, but still apply.
d. Some conditions do not appear in the policy, but still apply.
Some conditions are implied (e.g. that there is insurable interest) and they do not appear in the policy itself.
How does a brochure site normally operate?
Select one:
a. It permits information input by the customer online to be used to provide a quotation directly to the customer online.
b. It provides a non-interactive online version of the insurer’s or intermediary’s marketing material.
c. It provides customers with online access to change the details held or to obtain a new quotation if risk details change.
d. It allows customers to enter information online which is used to call the customer back to progress the enquiry or provide a quotation offline.
b. It provides a non-interactive online version of the insurer’s or intermediary’s marketing material.
With a brochure site, potential customers are provided with contact information, and are encouraged to contact the company using these means. Alternatively some ask for customer contact details, on the basis of which the enquirer is promised a telephone call response.
In which of these timescales does ICOBS confirm that an insurer must issue its renewal notice?
Select one:
a. 30 days before renewal of the policy is due.
b. In good time before the expiry of the policy. c. As soon as possible before renewal of the policy is due.
d. Promptly before expiry of the policy.
b. In good time before the expiry of the policy.
ICOBS states that the insurer must provide renewal terms ‘in good time’ before the expiry, or notify the insured that they are not willing to invite renewal.
