FULL TEST Flashcards
(101 cards)
1
Q
By paying their premium, someone who has insured their car is said to have:
A
transferred the risk to the insurer.
2
Q
People who are most likely to take out insurance are termed:
A
risk-averse.
3
Q
Risk management is UNLIKELY to include risk:
A
planning.
4
Q
When a business has policies in place to avoid risks from occurring, these are known as:
A
preventative controls.
5
Q
What is the level of risk usually based on?
A
The frequency and severity of an event occurring.
6
Q
The risk of an aircraft crashing would be regarded as a:
A
low frequency and high severity risk.
7
Q
Something that gives rise to a loss is:
A
a peril.
8
Q
To be insurable, the risk will usually need to be:
A
financial.
9
Q
What is the risk of a fire occurring known as?
A
Pure risk.
10
Q
Risks that could occur on such a vast scale that they could be uninsurable are known as:
A
fundamental risks.
11
Q
What is a fortuitous event?
A
It must be accidental or unexpected.
12
Q
Why is the ‘law of large numbers’ important with insurance?
A
The greater the number of similar risks, the closer the actual outcome will be to the expected losses.
13
Q
What is the best description of the principle of pooling risks?
A
The losses of the few are met by the contributions of the many.
14
Q
Where an insurance policy is arranged on a collective basis, the insured needs to be aware that:
A
each insurer is separately liable to the insured for its proportion of any claim that becomes payable.
15
Q
A manufacturer has agreed to settle a substantial proportion of any claim itself, with the insurer picking up the remainder. This is known as:
A
co-insurance.
16
Q
Why is insurance most likely to be purchased?
A
It provides peace of mind.
17
Q
What is the main advantage for someone to insure their car?
A
Most or all of the risk of financial loss is transferred to the insurer.
18
Q
Within the insurance industry, price comparison websites are known as:
A
aggregators.
19
Q
A mutual insurer will share profits with its:
A
policyholders.
20
Q
Within the Lloyd’s market, what is the role of a managing agent?
A
It manages the underwriting of one or more syndicates.
21
Q
Between which two parties must ‘contract certainty’ exist in the London Market?
A
The insured and insurer.
22
Q
Under the Insurance Distribution Directive, an ancillary insurance intermediary:
A
distributes insurance even though its principal activity is not insurance distribution.
23
Q
Who is acting as the agent in the arrangement of a motor insurance policy between Jason and Speedy Insurance?
A
Megan.
24
Q
How does an insured who buys insurance via direct marketing from an insurance company potentially benefit?
A
Premiums may be lower than would otherwise be the case.
25
How could Alicia benefit if she buys insurance through an aggregator rather than direct from an insurer?
She is more likely to get the best price and/or cover available.
26
Why is an insurance company most likely to use reinsurance?
It allows it to manage the risk it is prepared to accept.
27
Retroceding is the process of:
a reinsurer transferring some of its risks to other reinsurers.
28
A loss adjuster's role is primarily to:
process more complex claims from start to finish.
29
Who would have the day-to-day responsibility for ensuring that an insurance company abides by the rules and regulations set down by the regulator?
Compliance officer.
30
Which organisation represents worldwide insurance and reinsurance companies that operate through London?
International Underwriting Association of London.
31
Which insurance would most likely be EXEMPT from insurance premium tax?
Aircraft insurance.
32
What type of insurance cover is an example of property insurance?
Livestock.
33
Legal expenses and business interruption are both examples of what type of insurance?
Pecuniary.
34
Business interruption is an example of what type of insurance?
Pecuniary.
## Footnote
Pecuniary insurance covers financial losses due to business interruptions.
35
When is a contract binding on both parties in the context of private medical insurance?
Linda accepts the amended terms.
## Footnote
The binding nature of the contract occurs when the insured accepts the proposed terms.
36
When does a buildings insurance contract become binding for Steve?
1 September.
## Footnote
The contract becomes binding when the acceptance is posted, regardless of when it is received by the insurer.
37
In insurance contract law, what is normally considered as consideration?
premium payment.
## Footnote
Consideration is the value exchanged in a contract, typically the premium paid by the insured.
38
What will an insured's next renewal documentation typically include?
additional prescribed information encouraging her to shop around.
## Footnote
Insurers often include information to encourage policyholders to compare prices.
39
What is the position with cancellation if Kate has not made a claim?
She could cancel the policy without charge if she sent her cooling-off notice within the 14 day period, although she may have to pay for any services provided.
## Footnote
Consumers have the right to cancel policies within a cooling-off period.
40
Who is the principal in law if Lin Li arranges her buildings insurance via a broker?
Lin Li.
## Footnote
The insured is considered the principal, while the broker acts as an agent.
41
What type of agency agreement is established with a jointly agreed and legally enforceable written agreement?
Agency by consent.
## Footnote
This type of agency arises from mutual agreement between the parties involved.
42
An independent insurance broker acts as the agent of the insurance company when?
the broker has authority from the insurer to handle proposal forms and confirm cover.
## Footnote
Authority granted to the broker allows them to represent the insurer.
43
What is least likely to be found in a terms of business agreement?
Reason for the advice provided.
## Footnote
Terms of business agreements typically do not include the rationale behind the advice given.
44
In insurance, what does 'subject-matter of insurance' refer to?
item or event insured.
## Footnote
The subject-matter is the specific item or event that is covered by the insurance policy.
45
Why is Suresh unable to insure his brother's car?
insurable interest.
## Footnote
Insurable interest requires a financial stake in the item being insured.
46
What is the position if Colin wants to insure his father's house before inheriting it?
This would not be possible as the future expectation to inherit the property would not normally create an insurable interest.
## Footnote
Insurable interest must exist at the time of the insurance contract.
47
What must someone with insurance demonstrate under the principle of insurable interest?
That they stand to lose financially if property is lost or damaged.
## Footnote
Insurable interest necessitates a financial loss in case of an insured event.
48
What creates the insurable interest for Simon when purchasing a house?
The contract creates the insurable interest.
## Footnote
The legal agreement to purchase establishes a financial interest.
49
To comply with the duty of good faith, what must an insurer do?
It can only introduce non-standard terms if they are previously agreed.
## Footnote
Insurers must maintain transparency and fairness in their dealings.
50
What does the Consumer Insurance [Disclosure and Representations] Act 2012 require from consumers?
consumers to take reasonable care not to make a misrepresentation when applying for insurance.
## Footnote
This act emphasizes the responsibility of consumers in providing accurate information.
51
Who is subject to the duty of disclosure when arranging an insurance policy?
Both the proposer and insurer.
## Footnote
Both parties have obligations to disclose relevant information.
52
Under the FCA rules, when must information about the insurance contract be provided to consumers?
before the conclusion of the contract.
## Footnote
Consumers must be informed prior to finalizing any insurance agreement.
53
What happens if Tanya does not disclose relevant information when applying for insurance?
As a consumer, Tanya is only required to take reasonable care to answer any questions asked by the insurer. Her policy would be valid.
## Footnote
Consumers are not obligated to disclose unasked information.
54
What is an example of a physical hazard when applying for motor insurance?
The age of the driver.
## Footnote
The driver's age can influence risk assessment in insurance applications.
55
In insurance, what do moral hazards relate to?
insurance history of the insured or to their personal history.
## Footnote
Moral hazards involve behaviors that may increase the risk of loss.
56
If an applicant omits answers to two questions on a buildings insurance policy, what is the insurer likely to do?
It would investigate and settle the claim in accordance with the policy terms and conditions.
## Footnote
Insurers may still honor claims if they deem the omission not material.
57
Under the Consumer Insurance [Disclosure and Representations] Act 2012, what is required from someone applying for a personal insurance policy?
take reasonable care to answer the insurer's questions fully and accurately.
## Footnote
This law aims to ensure that consumers provide truthful and complete information.
58
What action is an insurer likely to take if an application form is completed recklessly?
Terminate the insurance contract from inception, refuse the claim and retain all premiums paid.
## Footnote
Reckless behavior can lead to severe penalties for the insured.
59
What happens if an insured deliberately gives false information when applying for motor insurance?
Damage to the car would not be covered but the third-party damage would be. The insurer may look to recover these costs from the insured.
## Footnote
Insurers can deny claims for damage directly caused by fraud.
60
What is not covered when a car insurance policy is in effect?
Damage to the car
## Footnote
Third-party damages would be covered.
61
What principle requires an insurer to establish all possible causes for a loss before deciding on a claim's validity?
proximate cause
62
What is the proximate cause of Dean's death after a car accident?
The infection
63
What does the principle of indemnity aim to maintain?
the insured's financial position
64
An example of a benefit policy is _______.
personal accident insurance
65
What is the maximum liability claim allowed under a motor insurance policy for injury resulting from a crash?
An unlimited amount
66
What is the maximum amount Heather could claim for stolen belongings worth £7,000?
£7,000
67
What will the insured typically receive if the stock of a wholesale shop was destroyed?
The replacement cost plus transport and handling costs
68
What is an insurance policy called where the amount of the potential total loss is agreed at the outset?
Agreed value policy
69
What is the maximum possible claim under an indemnity policy if the property's value at the time of loss is £900,000?
£900,000
70
When do insurers use averaging for a claim?
When a risk is underinsured
71
Contribution occurs in insurance claims when _______.
there are two or more insurers liable for the same risk
72
What is the duty under common law tort?
act in a reasonable way towards others
73
Employers in Great Britain must have employers' liability insurance with an indemnity limit of at least _______.
£5m
74
Which regulator would authorize a new insurance company in the UK?
The PRA
75
What does 'judgment-based' regulation refer to in the context of the PRA?
Assessing the future risks of a firm
76
The FCA's strategic objective is to _______.
make markets function well
77
The supervision of small regulated firms by the FCA will normally involve _______.
flexible teams rather than a named FCA supervisor
78
Who must obtain FCA's authorisation and approval in a regulated firm?
Those individuals that have a material impact on the conduct of the firm's regulated activities only
79
The cross-cutting rules of the FCA's Consumer Duty are designed to help firms _______.
interpret the four outcomes that also form part of the Duty
80
Who certifies an insurance adviser appointed to a 'significant harm function'?
The authorised firm
81
What did the Public Interest Disclosure Act 1998 introduce?
Whistle-blowing requirements
82
Under Solvency II, an insurance company must maintain enough capital to give it what level of confidence?
99.5%
83
What is the minimum amount of professional indemnity cover for a single claim that the FCA requires intermediary firms to have?
€1,300,380
84
For firms advising on insurance, how long must records of training and assessment of competence be kept?
Three years from the time that the employee ceased to carry out the role
85
If Beta Insurance has outsourced its claims handling to third-party firms, who would the FCA hold responsible?
Beta Insurance
86
What is typically the cooling-off period for a consumer motor insurance policy?
14 days
87
An insured cancels their insurance and uses the proceeds to set up multiple policies. This is an example of _______.
layering
88
To meet UK GDPR requirements, a firm must obtain a customer's consent to process their data and _______.
should consent be provided, the firm must be able to evidence this
89
In money laundering terms, reinvesting the proceeds is an example of:
layering.
## Footnote
Layering involves concealing the source of illegally obtained funds through a series of transactions.
90
To meet UK GDPR requirements, a firm must obtain a customer's consent to process their data and:
should consent be provided, the firm must be able to evidence this.
## Footnote
Firms must maintain records to demonstrate that consent was obtained.
91
For an insurer's online marketing to comply with the UK GDPR, people have to:
positively give their consent to opt-in to marketing.
## Footnote
This ensures that consent is explicit and not assumed.
92
Which organizations may investigate and require an insurance company to amend unfair policy terms?
The FCA and the Competition and Markets Authority.
## Footnote
Both organizations can enforce consumer protection laws.
93
Under FCA rules, the definition of an eligible complainant includes a:
guarantor.
## Footnote
Guarantors are recognized as eligible complainants under specific regulations.
94
An insurance broker must retain complaint files for a minimum of how many years after a complaint is settled?
3 years.
## Footnote
In this case, until 1 February 2028 for a complaint settled on 15 April 2025.
95
The latest a policyholder should receive a final response from their broker after a written complaint is:
27 January.
## Footnote
This is a response time frame based on regulatory requirements.
96
Who should a policyholder complain to if they believe they were mis-sold a regulated product?
The authorised firm that provided the advice.
## Footnote
Initial complaints should be directed to the firm involved in the transaction.
97
For a complaint referred to the Financial Ombudsman Service, the maximum financial award that can be given is:
£195,000.
## Footnote
This amount is subject to change based on regulatory updates.
98
If an insurer is unable to pay an employers' liability claim due to insolvency, the maximum protection under the Financial Services Compensation Scheme is:
£4m.
## Footnote
This amount reflects the coverage limits set by the scheme.
99
Under the Financial Services Compensation Scheme, the amount paid for an unpaid claim due to insurer failure is:
100%.
## Footnote
This indicates full coverage for eligible claims up to the compensation limits.
100
The CII Code of Ethics for its members:
goes beyond legal and regulatory rules.
## Footnote
It emphasizes ethical standards that exceed mere compliance.
101
How many central principles does the CII's Code of Ethics have?
Five.
## Footnote
These principles guide the conduct and decision-making of its members.
