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Flashcards in I10 Mock questions Deck (65):
1

One of the key roles of an insurance broker is to

A. act as an intermediary between the insurer and the regulator.

B. calculate the insurance premium.

C. conduct insurance mediation on behalf of insurers.

D. provide independent, impartial advice to clients.

D. provide independent, impartial advice to clients

2

How does the use of an insurance broker benefit an insurer?

A. All material circumstances will always be declared by the broker to the insurer.

B. It enables the insurer to easily cross-sell insurance policies for other classes of business to an existing insured.

C. It reduces the time spent by the insurer in explaining and administering a policyholder’s insurance requirements.

D. The responsibility for the payment of Insurance Premium Tax is passed to the broker.

C. It reduces the time spent by the insurer in explaining and administering a policyholder’s insurance requirements.

3

What type(s) of insurance broker is able to offer Lloyd’s policies to its clients?

A. Aggregators only.

B. Lloyd’s brokers only.

C. Wholesale brokers only.

D. All types of insurance broker.


D. All types of insurance broker.

4

An insurance broker is approached for a quotation by the owner of an engineering business. The broker obtains a number of quotations, helps the proposer to formulate a business continuity plan and then places the risk. The new insurer arranges a survey. Which of these elements is an added value service?

A. Assisting with the business continuity plan.

B. Obtaining the quotations.

C. Placing the risk.

D. Surveying the risk.

A. Assisting with the business continuity plan.

5

Insurance brokers are least likely to be involved in placing which type of insurance?

A. Construction.

B. Extended warranty.

C. Marine cargo.

D. Motor fleet.

B. Extended warranty.

6

The back office function within a firm of insurance brokers will NOT include

A. compliance.

B. marketing.

C. placement of risks.

D. settlement of insurer accounts.

C. placement of risks.

7

Under a delegated underwriting authority agreement, when would a coverholder normally declare bound risks by completing a bordereau and submitting it to the insurer?

A. Immediately the risk is bound.

B. Weekly.

C. Monthly.

D. Annually.

C. Monthly.

8

What action should an insurance broker take immediately upon notification from an insured of a third party injury claim?

A. Contact the third party to request full details.

B. Inform the Claims and Underwriting Exchange.

C. Notify the insurer.

D. Request completion of a claim form.

C. Notify the insurer.

9

At what point in the placing process must the insurance broker first take into account the client’s demands and needs?

A. When completing the demands and needs statement.

B. When completing the initial disclosure document.

C. When presenting the suitability statement to the client.

D. When sourcing the most appropriate insurance policy.

D. When sourcing the most appropriate insurance policy

10

If a proposer requests that no excess applies to his new insurance policy, the insurance broker should explain the

A. consequent limitations on cover.

B. effect on premium levels.

C. imposition of warranties.

D. restrictions on the policy term.

B. effect on premium levels.

11

Which document will an insurance broker normally use to establish the demands and needs of a potential client who requires professional indemnity insurance?

A. A proposal form.

B. A statement of fact.

C. A suitability statement.

D. A Terms of Business Agreement.

A. A proposal form.

12

A Lloyd’s broker will prepare a Market Reform Contract to

A. detail the monthly risks under a delegated authority agreement.

B. identify a client’s demands and needs.

C. notify an insurer of a claim.

D. provide underwriting information to an insurer.

D. provide underwriting information to an insurer.

13

Whom must a Lloyd’s broker initially notify under an insurance policy placed with a Lloyd’s underwriter when a catastrophe claim is reported by a client?

A. The Council of Lloyd’s.

B. The leading underwriter only.

C. Xchanging Claims Services.

D. All underwriters who have insured the risk.

B. The leading underwriter only.

14

A retail insurance broker has a fully-owned managing general agency (MGA). When considering delegated authority agreements, how does this arrangement affect the broker’s relationship with the delegating insurers?

A. The MGA must be used in separately defined market areas to those of the owning broker.

B. The MGA must have lower authority limits than the owning broker.

C. The MGA provides the owning broker with increased capacity on separately negotiated terms.

D. All delegated authority business must be placed with the MGA.

C. The MGA provides the owning broker with increased capacity on separately negotiated terms.

15

When a Lloyd’s broker agrees to place business on behalf of a broker who is NOT a Lloyd’s broker, the Lloyd’s broker is operating as a

A. consolidator.

B. producing broker.

C. retail broker.

D. wholesale broker.

D. wholesale broker.

16

What is the role of reinsurance brokers?

A. Aggregators.

B. Loss adjusters.

C. Market placement specialists.

D. Risk surveyors.

C. Market placement specialists.

17

An insurer is concerned that it stands to suffer financially from future claims. How can a reinsurance broker best assist the insurer?

A. By advising the insurer’s clients on risk reduction.

B. By advising the insurer regarding warranties and exclusions.

C. By helping the insurer to withdraw from the market.

D. By spreading the risk in the market.

D. By spreading the risk in the market.

18

Where a retail broker uses a wholesale broker to place business, who has a duty of care to the insured?

A. It is shared equally between the brokers.

B. It remains with the retail broker.

C. It solely depends on the terms of business agreed between the brokers.

D. It transfers from the retail broker to the wholesale broker.

B. It remains with the retail broker.

19

The Insurance Act 2015 emphasises what role for brokers with regard to material circumstances?

A. To ensure all material circumstances are supplied to enable accurate presentation of the risk.

B. To explain to the proposer that any misrepresentation will be treated as deliberate or reckless.

C. To explain to the proposer that failure to disclose a material circumstance is an offence under the Act.

D. To verify the accuracy of all information supplied by the proposer.

A. To ensure all material circumstances are supplied to enable accurate presentation of the risk.

20

What is one of the benefits to the client where an insurance broker provides a detailed underwriting submission to an insurer?

A. A faster quotation will always be obtained.

B. Fewer exclusions and warranties.

C. Increased probability of more favourable terms.

D. Wider cover will always be offered.

C. Increased probability of more favourable terms.

21

The Insurance: Conduct of Business sourcebook (ICOBS) states that an insurance broker, when explaining to a client why an insurer has been approached, must

A. demonstrate that all insurers have been approached.

B. demonstrate that the quotations are reasonable based on the client’s circumstances.

C. provide the client with a list of the leading insurers in the market sector and those which have been approached.

D. tell the client the basis of the broking procedure used.

D. tell the client the basis of the broking procedure used.

22

What should an insurance broker check before approaching a UK insurer to underwrite a risk?

A. That the insurer is regulated to underwrite the required class of insurance.

B. The amount of the insurer’s claim reserves.

C. The insurer’s underwriting profit.

D. That the insurer is a member of the Association of British Insurers

A. That the insurer is regulated to underwrite the required class of insurance.

23

Where a broker operates a no service claims-handling arrangement, what action must be taken when a claim is notified by a client?

A. Advise the client that the broker can only become involved if there are problems with the claim.

B. Advise the client that they have a duty to notify the insurer and the broker has no involvement.

C. Advise the insurer that the broker will forward the initial paperwork but that the insurer must then respond directly to the client.

D. Advise the insurer that a claim is being made but also tell the client to deal directly with the insurer

D. Advise the insurer that a claim is being made but also tell the client to deal directly with the insurer

24

Whom should an insurance broker inform if he suspects that a claim may be fraudulent?

A. The claimant.

B. The insurer.

C. The police.

D. The regulator.

B. The insurer.

25

An insurance broker suggests to a client that risk control measures are introduced to limit the extent of any physical damage if a loss occurs. This is known as

A. risk avoidance.

B. risk elimination.

C. risk minimisation.

D. risk prevention

C. risk minimisation.

26

An insurance broker’s risk survey has identified the potential for small, high-frequency claims. The same risk also results in occasional significantly higher claim values. What is likely to be the most appropriate recommendation from the broker based on this information?

A. Advise the client to self-insure in respect of this entire risk.

B. Exclude this risk from cover.

C. Make this risk subject to a warranty.

D. Set an excess to eliminate the smaller claims.

D. Set an excess to eliminate the smaller claims

27

When a multi-national business places insurance, which party is normally responsible for designing its insurance programme?

A. The insurance broker.

B. The insurer.

C. The policyholder.

D. The reinsurance company.

A. The insurance broker.

28

What should an insurance broker do when there is increased capacity in the insurance market?

A. Encourage clients to increase excess levels to maintain current premiums.

B. Encourage clients to invest in additional risk management.

C. Recommend clients to remain with existing insurers despite increasing premiums.

D. Search the market for more competitive terms for clients

D. Search the market for more competitive terms for clients

29

Why may a client use an insurance broker’s rent-a-captive facility in preference to establishing its own captive insurance company?

A. Administrative costs are reduced because a number of facilities are collectively managed by the broker.

B. It requires less insurance premium to fully fund the calculated risk.

C. There will be more funds available to settle claims.

D. To avoid conflicts of interest


A. Administrative costs are reduced because a number of facilities are collectively managed by the broker.

30

How is an insurance broker normally remunerated for supplying additional risk management services to a client?

A. As a first charge on any claim payment.

B. As a separate negotiated fee.

C. As part of the total insurance premium.

D. It is automatically included within the commission payment

B. As a separate negotiated fee.

31

A delegated authority agreement will normally be arranged between an insurance broker and

A. the Financial Conduct Authority.

B. an insurer.

C. a policyholder.

D. a reinsurer.

B. an insurer.

32

Who is normally the client of a wholesale insurance broker?

A. The insurer.

B. The proposer.

C. The reinsurer.

D. The retail broker

D. The retail broker

33

For what purpose does a firm of insurance brokers send a Terms of Business Agreement to a client?

A. It contains the client’s insurance quotation.

B. It details the services that the broker will provide to the clients.

C. It provides a summary of the client’s insurance coverage.

D. It states the client’s insurance requirements

B. It details the services that the broker will provide to the clients.

34

What does the duty of obedience require an insurance broker to do when acting for a client?

A. Act in the client’s best interests at all times.

B. Avoid any conflict of interest.

C. Keep accurate records of monies handled.

D. Perform all of the client’s lawful instructions in a timely manner

D. Perform all of the client’s lawful instructions in a timely manner

35

Under the principle of tort, for what are insurance brokers legally responsible to their principal?

A. To abide by all statutory requirements.

B. To achieve contract certainty.

C. To exercise reasonable care.

D. To maintain Continuous Professional Development records

C. To exercise reasonable care

36

During the claim process, when may a conflict of interest occur at a firm of insurance brokers?

A. When a claim payment is received from an insurer.

B. When a loss assessor and a loss adjuster are both involved in a claim.

C. When notifying an insurer of a claim.

D. When two or more clients are involved in the same claim

D. When two or more clients are involved in the same claim

37

Why might a conflict of interest arise if an insurance broker has a delegated authority, which includes a profit commission, with an insurer?

A. Business can only be placed with an insurer specifically requested by the client.

B. Business may be placed with other insurers who quote preferential terms.

C. Only good quality risks may be placed under the delegated authority.

D. Only sub-standard risks may be placed under the delegated authority

C. Only good quality risks may be placed under the delegated authority.

38

In which document will an insurer detail the level of authority that is provided to an insurance broker?

A. The demands and needs statement.

B. The policy wording.

C. The suitability statement.

D. The Terms of Business Agreement.

D. The Terms of Business Agreement.

39

In accordance with the Insurance: Conduct of Business sourcebook (ICOBS), what must an insurance broker disclose to a potential client regarding the premium to be paid?

A. The amount of commission within the premium.

B. The full premium calculation, including loadings and discounts.

C. The premium with any fee shown separately.

D. The premium both with and without Insurance Premium Tax.

C. The premium with any fee shown separately.

40

The Financial Conduct Authority’s approach to supervision requires insurance brokers to

A. deal only with insurers who are members of the Association of British Insurers.

B. identify and reduce risks which may affect its clients.

C. improve the level of qualifications of its team.

D. submit details of complaints on a monthly basis.

B. identify and reduce risks which may affect its clients.

41

What type of insurance broker is the Financial Conduct Authority responsible for regulating?

A. All European insurance brokers who place insurance risks with UK insurers.

B. Only those insurance brokers who conduct general insurance mediation activities.

C. Only those insurance brokers who conduct insurance mediation activities in the UK.

D. Only those insurance brokers who place consumer insurance.

C. Only those insurance brokers who conduct insurance mediation activities in the UK.

42

When does an insurance broker’s duty to treat a customer fairly expire?

A. When an insurance placement is completed.

B. At policy inception.

C. At policy termination only.

D. After policy termination when all claims have been settled.

D. After policy termination when all claims have been settled.

43

What is the maximum time period after inception during which an insurance broker should send an insurance policy to a consumer to comply with the Contract Certainty Code of Practice?

A. 5 days.

B. 7 days.

C. 10 days.

D. 14 days.

B. 7 days.

44

What does the regulator require in order for firms of insurance brokers to demonstrate the competency of employees?

A. Annual appraisals.

B. Continuing professional development.

C. Success in approved examinations.

D. The issuance of suitability statements.

B. Continuing professional development.

45

In order to satisfy regulatory requirements, what is the minimum number of years for which an insurance broker must keep training records?

A. 3 years.

B. 5 years.

C. 7 years.

D. 10 years

A. 3 years.

46

Where an employee of a firm of insurance brokers suspects that a client may be involved in money laundering, what action must initially be taken?

A. Cease any business transactions with the client.

B. Confront the client.

C. Freeze any assets held by the broker on behalf of the client.

D. Report the suspicion.

D. Report the suspicion.

47

Why is an insurance broker required to check the sanctions list?

A. To avoid placing business for a prohibited client.

B. To check a client’s financial assets.

C. To establish in which territories a business client operates.

D. To verify the legal existence of a business client.

A. To avoid placing business for a prohibited client.

48

How may an insurance broker inadvertently receive a bribe from a client?

A. By accepting a lunch invitation to discuss the renewal of a client’s insurance programme.

B. By receiving a client request to conduct a risk management site inspection.

C. By receiving a gift for placing a client’s insurance programme.

D. By receiving a request to speak at an international insurance conference.

C. By receiving a gift for placing a client’s insurance programme.

49

A client telephones an insurance broker to request details of the data that is held about him. What data, if any, must the broker provide?

A. Full details of the data, but it is illegal for a fee to be charged.

B. Full details of the data, but a fee may be charged.

C. A summary of the data.

D. Such data cannot be provided.

B. Full details of the data, but a fee may be charged.

50

For how long may an insurance broker retain personal data about a UK policyholder?

A. For the policy period only.

B. For a maximum of 10 years only.

C. Until the death of the policyholder only.

D. Only for the time period that is required for its purposes.

D. Only for the time period that is required for its purposes.

51

An insurance broker placed a risk based on information supplied by a consumer. Although the broker had every reason to believe the information to be accurate, deliberate misrepresentation was proven at the time of a claim. How is responsibility for this misrepresentation allocated under the Consumer Insurance (Disclosure and Representations) Act 2012?

A. Equally between the broker and consumer.

B. Fully with the broker.

C. Fully with the consumer.

D. It depends on whether or not the information was available on an industry database.


C. Fully with the consumer.

52

An insurance broker must comply with the requirements of the Consumer Insurance (Disclosure and Representation) Act 2012 when placing what type of insurance?

A. Business interruption.

B. Household.

C. Marine cargo.

D. Motor fleet.

B. Household.

53

The Financial Conduct Authority’s rules relating to identifying client needs, product information and claims handling are stated in the

A. Consumer Insurance Act 2012.

B. Insurance: Conduct of Business sourcebook (ICOBS).

C. Insurance Mediation Directive 2012.

D. Terms of Business Agreement.

B. Insurance: Conduct of Business sourcebook (ICOBS).

54

Why must an insurance broker segregate client assets from broker funds?

A. To allow claims payments to be made to clients.

B. To allow the offsetting of transactions against monies held for clients.

C. To ensure client monies are protected in the event of the failure of the broker.

D. To facilitate the addition of interest earned on balances held.

C. To ensure client monies are protected in the event of the failure of the broker.

55

What money may be retained in an insurance broker’s client asset account?

A. Commission earned on insurance premiums.

B. Fees received from clients for insurance services.

C. Income received from investments.

D. Return premiums from insurers prior to payment to clients.

D. Return premiums from insurers prior to payment to clients.

56

When a risk transfer arrangement is in place with an insurer, who is responsible for client funds if the money is lost due to the bankruptcy of an insurance broker?

A. The client.

B. The Financial Conduct Authority.

C. The Financial Services Compensation Scheme.

D. The insurer.

D. The insurer.

57

What is the principal aim of the Insurance Mediation Directive 2002?

A. Consumer protection.

B. Data protection.

C. Prevention of bribery in insurance.

D. Prevention of money laundering.

A. Consumer protection.

58

How much commission does an insurance broker receive on placement of an insurance policy with a premium of £500 plus Insurance Premium Tax and a 20% commission rate?

A. £90.50

B. £100.00

C. £109.50

D. £120.00

B. £100.00

59

Which element of the amount payable by a client must an insurance broker show separately on an invoice?

A. Commission.

B. Fee.

C. Insurance Premium Tax.

D. Work transfer fee

B. Fee.

60

Under a contract of insurance, what is brokerage?

A. The commission paid to the broker by the insurer, which is included in the premium.

B. The commission rebated by the insurer to the insured in cases with limited broker involvement.

C. A fee paid by the insured directly to the broker.

D. A fee paid by the insured directly to the insurer, in addition to the premium.

A. The commission paid to the broker by the insurer, which is included in the premium.

61

How does an insurance broker obtain additional income by up-selling?

A. By extending cover under an existing policy.

B. By providing insurance for a different class of business to an existing client.

C. By referrals from existing clients.

D. By targeting competitors’ clients.

A. By extending cover under an existing policy.

62

Broker X focuses on motor insurance and Broker Y on complex commercial risks. Both brokers offer high levels of customer service. Which broker, if either, would normally achieve ongoing renewal retention rates of above 95%?

A. Neither broker.

B. Broker X only.

C. Broker Y only.

D. Both brokers.

C. Broker Y only.

63

Why is it important that an insurance broker with a high client retention level also focuses on attracting new clients?

A. The client base will naturally erode.

B. Commission rates are always higher for new business.

C. Cross-sold business levels are always significantly lower than new client levels.

D. The regulator requires a balanced approach to business

A. The client base will naturally erode.

64

What is the main disadvantage to a firm of insurance brokers of placing policies on a loss-leader basis?

A. Attraction of poor quality business in the early stages.

B. The need to increase the incentivisation of sales staff.

C. Significantly reduced profits in the early stages.

D. Such policies have a high claims ratio

C. Significantly reduced profits in the early stages.

65

Why must an insurance broker have more than one bank account?

A. The Financial Services Compensation Scheme limits the amount of compensation payable following financial failure.

B. To keep money owed to clients and insurers separate from income earned by the broker.

C. To separate insurance premiums received from domestic and international clients.

D. Terms of Business Agreements require that separate accounts operate for each insurer

B. To keep money owed to clients and insurers separate from income earned by the broker.