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Flashcards in IF1 Exam Questions Deck (100)
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1

A claim for a new windscreen is an example of an event that is
A. high frequency and high severity.
B. high frequency and low severity.
C. low frequency and high severity.
D. low frequency and low severity.

high frequency and low severity.

2

The main elements of risk are
A. certainty and predictability.
B. certainty and unpredictability.
C. uncertainty and predictability.
D. uncertainty and unpredictability.

uncertainty and unpredictability.

3

The key components of risk management are
A. analysis, control and insurable interest.
B. identification, analysis and control.
C. identification, analysis and frequency.
D. identification, control and predictability.

identification, analysis and control.

4

Which type of risk arises from a cause outside the control of any one individual and affects a large number of people?
A. A fundamental risk.
B. A particular risk.
C. A pure risk.
D. A speculative risk.

A. A fundamental risk.

5

In relation to general insurance, the type of risk that CANNOT be insured is a risk where
A. no financial measurement of the potential loss can be made.
B. the potential for a large number of homogeneous exposures is absent.
C. the severity of the potential loss is difficult to quantify.
D. there is a physical hazard which increases the likelihood of a loss occurring.

A. no financial measurement of the potential loss can be made.

6

Key components in assessing the level of risk are
A. certainty and predictability.
B. frequency and severity.
C. insurable interest and indemnity.
D. uncertainty and predictability.

B. frequency and severity.

7

In relation to insurance, a poor hazard is usually
A. a risk that can only be covered under special terms.
B. something which an underwriter must remove before a proposal can be accepted.
C. something which increases the risk of a loss arising under a policy.
D. something which is listed within a policy as an event for which cover is provided.

C. something which increases the risk of a loss arising under a policy.

8

A tsunami is an example of an event that is
A. high frequency and high severity.
B. high frequency and low severity.
C. low frequency and high severity.
D. low frequency and low severity.

C. low frequency and high severity.

9

Following a review, a large company has decided to restrict its purchase of non-compulsory insurance to amounts in excess of a certain level. This decision represents an increase in the company’s
A. moral hazard.
B. risk retention.
C. risk transfer.
D. uninsurable risks.

B. risk retention.

10

External elements that can threaten the assets or the earning capacity of a company are primarily dealt with by which department?

D. Risk management.

11

The primary function of insurance is to
A. act as a risk transfer mechanism.
B. eliminate all risk.
C. enable the policyholder to make a profit.
D. prevent claims from occurring.

A. act as a risk transfer mechanism.

12

The main reason a window cleaner requests a quote for public liability insurance is to provide him with
A. a fund to pay any claims.
B. insurance that is required for his trade.
C. more trade as he can show he has insurable interest. D. peace of mind.

D. peace of mind.

13

A company manufactures ink cartridges, but due to a manufacturing fault the cartridges leak, causing damage to external property. What type of policy would cover the manufacturer against a claim?
A. A business interruption policy. B. A material damage policy.
C. A product liability policy.
D. A public liability policy.

C. A product liability policy.

14

Which type of insurance policy provides cover for a lump-sum payment in the event of accidental death or bodily injury?
A. An employers’ liability insurance policy.
B. A fidelity guarantee insurance policy.
C. A personal accident and sickness insurance policy.
D. A private medical insurance policy.

C. A personal accident and sickness insurance policy.

15

A person who is risk averse will generally transfer risk away through the use of
A. insurance.
B. risk assessment.
C. risk surveys.
D. savings and investment.

A. insurance.

16

A risk is co-insured between two insurers. If one insurer becomes insolvent and cannot pay a valid claim, what is the responsibility of the other insurer?
A. It has no responsibility as the contract is void.
B. It is only responsible for its signed percentage.
C. If it is a compulsory insurance it must settle the claim in full.
D. It must always settle the claim in full.

B. It is only responsible for its signed percentage.

17

An individual purchases travel insurance for when he goes on holiday without realising that his household policy also covers some similar elements. This is known as
A. co-insurance.
B. dual insurance.
C. reinsurance.
D. self-insurance.

B. dual insurance.

18

The main benefit to an individual when insuring her house is that
A. it reduces the chance of damage to the property.
B. maintenance costs are covered.
C. mortgage payments are lower.
D. the risk of a loss is transferred.

D. the risk of a loss is transferred.

19

The main financial advantage for an insurer that operates on a direct basis is that it
A. can charge higher premiums.
B. does not have to pay commission charges.
C. incurs smaller advertising costs.
D. receives fewer claims.

B. does not have to pay commission charges.

20

Which individuals provide financial backing for Lloyd’s syndicates?
A. Managing agents.
B. Members’ agents.
C. Names.
D. Underwriters.

C. Names.

21

The third party which sometimes collects premiums from the insured on behalf of the insurer is the
A. intermediary.
B. reinsurer.
C. risk manager.
D. underwriter.

A. intermediary.

22

What type of business does a reinsurer usually accept?
A. Business from individuals who have already insured the risk with an insurer.
B. Business from non-insurance companies which have large insurance needs.
C. Business originally underwritten by an insurer.
D. Business which an insurer has refused to underwrite.

C. Business originally underwritten by an insurer.

23

An electrical fault has caused insured fire damage in excess of £10,000. Which expert would the insured normally appoint to negotiate with the insurer on his behalf?
A. Electrical engineer.
B. Forensic scientist.
C. Loss adjuster.
D. Loss assessor.

D. Loss assessor.

24

Within Lloyd’s, which body is specifically responsible for setting guidelines for all syndicates to safeguard standards of underwriting and risk management?
A. Council of Lloyd’s.
B. Financial Conduct Authority.
C. Lloyd’s Franchise Board.
D. Prudential Regulation Authority.

C. Lloyd’s Franchise Board.

25

A coverholder at Lloyd’s is a
A. broker authorised by the Corporation of Lloyd’s to do business at Lloyd’s.
B. company authorised by a managing agent to issue contracts of insurance.
C. policyholder.
D. service company.

B. company authorised by a managing agent to issue contracts of insurance.

26

The London Market is predominantly associated with the placing of what type of risks?
A. Aviation liability insurance risks only.
B. Complex international insurance and reinsurance programmes.
C. Marine liability insurance risks only.
D. Motor fleet insurance risks up to a premium of £500,000.

B. Complex international insurance and reinsurance programmes.

27

Which insurers make up the London Market?
A. Reinsurers and Lloyd’s syndicates only.
B. Lloyd’s syndicates and captive insurers only.
C. Insurers, reinsurers, Lloyd’s syndicates and protection and indemnity club members.
D. Insurers, reinsurers, Lloyd’s syndicates and captive insurers.

C. Insurers, reinsurers, Lloyd’s syndicates and protection and indemnity club members.

28

What type of insurer is owned by a non-insurance parent company and is established with the express purpose of providing insurance cover for the parent company’s own risks?
A. A captive insurer.
B. A Lloyd’s syndicate.
C. A mutual insurer.
D. A proprietary insurer.

A captive insurer.

29

An insurer owned entirely by its policyholders is a
A. captive insurer.
B. co-insurer.
C. mutual insurer.
D. tied agent.

C. mutual insurer.

30

An entity that enables potential policyholders to complete a single online proposal and obtain quotes from several different insurers NOT associated with the entity is known as
A. a data controller.
B. an insurance aggregator.
C. a mutual insurer.
D. a tied agent.

B. an insurance aggregator.