IF4 Test Questions

Question 1

What department of an insurance company is seen as the ‘shop window’?

Answer 1

The claims department

Question 2

In the event of a claim, the insured must prove what?

Answer 2

The amount/value of the loss

Question 3

Which of these areas do claims conditions fall into?

A. Conditions precedent to contract
B. Conditions prior to contract
C. Conditions precedent to liability
D. Conditions subsequent to liability

Answer 3

C. Conditions precedent to liability

Question 4

What is prompt notification to the insurer an example of?

Answer 4

An express duty

Question 5

In which of the following circumstances would an insurance policy claim be valid? Where the damage was caused by a:

A. Expected peril
B. Named peril
C. Unnamed peril
D. Excluded peril

Answer 5

B. Named peril

Question 6

What sort of policy/basis is provided by a sickness or personal accident policy?

Answer 6

Benefit basis or benefit policy

Question 7

A claim under a sickness policy is usually subject to what?

Answer 7

A franchise

Question 8

What is a franchise on a sickness policy?

Answer 8

A franchise is a period of time that must lapsed before a claim is valid.

Question 9

What is a typical limitation of creditor insurance?

Answer 9

Cover doesn’t apply for the first month of the policy period.

Question 10

What effect took place after the Employers Liability (Compulsory Insurance) Regulations of 1998?

Answer 10

It increased the minimum required limit of cover from £2 million to £5 million.

Question 11

What is claims leakage?

Answer 11

Wastage or avoidable payments

Question 12

What is the relationship between Claims reserving and setting premiums?

Answer 12

Claims reserving enables the assessment of adequacy of premium rates.

Question 13

What key indicator arises from the process of claims reserving?

Answer 13

The financial solvency of an insurance company.

Question 14

What is the financial threshold for micro-enterprises seeking dispute resolution via the FOS?

Answer 14

They must turn over less than £2 million per annum.

Question 15

Under which specific rule does claims handling fall?

A. ABI General insurance Claims Code
B. ICOBS
C. ABI Statement of General Insurance Practice
D. Threshold conditions

Answer 15

B. ICOBS

Question 16

What is the RTA personal injury claims portal?

Answer 16

A system for road traffic accident personal injury claims with a value of up to £25,000.

Question 17

For contents insurance, what type of good are items such as towels and bedding classed as?

Answer 17

Consumer goods

Question 18

What is mitigation?

Answer 18

Carrying out reasonable steps to prevent further damage.

Question 19

In the context of business interruption insurance, what does an indemnity period represent?

Answer 19

The maximum length of any claim.

Question 20

Public liability policies are often written on a losses-occurring basis. What does this mean?

Answer 20

That claims will be consider in respect of losses that are incurred during the period of insurance, even if the claim manifests itself later.

Question 21

What are the primary and over-arching design considerations for a Claims Management System?

Answer 21

Claims philosophy and claims management procedures.

Question 22

What are the determining factors in choosing a claims management system?

Answer 22

• Company structure
• Types of business written
• Management decisions about system development

Question 23

What type of company structure is most suited to smaller insurance organisations?

Answer 23

A functional structure.

Question 24

What are the characteristics of a centralised organisation?

Answer 24

Authority is retained at the top and there is little delegation.

Question 25

Who is required to act as the eyes and ears of the underwriter?

Answer 25

The surveyor.

Question 26

What is the purpose of claims projection?

Answer 26

To establish the likely ultimate gross payout that the insurer may have to make during an underwriting year.

Question 27

In the case of subrogation, where it is found a third party is insured, against whom will the insurers rights of recovery be?

Answer 27

The responsible third party directly.

Question 28

Why are ex gratia payments not generally categorised as claims leakage?

Answer 28

They are not based on contractual obligation.

Question 29

What is a solvency margin?

Answer 29

A proportion of premium income set aside to pay out reported and estimated claims.

Question 30

What does the balance sheet of an insurance company show?

Answer 30

The entire assets and liabilities of the company at the end of the financial year.

Question 31

What is the correct term when a claim is reported by a policyholder but the claims handler knows the amount has been understated?

Answer 31

Incurred but not enough reported.

Question 32

In the context of claims handling, what is quantum?

Answer 32

The amount of a claim

Question 33

Under the Insurance Act 2015, what do insurer’s need to do when a claim is received from a commercial customer in order to validate the claim which they didn’t need to do before?

Answer 33

Confirm whether the duty of fair presentation had been complied with.

Question 34

What is the importance of Pawsey V Scottish Union and National (1907)?

Answer 34

It defined proximate cause.

Question 35

Ambulances, Forklift trucks and Cranes are all examples of what in the context of commercial insurance?

Answer 35

Vehicles of special construction.

Question 36

A personal accident and sickness policy will usually exclude cover for sickness contracted within how many days of policy inception?

Answer 36

21 days

Question 37

What cover under a personal accident and sickness policy typically provide a weekly benefit for a maximum of 104 weeks?

Answer 37

Temporary total disablement.

Question 38

What is subsidence?

Answer 38

The movement of land on which the insured’s building stands on due to movement in the underground workings.

Question 39

What are mediation and conciliation examples of?

Answer 39

Ways of seeking to resolve a claims dispute by alternative dispute resolution.

Question 40

What is the financial threshold for micro-enterprises seeking dispute resolution via the FOS?

Answer 40

They must turn over less than £2 million (May also appear as Euros, €).

Question 41

In the context of business interruption insurance, what does an indemnity period represent?

Answer 41

The maximum length of any claim.

Question 42

What does it mean when a policy is written on a ‘loss-occurring basis’?

Answer 42

That claims will be considered in respect of losses that are occur d during the period of insurance, even if a claim manifests later.

Question 43

What are the primary and over-arching design considerations for a claims management system?

Answer 43

Claims philosophy and claims management procedures.

Question 44

What are the factors in determining the choice of a claims management system?

Answer 44

- Company structure - Type of business written - Management decisions about system development.

Question 45

What type of company structure is most suited to smaller insurance organisations?

Answer 45

A functional structure.

Question 46

Authority is retained at the top and there is little delegation. What type of organisation is this describing?

Answer 46

A centralised organisation.

Question 47

They are the eyes and ears of the underwriter. Who is being described here?

Answer 47

The surveyor.

Question 48

What is the purpose of claims projection?

Answer 48

To establish the likely ultimate gross payout that an insurer may have to make during an underwriting year.

Question 49

What is the purpose of the Arbitration Act 1996?

Answer 49

It details the powers of arbitrators and the processes to be followed in the case of a tribunal.

Question 50

What does a balance sheet of an insurance company show?

Answer 50

The entire assets and liabilities of the company at the end of the financial year.

Question 51

What is the correct term to apply where a claim is reported by a policyholder but the claims handler knows the the amount to have been understated?

Answer 51

Incurred but not enough reported.

Question 52

What type of duty is mitigation?

Answer 52

An implied duty.

Question 53

Under the Insurance Act 2015, what must an insurer now check when establishing whether a claim from a commercial customer is valid that they didn’t have to check before?

Answer 53

That the duty of fair presentation has been complied with.

Question 54

Ambulances, cranes and forklift trucks are all examples of what?

Answer 54

Vehicles of special construction.

Question 55

A personal accident and sickness insurance policy will usually exclude cover for a sickness contracted within how many days of policy inception?

Answer 55

21 days.

Question 56

Under a personal accident and sickness insurance policy, what cover is typically provided on a weekly benefit for a maximum of 104 weeks?

Answer 56

Temporary total disablement.

Question 57

By whom is the Standard Fire Policy form recommended on the UK insurance market?

Answer 57

The ABI (Association of British Insurers).

Question 58

What is extended or full theft cover?

Answer 58

A theft policy which has been extended to include theft without forceable or violent entry.

Question 59

What is effective claims reserving a key indicator of?

Answer 59

A company’s financial solvency.

Question 60

What is the objective of the Art Loss Register?

Answer 60

To increase the recovery rate of stolen artwork and deter theft by making it a sale of stolen items more difficult.

Question 61

Introduced with the intention of reducing cost, delay and complexity in the way personal injury claims were handled. What rules are being described here?

Answer 61

The Civil Procedure Rules 1999.

Question 62

What means may firms use to effectively demonstrate they are consistently providing fair treatment to their customers?

Answer 62

Delivering on the FCA’s six customer outcomes.

Question 63

What is the scope of the Personal Injury Pre-Action Protocols under the Civil Procedure Rules? A. They include all personal injury claims arising from motor incidents. B. They include all personal injury claims. C. They include all non-motor personal injury claims. D. They include personal injury claims arising from non-commercial incidents.

Answer 63

B. They include all personal injury claims.

Question 64

What are special damages?

Answer 64

Damages for losses that can be quantified.

Question 65

What is the role of IT in the effective management of claims information?

Answer 65

It controls the technical issues of a large process.

Question 66

What are the key considerations when designing a claims management system?

Answer 66

The volume and complexity of claims.

Question 67

What type of structure would allow employees to specialise in their type of work?

Answer 67

A functional structure.

Question 68

What does MPL mean?

Answer 68

The maximum probable loss that could occur.

Question 69

What is the loss development factor method?

Answer 69

A method used to project claims for reserving purposes.

Question 70

What do a company’s management accounts provide for?

Answer 70

Planning, monitoring and control.

Question 71

What was the effect of the Third EU Motor Insurance Directive 1992 on motor insurance policies issued in the UK?

Answer 71

Cover had to provide for the insured vehicle to be used in any other EU country.

Question 72

For buildings insurance... What is the typical duration in the case of an unoccupancy period exclusion?

Answer 72

30 or 60 days.

Question 73

What is a global claims reserve?

Answer 73

A reserve covering a whole book of business.

Question 74

What are the limitations of the arbitration clause in an insurance policy?

Answer 74

It will only deal with matters of quantum... Matters of liability cannot be referred through arbitration.

Question 75

What does ATE legal expenses cover do?

Answer 75

It underwrites the possibility that a court action will be unsuccessful.

Question 76

What type of company structure is most suited to large, multi-product insurance organisations?

Answer 76

A traditional hierarchy.

Question 77

What is the most common form of claims settlement?

Answer 77

Cash payment

Question 78

What types of firms are subject to the least intrusive levels of regulation by the FCA?

Answer 78

Flexible portfolio firms.

Question 79

What are the overview roles of a claims manager?

Answer 79

Strategy - Ensuring a coherent approach to claims management. Cost - Monitoring and controlling the running costs of the department and the costs the claims themselves. Staffing - Recruit, train and motivate staff.

Question 80

What are the 4 steps of preventing leakage?

Answer 80

- Senior management focus - Employee skills - Supervision of staff - Quality management

Question 81

What are the 5 ‘other’ types of reserve?

Answer 81

- Equalisation reserves - Catastrophe reserves - Unearned premium reserve and unexpired risk reserve - Provision for claims handling expenses - Reopened claims reserves.

Question 82

What type of structure is suited to a large multi product company?

Answer 82

Divisional structure.

Question 83

In relation to legal proceedings, what was introduced as a result of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LAPSO)?

Answer 83

Qualified one way costs shifting.

Question 84

What department provides the largest outflow of money within an insurance company?

Answer 84

The claims department.

Question 85

Under the ABI Personal Effects Contribution Agreement, contribution doesn’t apply when?

Answer 85

There is a claim involving loss or damage to personal effects due to theft from a vehicle.

Question 86

What sort of obligations do motor insurers have under Part VI of the Road Traffic Act?

Answer 86

Statutory obligations.

Question 87

What sort of basis are Professional Indemnity policies written on?

Answer 87

Loss occurring basis.

Question 88

Under a personal accident policy, what is usually paid out as an annuity?

Answer 88

Permanent total disablement.

Question 89

Who sets claims handling standards that all authorised insurers must comply with?

Answer 89

The Financial Conduct Authority (FCA).

Question 90

What did the case law ‘Konstantinos Agapitos Vs Ian Charles Agnew’ establish? Hint: IC

Answer 90

Fraud - If any of the claim is fraudulent or exaggerated, the whole claim fails.

Question 91

What did the case law ‘Manifest Shipping Company Vs Uni-Polaris Shipping establish? Hint: Manifest has an F in it.

Answer 91

Fraud - If any of the claim is fraudulent or exaggerated, the whole claim fails.

Question 92

What did the case law ‘Gabay Vs Lloyd’ establish? Hint: Horses

Answer 92

Proximate Cause - A ship carrying horses encountered a storm. The horse were scared and caused injury to each other.

Question 93

What did the case law ‘Marsden Vs City & County Insurance’ establish? Hint: Marsden begins with M.

Answer 93

Proximate cause - A fire in a shop next door, windows smashed and damage was caused. A riot caused the fire so the riot was the proximate cause.

Question 94

What did the case law ‘Versloot Dredging Vs HDI Gerling Industrie’ establish? Hint: Loot

Answer 94

Fraud - Superseded previous fraud case law, meaning if the fraud is immaterial to the loss then the claim will still be paid.

Question 95

What are the 2 main ways of seeking resolutions by ADR?

Answer 95

Mediation or Conciliation.

Question 96

What is mediation?

Answer 96

Both parties agree to the appointment of an impartial party. The chosen party will then clarify the position of each party and facilitate an amicable settlement. The mediator is NOT an expert however and if no settlement agreed may still proceed to court.

Question 97

What is conciliation?

Answer 97

A conciliator is chosen for their expertise and they will assist in providing a dispute resolution. Both parties may agree in advance that any award given is binding.