Revision mate questions Flashcards
(117 cards)
1
Q
An insurance broker decides to apply a fee in addition to the policy premium in order to reflect the extra work involved on a case. Which of the following assumptions is incorrect?
a. Fees are paid by the insured to the broker for the service they provide.
b. The fee would generally not be reimbursed to the client following a mid-term adjustment.
c. As the fee is for the broker’s service, it does not need to be separately shown on an invoice.
d. The fee should be agreed prior to the contract.
A
c. As the fee is for the broker’s service, it does not need to be separately shown on an invoice.
2
Q
According to common law, everyone who acts on behalf of another person is:
a. a principal.
b. an adviser.
c. an agent.
d. an introducer.
A
c. an agent.
3
Q
Larger insurance brokerages often have a number of departments, each with a different function. Which would be best described as a ‘back office’ function in a large broker office situated in a five-storey building?
a. The IT department on the ground floor which enables all other departments to function.
b. The new business department where staff are located at the rear and middle of the top floor.
c. The client service department which is located at the front of the building on the first floor.
d. The claims department which is located at the rear of the second and third floors.
A
a. The IT department on the ground floor which enables all other departments to function.
4
Q
A reinsurance broker arranges reinsurance cover for a client who is a reinsurer [ABC Reinsurance Ltd.]. Cover is arranged with another reinsurer [XYZ Reinsurance Ltd.]. In this example, XYZ Reinsurance Ltd. would be the:
a. primary insurer.
b. retrocessionaire.
c. client.
d. cedant.
A
b. retrocessionaire.
5
Q
Although insurance brokers receive income from a variety of sources, the usual source of income is from commission [or brokerage]. Which option best describes commission?
a. Commission does not form part of the insurer’s premium.
b. Commission is earned by securing business and is fully retained even if the policy is later cancelled.
c. Commission is the fee the client pays a broker for the work involved in transacting business as agent.
d. Commission is a reimbursement of an agreed percentage of the premium by the insurer.
A
d. Commission is a reimbursement of an agreed percentage of the premium by the insurer.
6
Q
Although insurance brokers can engage in a wide range of financial services activities, nowadays the term is generally used to describe organisations that:
a. offer independent advice.
b. function as tied agencies.
c. assist with insurance claims.
d. introduce customers to other intermediaries.
A
a. offer independent advice.
7
Q
A broking account executive successfully negotiates some revised terms with the head underwriter at the holding insurer on behalf of a client. The broker has used their broking network facility to arrange a 5% discount. The principal in this relationship is the:
a. underwriter who agreed to the policy terms.
b. client who instructed the broker to arrange the cover.
c. insurer who carries the risk and agrees to accept the cover.
d. network which arranged the 5% discount.
A
b. client who instructed the broker to arrange the cover
8
Q
Identify which of the following statements is NOT true of Lloyd’s of London?
a. Lloyd’s consists of numerous syndicates.
b. The Council of Lloyd’s can approve any broker to deal with Lloyd’s.
c. Lloyd’s is a subscription market.
d. Lloyd’s is an insurer.
A
d. Lloyd’s is an insurer.
9
Q
Which of these is a benefit to both a client and their insurer of using an insurance broker?
a. Technical expertise to explain products in full.
b. The delegation of tasks such as premium collection.
c. Time and money saved in relation to administration.
d. The ability to quote from a range of insurers.
A
a. Technical expertise to explain products in full.
10
Q
Insurance brokers often offer a range of ‘Added Value Services’ to assist with the needs of their clients. Can you identify which of the following options would NOT be typical of an ‘Added Value Service’ offered by a broker?
a. Health and safety consultation.
b. Specialist tax advice.
c. Property survey.
d. Business continuity planning.
A
b. Specialist tax advice.
11
Q
Broking firms whose principal method of growth is through mergers and acquisitions which result in a smaller number of larger firms are known as:
a. wholesale brokers.
b. global firms.
c. aggregators.
d. consolidators.
A
d. consolidators.
12
Q
A Lloyd’s broker finds that a slip submitted to underwriters has become oversubscribed. To correct the matter, what action should the Lloyd’s broker take?
a. Liaise with the Council of Lloyd’s to correct the matter.
b. Submit the slip ‘as is’ to the Bureau for amendment.
c. Proportionately reduce each underwriter’s line.
d. Cancel the slip, create a new one and start again from the beginning.
A
c. Proportionately reduce each underwriter’s line.
13
Q
Most insurance brokers will deal with retail customers, however what type of broker specifically has other brokers as its clients?
a. A wholesale broker.
b. A general insurer.
c. An aggregator.
d. An online broker.
A
a. A wholesale broker.
14
Q
Although insurance brokers can engage in a wide range of financial services activities, nowadays the term is generally used to describe organisations that:
a. introduce customers to other intermediaries.
b. function as tied agencies.
c. offer independent advice.
d. assist with insurance claims.
A
c. offer independent advice.
15
Q
A broking account executive successfully negotiates some revised terms with the head underwriter at the holding insurer on behalf of a client. The broker has used their broking network facility to arrange a 5% discount. The principal in this relationship is the:
a. network which arranged the 5% discount.
b. insurer who carries the risk and agrees to accept the cover.
c. underwriter who agreed to the policy terms.
d. client who instructed the broker to arrange the cover.
A
d. client who instructed the broker to arrange the cover.
16
Q
Which of these is a benefit to both a client and their insurer of using an insurance broker?
a. The ability to quote from a range of insurers.
b. The delegation of tasks such as premium collection.
c. Technical expertise to explain products in full.
d. Time and money saved in relation to administration.
A
c. Technical expertise to explain products in full.
17
Q
Identify which of the following statements is NOT true of Lloyd’s of London?
a. Lloyd’s consists of numerous syndicates.
b. Lloyd’s is an insurer.
c. Lloyd’s is a subscription market.
d. The Council of Lloyd’s can approve any broker to deal with Lloyd’s.
A
b. Lloyd’s is an insurer.
18
Q
The Consumer Insurance [Disclosure and Representations] Act 2012 is designed to offer better protection to:
a. consumers.
b. business customers.
c. company directors.
d. commercial organisations.
A
a. consumers.
19
Q
What can a broker issue to help them to meet their duty to fully explain their recommendations and how these will deliver the client’s demands and needs?
a. A suitability statement.
b. An acceptance letter.
c. A proposal form.
d. An initial disclosure document.
A
a. A suitability statement.
20
Q
To which situation would the Consumer Insurance [Disclosure and Representations] Act 2012 apply?
a. A shopkeeper looking to insure stock in the basement.
b. A homeowner looking to insure their new-build family home.
c. Disclosure of a significant trading loss in the last financial year for a design company.
d. A roofing company requiring employers’ liability cover for employees working at height.
A
b. A homeowner looking to insure their new-build family home.
21
Q
Which instance best summarises why a customer would want to use an insurance broker?
a. When a client is unclear about the product they need.
b. When a client is interested in a range of products offered by a tied agent.
c. When a client needs to spread insurance costs using instalments.
d. When a client needs to arrange cover sooner rather than later.
A
a. When a client is unclear about the product they need.
22
Q
According to the Consumer Insurance [Disclosure and Representations] Act 2012, consumers should at all times:
a. disclose every material circumstance that would influence the judgment of a prudent insurer.
b. follow the principal of utmost good faith in their dealings with insurers.
c. make a fair presentation of the risk to the underwriter.
d. take reasonable care to answer insurers’ questions fully and accurately.
A
d. take reasonable care to answer insurers’ questions fully and accurately.
23
Q
Which of the following is a ‘limiting factor’ which will affect a broker’s choice of insurer?
a. Financial security.
b. Ease of payment.
c. Reputation and experience.
d. Credit facilities.
A
a. Financial security.
24
Q
Risks are presented to London Market underwriters on a standard form known as the:
a. Market Reform Contract.
b. London Underwriting Contract.
c. London Market Form.
d. Lloyd’s submission form.
A
a. Market Reform Contract.
25
The Financial Conduct Authority's [FCA’s] Contract Certainty Code of Practice requires the full policy wording to be delivered to customers within a certain time frame. Can you identify the correct time frame in which a commercial customer should receive full documentation?
a. 7 days.
b. 21 days.
c. 28 days.
d. 30 days.
d. 30 days.
26
A statement of fact is usually used:
a. when a risk requires a survey or inspection.
b. when a risk is reasonably straight forward.
c. with the broker’s initial quote request to the insurer.
d. as soon as a signed proposal form has been submitted.
b. when a risk is reasonably straight forward
27
After assessing a client’s needs and wants, a broker puts forward a recommendation to the client on the basis of a ‘fair analysis’. What could the client expect this analysis to include?
a. A summary of the products of a household-name insurer.
b. A risk survey summary with appropriate recommendations.
c. A financial review of the sector in which the client operates.
d. Consideration of a sufficiently large number of relevant insurers.
d. Consideration of a sufficiently large number of relevant insurers.
28
The final stage in the standard process of providing insurance products is to:
a. source the appropriate product[s].
b. complete an appropriate proposal form.
c. formally arrange cover and bring the insurer and the client to contract.
d. confirm the client's demands and needs.
c. formally arrange cover and bring the insurer and the client to contract.
29
The Consumer Insurance [Disclosure and Representations] Act 2012 is designed to offer better protection to:
a. commercial organisations.
b. consumers.
c. company directors.
d. business customers.
b. consumers.
30
According to the Consumer Insurance [Disclosure and Representations] Act 2012, consumers should at all times:
a. disclose every material circumstance that would influence the judgment of a prudent insurer.
b. make a fair presentation of the risk to the underwriter.
c. follow the principal of utmost good faith in their dealings with insurers.
d. take reasonable care to answer insurers' questions fully and accurately.
d. take reasonable care to answer insurers' questions fully and accurately.
31
What can a broker issue to help them to meet their duty to fully explain their recommendations and how these will deliver the client's demands and needs?
a. An initial disclosure document.
b. An acceptance letter.
c. A suitability statement.
d. A proposal form.
c. A suitability statement.
32
After assessing a client’s needs and wants, a broker puts forward a recommendation to the client on the basis of a ‘fair analysis’. What could the client expect this analysis to include?
a. A risk survey summary with appropriate recommendations.
b. A summary of the products of a household-name insurer.
c. Consideration of a sufficiently large number of relevant insurers.
d. A financial review of the sector in which the client operates.
c. Consideration of a sufficiently large number of relevant insurers.
33
With regards to the specific terminology used in relation to delegated authority schemes, which of the following gives an accurate description of the role of the coverholder?
a. The report provided by the entity delegated to of the risks and claims provided.
b. An insurance broker or wholesaler that underwrites risks.
c. An entity to which an insurer can give delegated authority.
d. The contract under which delegated authority is given.
c. An entity to which an insurer can give delegated authority.
34
In your role as an insurance broker you receive a number of client calls. Which of the following options best describes a risk control scenario?
a. A client informs you that they are thinking about whether some extension work at their busy high street shop is necessary.
b. A client informs you that they are likely to receive a penalty notice for speeding.
c. A nursery client informs you that the insurer's requirement for their child protection policy is now in place.
d. A client informs you that they are looking to change their car to a newer model.
c. A nursery client informs you that the insurer's requirement for their child protection policy is now in place.
35
As lead underwriter with an insurer, you approve a delegated authority agreement. In thinking through your strategy, can you identify an advantage of the agreement?
a. Increased potential for funds to be mismanaged.
b. Coverholder could sub-delegate without authorisation.
c. Reduced levels of control in underwriting each risk.
d. Reduction in operating costs per risk.
d. Reduction in operating costs per risk.
36
A captive insurance company is best described as:
a. an insurer based outside of the UK that specialises in employers' liability risks in the UK.
b. an insurance company which is primarily set up to insure the risks of its parent.
c. a proprietary company which uses a range of other insurers to cover its risks.
d. an overseas branch of a composite ‘household name’ insurer.
b. an insurance company which is primarily set up to insure the risks of its parent.
37
You are asked to evaluate a risk to predict the likelihood of future losses. What best describes the activity you are engaged in?
a. Risk control.
b. Risk avoidance.
c. Risk implementation.
d. Risk analysis.
d. Risk analysis.
38
As part of an insurance company's claims team, you are tasked with clarifying the correct name of a client who is insured under a delegated authority agreement. Your manager instructs you to speak with the coverholder. Who should you call?
a. The end client who has paid their premium in full but has not received full documentation.
b. The underwriter who regularly audits the delegated authority agreement.
c. The end client who has paid their premium in full and has received full documentation.
d. The organisation or persons that are in receipt of the delegated authority facility.
d. The organisation or persons that are in receipt of the delegated authority facility.
39
Of the methods of risk control available, which of the following is most effective at eliminating risk?
a. Reduction.
b. Minimisation.
c. Transfer.
d. Avoidance.
d. Avoidance.
40
Glen owns a number of out of town warehouses and is considering commercial risk management so that he can make informed decisions about the risks faced by his business. What is the final stage of the risk management process?
a. Risk analysis.
b. Risk control.
c. Risk identification.
d. Risk perception.
b. Risk control.
41
The final stage in the process of operating a delegated authority scheme can be described as the:
a. operation of the agreement.
b. presentation of the business case.
c. drawing up of the agreement and procedures.
d. auditing and monitoring of procedures.
d. auditing and monitoring of procedures.
42
What term is used to describe the report detailing the risks written and claims reported by an entity to which an insurer has given delegated authority?
a. Binding.
b. Coverholder.
c. Delegated.
d. Bordereau.
d. Bordereau.
43
In accordance with the law of agency, which of the following statements is correct?
a. A delegated authority relationship permits more than one principal at any one time.
b. An agent can have only one principal at any one time.
c. An agent can have more than one principal at any one time, providing all parties agree.
d. An insurance broker has both client and insurer as their principal at the same time.
b. An agent can have only one principal at any one time.
44
Although agents are bound by their principal’s instructions, insurance brokers are usually permitted to delegate tasks that:
a. involve speculation regarding the principal’s legal status.
b. involve guesswork of a principal’s circumstances.
c. are purely mechanical in their nature.
d. require decisions of judgment on the principal’s behalf
c. are purely mechanical in their nature.
45
An insurance broker secures cover on behalf of their principal – the customer. The broker receives the completed policy documents which are held in trust before being sent to the customer. This relationship is best described as a:
a. trusting relationship.
b. fiduciary relationship.
c. holding relationship.
d. temporary relationship.
b. fiduciary relationship.
46
In your role as an insurance broker, you have a range of legal duties. Under the law of agency, each of the following is a key legal duty that is required of you with the exception of the duty of:
a. due skill and care.
b. accountability.
c. good faith.
d. remuneration.
d. remuneration.
47
A broker is granted approval by an insurer to operate a delegated authority on a property scheme. A customer requires cover for a property and requests that the cover notes the interest of ABC Bank. When the broker places cover within the delegated authority agreement, which option best describes the role of the broker?
a. The broker is the principal and the insurer is the agent.
b. The broker is not an agent in this scenario.
c. The broker acts primarily as agent of the insurer.
d. The broker acts primarily as agent for the bank.
c. The broker acts primarily as agent of the insurer.
48
Which instance would not normally be seen as a broker inducement which could give rise to a conflict of interest?
a. When an insurer gives a cash gift to a broker to assist with growth plans.
b. Where a broker attends an expensive corporate event at the insurer's expense.
c. When an insurer grants 15% commission to a broker on a £3,000 household policy.
d. When an insurer provides a 0% loan to a broker in return for a high level of support.
c. When an insurer grants 15% commission to a broker on a £3,000 household policy.
49
A customer requests a commercial quotation from a broker. The broker creates a full quotation along with accompanying documentation. The customer accepts and the broker arranges cover accordingly. In which instance is the broker entitled to commission? When the broker:
a. can evidence they did not misrepresent any information.
b. can evidence a client’s questions were competently answered.
c. supplies a quotation in a timely manner.
d. can prove they were the effective cause of any transaction.
d. can prove they were the effective cause of any transaction.
50
An insurance broker accepts a contingent commission arrangement with an insurer. Which situation best describes what this agreement is?
a. If a policy is cancelled mid-term, the insurer can recover a pro-rata element of any commission that was paid to the broker.
b. A broker can place cover on a 0% commission basis.
c. An overriding commission payment will be paid to the broker subject to a certain level of business being achieved.
d. The insurer agrees to rebate commission because of a previous accounting error.
c. An overriding commission payment will be paid to the broker subject to a certain level of business being achieved.
51
When considering terms of business agreements [TOBAs], which of the following would you expect to see in a TOBA between an insurer and a client but NOT in a TOBA between an insurer and a broker?
a. The availability of compensation.
b. Conflict management.
c. Ownership and access to data and records.
d. Broker's authority.
a. The availability of compensation.
52
An insurance broker is able to bring a principal and a third party together in a contractual relationship. Which of the following is the principal?
a. The underwriter.
b. The insurance broker.
c. The insurer.
d. The client.
d. The client.
53
In accordance with data protection legislation, which of the following would be considered a data subject?
a. A datasheet summarising the size of the population.
b. A person who died over 10 years ago.
c. The profit and loss accounts for a Limited Company.
d. A living person who retired 10 years ago.
d. A living person who retired 10 years ago.
54
Of the four criminal offences under the Bribery Act 2010, which has been the main cause for concern for insurance brokers?
a. Bribing a foreign public official.
b. Giving, promising or offering a bribe.
c. Failure by a commercial organisation to prevent bribery.
d. Requesting, agreeing to receive or accepting a bribe.
c. Failure by a commercial organisation to prevent bribery.
55
As part of your role with an international insurance broker, you often have to arrange cover on overseas assets for overseas clients. As a matter of best practice, it would be advisable to check the clients against:
a. HM International Property Database.
b. the International Sanctions Due Diligence Database.
c. HM Treasury’s sanctions list.
d. the Home Office International list.
c. HM Treasury’s sanctions list.
56
An insurance broker monitors a range of their insurance mediation activities to ensure compliance with the Financial Conduct Authority's [FCA's] rules. Which example would NOT normally be classed as an insurance mediation activity?
a. An administrative assistant who updates the details of a home insurance policy.
b. A part-time account executive at an insurance brokerage who only occasionally places cover.
c. An apprentice insurance broker who deals with clients, but has not completed their 6 month trial.
d. A third party web designer creating code for an insurance broker’s website.
d. A third party web designer creating code for an insurance broker’s website.
57
Insurance contracts are often transacted at considerable distances between the insurer, the broker and the customer. Can you identify a key consideration of the distance communications rules in ICOBS 3?
a. Policy wordings must be available in booklet form.
b. Information in a durable medium must be supplied before the conclusion of the contract.
c. Transactions over the internet must be finalised through a software house using EDI.
d. When a broker is located over 100 miles from a customer, the broker should inform the customer of this fact.
b. Information in a durable medium must be supplied before the conclusion of the contract.
58
Insurance brokers are required to make regular returns to the Financial Conduct Authority [FCA] on an integrated system called GABRIEL. What is the correct name for these returns?
a. Return Monitoring Retail Activities (RMRA).
b. Activity Return Monitoring Services (ARMS).
c. Retail Mediation Activities Return (RMAR).
d. Mediated Retail Services Activities (MRSA).
c. Retail Mediation Activities Return (RMAR).
59
Although the Financial Conduct Authority [FCA] carries out a wide range of activities, its primary objective is:
a. taking a non-risk based approach to their activities.
b. authorising and regulating organisations engaged in financial services.
c. consumer protection through the fair treatment of customers.
d. policing financial services and issuing fines for breaches of regulation.
c. consumer protection through the fair treatment of customers.
60
Insurance brokers operate within a regulatory environment. Which of the following is NOT considered a direct impact of the regulatory environment?
a. Carrying on regulated activities without authorisation is a criminal offence.
b. Regulated firms must follow the Financial Conduct Authority's (FCA's) rules and principles to maintain their authorisation.
c. Regulated firms must ensure that the insurers they deal with are properly authorised.
d. Brokers must adhere to the rules and principles laid down by the British Insurance Brokers' Association (BIBA).
d. Brokers must adhere to the rules and principles laid down by the British Insurance Brokers' Association (BIBA).
61
An insurance broker receives instructions from a customer who is acting in both a private and a commercial capacity. According to ICOBS 2, the broker should treat the customer as a:
a. dual customer.
b. retail customer.
c. private customer.
d. commercial customer.
d. commercial customer.
62
When authorising an insurance intermediary, governance is a key area of consideration for the Financial Conduct Authority [FCA]. Which option best describes the area of governance?
a. The shared values and beliefs that help define the firm.
b. The end-to-end sales processes of the firm.
c. How the firm is managed, directed and controlled.
d. How the firm looks to prevent financial crime.
c. How the firm is managed, directed and controlled.
63
A broker receives a £200 return of premium from an insurer following a mid-term adjustment by a customer. Which scenario best describes what should happen next?
a. The £200 is classed as a ‘client asset’ and should be returned to the customer without delay.
b. The £200 is classed as insurer money. A credit should be raised to the client and sent promptly.
c. The £200 is classed as broker funds. A credit should be raised to the client and sent promptly.
d. The £200 can be temporarily invested by the broker, but has to be returned to the client within 90 days.
a. The £200 is classed as a ‘client asset’ and should be returned to the customer without delay.
64
Clients may move their business between insurance brokers from year to year, which in turn can affect a broker's renewal retention rates. This process is known as:
a. spin.
b. churn.
c. trim.
d. flow.
b. churn.
65
An insurance broker successfully sells a £30 travel insurance policy to an existing client who already has their van insured through the broker at a premium of £1,000. Which of the following is a common expression to describe the sale of the travel insurance?
a. Up-selling.
b. Re-selling.
c. Cross-selling.
d. Extra-selling
c. Cross-selling.
66
Can you identify which organisation issued the Insurance Distribution Directive [IDD]?
a. The UK Home Office.
b. The European Union.
c. The Bank of England.
d. The UK Parliament.
b. The European Union.
67
Which of the following would NOT be considered broker funds?
a. Earned commission transferred 2 days ago from the client account to the office account.
b. A mid-term adjustment which results in a return premium of £50.
c. A policy fee of £25 which has been withdrawn from the client account.
d. £100 cleared commission received into the office account.
b. A mid-term adjustment which results in a return premium of £50.
68
Under the Insurance Distribution Directive [IDD], insurance staff must now complete at least how many hours of professional training or development each year?
a. 15 hours.
b. 35 hours.
c. 21 hours.
d. 48 hours.
a. 15 hours.
69
Where broker, client and insurer money are kept in the same bank account by a broker, this could result in:
a. co-merging.
b. co-mixing.
c. co-mingling.
d. co-circulating.
c. co-mingling.
70
With regards to the Insurance Product Information Document [IPID], which of the following statements is INCORRECT?
a. It replaces the current documentation.
b. It should be supplied at each quotation.
c. It is a short, pre-contractual policy summary.
d. It allows customers to easily compare similar products.
a. It replaces the current documentation.
71
An insurance broker acquires a well-known commercial customer at little or no commission. The broker hopes that by having the well-known business as a customer, it will help to secure more business in the future. The acquisition of this business is best described as being a:
a. good-deal' policy.
b. ‘cut your losses and run’ policy.
c. loss leader'.
d. ‘zero hero’.
c. loss leader'.
72
An insurance broker decides to invest in client service with the goal of increasing retention levels of business. Which of the following would best fit with this goal?
a. Use sales staff who are remunerated on a commission-only basis for high motivation.
b. Make use of telesales companies for cold-calling expertise.
c. An effective pipeline for potential new business.
d. Recruit and retain quality staff and train them appropriately.
d. Recruit and retain quality staff and train them appropriately.
73
A client calls your insurance brokerage to say they are dissatisfied. The client believes inadequate cover arranged by your company has led to a loss. Which of the following statements is correct?
a. The client needs to explain their complaint in writing in order for it to be taken further.
b. This is the client’s first call regarding the matter. As they will not take ‘no’ for an answer, you refer them to the Financial Ombudsman Service.
c. The complaint is valid as complaints do not have to be made in writing.
d. You are aware of the circumstances and are convinced your company has done nothing wrong. You believe the client is mistaken and advise them to forget the matter.
c. The complaint is valid as complaints do not have to be made in writing.
74
Sometimes, a client will want to register a complaint with a broker. In order to deal with this, which option best describes the Financial Conduct Authority's [FCA’s] requirements to deal with complaints?
a. Brokers should write to the complainant within ten weeks and settle any dispute where possible.
b. Brokers should develop a strong business culture, keeping the needs of clients in mind in order to avoid complaints.
c. Brokers should have a formal complaints procedure in place and inform their clients of it.
d. Brokers should deal quickly with complaints in accordance with their corporate culture.
c. Brokers should have a formal complaints procedure in place and inform their clients of it.
75
Which of the following is LEAST likely to be an example of the mis-selling of a general insurance product?
a. The product is not the cheapest available.
b. Incorrect advice is given, either deliberately or negligently.
c. Not enough information is provided.
d. The product is not in line with a client's demands and needs.
a. The product is not the cheapest available.
76
In the event that a customer makes a complaint, what is the most important part of the complaints procedure?
a. To assess whether a complaint is complex.
b. To recognise that a complaint has been made.
c. To clarify within 24 hours whether a complaint is a service issue.
d. To clarify whether a complaint can be resolved within 24 hours.
b. To recognise that a complaint has been made.
77
An intermediary reassesses their business strategy and weighs up existing levels of business financial capital and trust capital. Which option best describes trust capital?
a. A commodity which must be earned.
b. The relationship of trust between the FCA and an authorised insurance intermediary.
c. Purchasing social media ‘likes’ with a digital media company.
d. Additional investment capital – often in the form of a director loan to the company.
a. A commodity which must be earned.
78
All insurance intermediaries are keen to avoid claims for errors and omissions [E&O claims]. Can you identify which statement is NOT considered a key principle for reducing E&O claims?
a. The most important thing is to be nice to customers.
b. Always ask someone more experienced if you are unsure of an answer.
c. Always keep written records of conversations and instructions.
d. Do the task correctly the first time.
a. The most important thing is to be nice to customers.
79
An insurance intermediary is keen to engage in standards of excellence when working with clients. Which of the following best describes excellence in customer service?
a. Not making too many mistakes.
b. Returning client calls and messages when convenient to the broker.
c. Communicating with the client in a manner that best suits the insurance brokerage.
d. Always completing what has been agreed by the deadline.
d. Always completing what has been agreed by the deadline.
80
The Financial Ombudsman Service [FOS] is a valuable part of the financial services landscape in the UK. Which of the following is NOT true of the FOS?
a. It is unable to consider complaints that are time-barred in any circumstances.
b. It has the ability to award a monetary settlement that is binding on the firm of up to £375,000.
c. It is funded by both a general levy paid by all firms and case fees by the firms to which complaints relate.
d. It only deals with disputes from a specified list of eligible complainants.
a. It is unable to consider complaints that are time-barred in any circumstances.
81
A broking firm has goals and strategies which incorporate core values, standards and beliefs which are also shared by firm’s staff. This could be best described as its:
a. in-house marketing goals.
b. business-staff strategy.
c. corporate culture.
d. rules of engagement.
c. corporate culture.
82
According to the Financial Conduct Authority [FCA], where a complaint has not been satisfactorily resolved, firms have to provide a final or written response to the customer for acceptance or referral to the Financial Ombudsman Service [FOS]. What is the correct period of time allowed for this process?
a. Six weeks of receipt of the complaint.
b. Ten weeks of receipt of the complaint.
c. Two weeks of receipt of the complaint.
d. Eight weeks of receipt of the complaint.
d. Eight weeks of receipt of the complaint.
83
Of the four criminal offences under the Bribery Act 2010, which has been the main cause for concern for insurance brokers?
a. Bribing a foreign public official.
b. Failure by a commercial organisation to prevent bribery.
c. Giving, promising or offering a bribe.
d. Requesting, agreeing to receive or accepting a bribe.
b. Failure by a commercial organisation to prevent bribery.
84
Insurance contracts are often transacted at considerable distances between the insurer, the broker and the customer. Can you identify a key consideration of the distance communications rules in ICOBS 3?
a. Information in a durable medium must be supplied before the conclusion of the contract.
b. Policy wordings must be available in booklet form.
c. When a broker is located over 100 miles from a customer, the broker should inform the customer of this fact.
d. Transactions over the internet must be finalised through a software house using EDI.
a. Information in a durable medium must be supplied before the conclusion of the contract.
85
Although the Financial Conduct Authority [FCA] carries out a wide range of activities, its primary objective is:
a. taking a non-risk based approach to their activities.
b. consumer protection through the fair treatment of customers.
c. policing financial services and issuing fines for breaches of regulation.
d. authorising and regulating organisations engaged in financial services.
b. consumer protection through the fair treatment of customers.
86
When authorising an insurance intermediary, governance is a key area of consideration for the Financial Conduct Authority [FCA]. Which option best describes the area of governance?
a. How the firm looks to prevent financial crime.
b. The end-to-end sales processes of the firm.
c. How the firm is managed, directed and controlled.
d. The shared values and beliefs that help define the firm.
c. How the firm is managed, directed and controlled.
87
The Financial Ombudsman Service [FOS] is a valuable part of the financial services landscape in the UK. Which of the following is NOT true of the FOS?
a. It has the ability to award a monetary settlement that is binding on the firm of up to £375,000.
b. It only deals with disputes from a specified list of eligible complainants.
c. It is funded by both a general levy paid by all firms and case fees by the firms to which complaints relate.
d. It is unable to consider complaints that are time-barred in any circumstances.
d. It is unable to consider complaints that are time-barred in any circumstances.
88
With regards to the Insurance Product Information Document [IPID], which of the following statements is INCORRECT?
a. It replaces the current documentation.
b. It allows customers to easily compare similar products.
c. It is a short, pre-contractual policy summary.
d. It should be supplied at each quotation.
a. It replaces the current documentation.
89
Insurance brokers operate within a regulatory environment. Which of the following is NOT considered a direct impact of the regulatory environment?
a. Brokers must adhere to the rules and principles laid down by the British Insurance Brokers' Association (BIBA).
b. Regulated firms must ensure that the insurers they deal with are properly authorised.
c. Regulated firms must follow the Financial Conduct Authority's (FCA's) rules and principles to maintain their authorisation.
d. Carrying on regulated activities without authorisation is a criminal offence.
a. Brokers must adhere to the rules and principles laid down by the British Insurance Brokers' Association (BIBA).
90
A broker receives a £200 return of premium from an insurer following a mid-term adjustment by a customer. Which scenario best describes what should happen next?
a. The £200 is classed as broker funds. A credit should be raised to the client and sent promptly.
b. The £200 can be temporarily invested by the broker, but has to be returned to the client within 90 days.
c. The £200 is classed as a ‘client asset’ and should be returned to the customer without delay.
d. The £200 is classed as insurer money. A credit should be raised to the client and sent promptly.
c. The £200 is classed as a ‘client asset’ and should be returned to the customer without delay.
91
According to the Financial Conduct Authority [FCA], where a complaint has not been satisfactorily resolved, firms have to provide a final or written response to the customer for acceptance or referral to the Financial Ombudsman Service [FOS]. What is the correct period of time allowed for this process?
a. Two weeks of receipt of the complaint.
b. Eight weeks of receipt of the complaint.
c. Six weeks of receipt of the complaint.
d. Ten weeks of receipt of the complaint.
b. Eight weeks of receipt of the complaint.
92
Although the Financial Conduct Authority [FCA] carries out a wide range of activities, its primary objective is:
a. taking a non-risk based approach to their activities.
b. consumer protection through the fair treatment of customers.
c. policing financial services and issuing fines for breaches of regulation.
d. authorising and regulating organisations engaged in financial services.
b. consumer protection through the fair treatment of customers.
93
As part of an insurance company's claims team, you are tasked with clarifying the correct name of a client who is insured under a delegated authority agreement. Your manager instructs you to speak with the coverholder. Who should you call?
a. The end client who has paid their premium in full and has received full documentation.
b. The organisation or persons that are in receipt of the delegated authority facility.
c. The underwriter who regularly audits the delegated authority agreement.
d. The end client who has paid their premium in full but has not received full documentation.
b. The organisation or persons that are in receipt of the delegated authority facility.
94
Clients may move their business between insurance brokers from year to year, which in turn can affect a broker's renewal retention rates. This process is known as:
a. churn.
b. flow.
c. spin.
d. trim.
a. churn.
95
Insurance brokers often offer a range of 'Added Value Services' to assist with the needs of their clients. Can you identify which of the following options would NOT be typical of an 'Added Value Service' offered by a broker?
a. Property survey.
b. Business continuity planning.
c. Health and safety consultation.
d. Specialist tax advice.
d. Specialist tax advice.
96
Where broker, client and insurer money are kept in the same bank account by a broker, this could result in:
a. co-mixing.
b. co-mingling.
c. co-merging.
d. co-circulating.
b.co-mingling.
97
Under the Insurance Distribution Directive [IDD], insurance staff must now complete at least how many hours of professional training or development each year?
a. 48 hours.
b. 21 hours.
c. 35 hours.
d. 15 hours
d. 15 hours
98
In the event that a customer makes a complaint, what is the most important part of the complaints procedure?
a. To recognise that a complaint has been made.
b. To clarify whether a complaint can be resolved within 24 hours.
c. To assess whether a complaint is complex.
d. To clarify within 24 hours whether a complaint is a service issue.
a. To recognise that a complaint has been made.
99
A client calls your insurance brokerage to say they are dissatisfied. The client believes inadequate cover arranged by your company has led to a loss. Which of the following statements is correct?
a. You are aware of the circumstances and are convinced your company has done nothing wrong. You believe the client is mistaken and advise them to forget the matter.
b. This is the client’s first call regarding the matter. As they will not take ‘no’ for an answer, you refer them to the Financial Ombudsman Service.
c. The complaint is valid as complaints do not have to be made in writing.
d. The client needs to explain their complaint in writing in order for it to be taken further.
c. The complaint is valid as complaints do not have to be made in writing.
100
Which of these is a benefit to both a client and their insurer of using an insurance broker?
a. The delegation of tasks such as premium collection.
b. Time and money saved in relation to administration.
c. Technical expertise to explain products in full.
d. The ability to quote from a range of insurers.
c. Technical expertise to explain products in full.
101
An insurance broker monitors a range of their insurance mediation activities to ensure compliance with the Financial Conduct Authority's [FCA's] rules. Which example would NOT normally be classed as an insurance mediation activity?
a. An apprentice insurance broker who deals with clients, but has not completed their 6 month trial.
b. A part-time account executive at an insurance brokerage who only occasionally places cover.
c. A third party web designer creating code for an insurance broker’s website.
d. An administrative assistant who updates the details of a home insurance policy.
c. A third party web designer creating code for an insurance broker’s website.
102
All insurance intermediaries are keen to avoid claims for errors and omissions [E&O claims]. Can you identify which statement is NOT considered a key principle for reducing E&O claims?
a. The most important thing is to be nice to customers.
b. Always keep written records of conversations and instructions.
c. Do the task correctly the first time.
d. Always ask someone more experienced if you are unsure of an answer.
a. The most important thing is to be nice to customers.
103
An insurance broker decides to apply a fee in addition to the policy premium in order to reflect the extra work involved on a case. Which of the following assumptions is incorrect?
a. Fees are paid by the insured to the broker for the service they provide.
b. The fee would generally not be reimbursed to the client following a mid-term adjustment.
c. As the fee is for the broker's service, it does not need to be separately shown on an invoice.
d. The fee should be agreed prior to the contract.
c. As the fee is for the broker's service, it does not need to be separately shown on an invoice.
104
Insurance brokers are required to make regular returns to the Financial Conduct Authority [FCA] on an integrated system called GABRIEL. What is the correct name for these returns?
a. Return Monitoring Retail Activities (RMRA).
b. Mediated Retail Services Activities (MRSA).
c. Activity Return Monitoring Services (ARMS).
d. Retail Mediation Activities Return (RMAR)
d. Retail Mediation Activities Return (RMAR)
105
What term is used to describe the report detailing the risks written and claims reported by an entity to which an insurer has given delegated authority?
a. Coverholder.
b. Bordereau.
c. Delegated.
d. Binding.
b. Bordereau.
106
An insurance broker accepts a contingent commission arrangement with an insurer. Which situation best describes what this agreement is?
a. An overriding commission payment will be paid to the broker subject to a certain level of business being achieved.
b. A broker can place cover on a 0% commission basis.
c. The insurer agrees to rebate commission because of a previous accounting error.
d. If a policy is cancelled mid-term, the insurer can recover a pro-rata element of any commission that was paid to the broker.
. An overriding commission payment will be paid to the broker subject to a certain level of business being achieved.
107
In accordance with the law of agency, which of the following statements is correct?
a. An agent can have only one principal at any one time.
b. A delegated authority relationship permits more than one principal at any one time.
c. An agent can have more than one principal at any one time, providing all parties agree.
d. An insurance broker has both client and insurer as their principal at the same time.
a. An agent can have only one principal at any one time.
108
An insurance broker acquires a well-known commercial customer at little or no commission. The broker hopes that by having the well-known business as a customer, it will help to secure more business in the future. The acquisition of this business is best described as being a:
a. good-deal' policy.
b. ‘zero hero’.
c. 'loss leader'.
d. ‘cut your losses and run’ policy.
c. 'loss leader'.
109
An insurance broker receives instructions from a customer who is acting in both a private and a commercial capacity. According to ICOBS 2, the broker should treat the customer as a:
a. private customer.
b. commercial customer.
c. dual customer.
d. retail customer.
b. commercial customer.
110
Although agents are bound by their principal’s instructions, insurance brokers are usually permitted to delegate tasks that:
a. require decisions of judgment on the principal’s behalf.
b. are purely mechanical in their nature.
c. involve speculation regarding the principal’s legal status.
d. involve guesswork of a principal’s circumstances.
b. are purely mechanical in their nature.
111
Sometimes, a client will want to register a complaint with a broker. In order to deal with this, which option best describes the Financial Conduct Authority's [FCA’s] requirements to deal with complaints?
a. Brokers should develop a strong business culture, keeping the needs of clients in mind in order to avoid complaints.
b.Brokers should write to the complainant within ten weeks and settle any dispute where possible.
c. Brokers should have a formal complaints procedure in place and inform their clients of it.
d. Brokers should deal quickly with complaints in accordance with their corporate culture.
c. Brokers should have a formal complaints procedure in place and inform their clients of it.
112
When considering terms of business agreements [TOBAs], which of the following would you expect to see in a TOBA between an insurer and a client but NOT in a TOBA between an insurer and a broker?
a. The availability of compensation.
b. Broker's authority.
c. Conflict management.
d. Ownership and access to data and records.
a. The availability of compensation.
113
An intermediary reassesses their business strategy and weighs up existing levels of business financial capital and trust capital. Which option best describes trust capital?
a. A commodity which must be earned.
b. Additional investment capital – often in the form of a director loan to the company.
c. Purchasing social media ‘likes’ with a digital media company.
d. The relationship of trust between the FCA and an authorised insurance intermediary.
a. A commodity which must be earned.
114
s lead underwriter with an insurer, you approve a delegated authority agreement. In thinking through your strategy, can you identify an advantage of the agreement?
a. Increased potential for funds to be mismanaged.
b. Reduced levels of control in underwriting each risk.
c. Reduction in operating costs per risk.
d. Coverholder could sub-delegate without authorisation.
c. Reduction in operating costs per risk.
115
A broker is granted approval by an insurer to operate a delegated authority on a property scheme. A customer requires cover for a property and requests that the cover notes the interest of ABC Bank. When the broker places cover within the delegated authority agreement, which option best describes the role of the broker?
a. The broker acts primarily as agent for the bank.
b. The broker is not an agent in this scenario.
c. The broker is the principal and the insurer is the agent.
d. The broker acts primarily as agent of the insurer.
d. The broker acts primarily as agent of the insurer.
116
What is the Principal aim of the Insurance Distribution Directive?
a. Consumer Protection
b. Data Protection
c. Prevention of bribery in Insurance
d. Prevention of money laundering
a. Consumer Protection
117
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 must be automatically provided
b. Full details of the data following a check to confirm the clients identity
c. A summary of the data
d. Such data cannot be provided
b. Full details of the data following a check to confirm the clients identity
