Study

Question 1

Which of the following distinguishes pure risk from speculative risk?

Answer 1

b. Speculative risk is insurable, while pure risk is not.

Pure risk involves only loss potential, while speculative risk involves the chance of profit.

Question 2

Which scenario best illustrates an example of pure risk?

Answer 2

b. Owning a car that may incur damage from a collision.

Pure risk scenarios typically involve situations that can result in loss without the potential for profit.

Question 3

Which of the following events is considered an insurable peril?

Answer 3

b. Fire damage to a residential property.

Insurable perils are events that can be covered by insurance policies.

Question 4

Fill in the blank: Pure risk involves the possibility of _______.

Answer 4

loss only.

Question 5

Fill in the blank: Speculative risk involves the possibility of both _______ and _______.

Answer 5

loss, profit.

Question 6

True or False: Pure risk is insurable because it only has loss potential.

Answer 6

True.

Question 7

True or False: Economic recession causing market losses is considered an insurable peril.

Answer 7

False.

Question 8

Which type of risk includes scenarios like investing in a startup?

Answer 8

Speculative risk.

Speculative risks involve situations where there is a chance of profit or loss.

Question 9

Which federal agency is primarily responsible for supervising insurance companies and ensuring their financial soundness in Canada?

Answer 9

Office of the Superintendent of Financial Institutions (OSFI)

OSFI is the main regulatory authority overseeing insurance companies in Canada.

Question 10

What does the order of commencement issued by the superintendent signify?

Answer 10

The company is officially approved to commence and carry on business, with specified classes of insurance it may underwrite.

This indicates regulatory approval for the company to operate in the insurance market.

Question 11

Which legislation generally deals with registration and licensing of motor vehicles, licensing drivers, and traffic control of vehicles on highways?

Answer 11

The Highway Traffic Act

This act provides the framework for regulating road traffic and vehicle operation.

Question 12

Statutory conditions applying to accident and sickness, automobile, and fire insurance policies are designed primarily to:

Answer 12

Standardized conditions that provide insureds with a consistent approach to claims settlement by establishing certain rights and obligations from both the insured and insurer.

These conditions ensure fairness and clarity in the claims process.

Question 13

What must foreign insurance companies do to write business in Canada?

Answer 13

Comply with the same requirements as Canadian insurers and obtain an order from the superintendent approving the types of risks they may insure.

Question 14

Foreign insurance companies in Canada operate under what regulation?

Answer 14

Provincial regulation without any federal oversight.

Question 15

What is required for foreign insurance companies to register in Canada?

Answer 15

Register with the local chamber of commerce.

Question 16

What exemption do foreign insurance companies from G7 countries have in Canada?

Answer 16

Exempt from capitalization and reserve requirements.

Question 17

What does the Personal Information Protection and Electronic Documents Act (PIPEDA) protect?

Answer 17

The collection, use, and disclosure of personal information, ensuring that such data is kept confidential and used only for its intended purpose.

Question 18

A claims adjuster mistakenly emails a client’s personal details to an unauthorized recipient. This incident is an example of what?

Answer 18

A privacy breach.

Question 19

Fill in the blank: PIPEDA ensures that personal information is kept _______.

Answer 19

confidential.

Question 20

True or False: Foreign insurance companies in Canada are subject to federal oversight.

Answer 20

False.

Question 21

What type of approval do foreign insurers need to insure specific risks in Canada?

Answer 21

An order from the superintendent.

Question 22

Which type of reinsurance involves a proportional sharing of both the premiums and the losses?

Answer 22

Proportional (pro rata) reinsurance.

Question 23

What is an appropriate response step when a privacy breach occurs?

Answer 23

Identify and contain the breach, assess the risks, notify affected parties as required, and implement measures to prevent future incidents.

Question 24

Which legal framework governs the terms of insurance contracts in Quebec?

Answer 24

General conditions under The Civil Code of Québec.

Question 25

Under common law, which of the following is NOT a required element for forming a valid contract?

Answer 25

A unilateral mistake by one party.

Question 26

What are the requirements for a valid contract in the Civil Code of Quebec?

Answer 26

A valid contract must have a Cause, Consent, and Capacity to contract. ## Footnote It does not require consideration expressed in monetary terms.

Question 27

What does the requirement of insurable interest in an insurance contract mean?

Answer 27

The insured must have a legal or financial relationship with the property such that its loss would cause economic harm. ## Footnote Ownership of the property is not required in every case.

Question 28

How does the insurer calculate indemnity based on the actual cash value (ACV) method?

Answer 28

The insurer pays the replacement cost minus depreciation for wear and tear.

Question 29

What does 'like, kind, and quality' (LKO) mean in a replacement cost policy?

Answer 29

The damaged property is replaced with property that is similar in type, condition, and quality, even if it is used.

Question 30

What is the purpose of salvage in an insurance claim?

Answer 30

To enable the insurer to reduce loss when part of the damaged property was not completely destroyed.

Question 31

What does subrogation in an insurance contract permit the insurer to do?

Answer 31

Assume the insured's legal rights to recover costs from a third party responsible for the loss after indemnifying the insured.

Question 32

What does the principle of contribution in insurance ensure?

Answer 32

Insurers covering the same risk share the loss on a proportional basis so that the insured does not profit by claiming from more than one policy.

Question 33

What is required by utmost good faith (uberrimae fidei) in an insurance contract?

Answer 33

Both parties are obligated to disclose all material facts that might affect the risk evaluation, premium determination, or policy terms.

Question 34

Which scenario best illustrates non-disclosure in an insurance application?

Answer 34

An applicant intentionally misrepresenting that their home is constructed of brick when it is in fact brick composite to impress the insurance agent.

Question 35

What is the primary function of an insurance policy?

Answer 35

It evidences the contract between the insurer and the insured, clearly stating the coverage, terms, and conditions.

Question 36

A certificate of insurance is best described as?

Answer 36

A temporary document binding coverage until the formal policy is issued.

Question 37

Which statement best distinguishes a binder from a cover note?

Answer 37

A binder is a temporary memorandum to insure a risk pending formal policy issuance, whereas a cover note is issued by a broker or agent to notify the insured of the insurance protection provided.

Question 38

What information is included in the insuring agreements section of an insurance policy?

Answer 38

A description of the property covered, the subject matter of insurance. ## Footnote The insuring agreements section outlines the essential coverage details of the insurance policy.

Question 39

Which of the following statements about the assignment of insurance contracts is correct?

Answer 39

An insurance contract is a personal contract that generally cannot be assigned to another party without the insurer's consent, except for the assignment of claim proceeds. ## Footnote This highlights the personal nature of insurance contracts and the need for insurer approval for assignments.

Question 40

What best describes the difference between treaty reinsurance and facultative reinsurance?

Answer 40

Treaty reinsurance covers class of risks automatically under a binding agreement, whereas facultative reinsurance is negotiated individually for each risk. ## Footnote This distinction is critical for understanding how different types of reinsurance operate.

Question 41

In non-proportional (excess of loss) reinsurance, how is a loss typically shared between the insurer and the reinsurer?

Answer 41

The insurer pays all losses up to a predetermined amount (the priority), and the reinsurer pays the portion of the loss that exceeds that amount, up to an agreed limit. ## Footnote This structure allows insurers to manage risk exposure effectively.

Question 42

Coverage summery section in an insurance policy includes:

Answer 42

The names and address on the insured and insurer. Effective date end date and term. Premium deductible and insured amounts.

Question 43

While policies differ a. Riding to coverage what are the five main sections:

Answer 43

Coverage summery, insuring agreements, stat conditions/Quebec general conditions, policy conditions and signature clause.

Question 44

Pro rate cancellation in the context of terminating an insurance policy refers to:

Answer 44

Cancelling the policy with a refund that is proportional to the unused portion of the premium.

Question 45

How do insurers typically handle the renewal of insurance contracts?

Answer 45

By sending renewal receipts or certificates to summarize the essential details of the insurance.

Question 46

Types of Insurance Providers

Answer 46

Stock companies Mutuals - stock and factory Governments of Insurers Captive insurance companies Lloyds insurance market

Question 47

How do stock market companies differ from mutual insurance companies in managing profits and losses?

Answer 47

Stock company distribute profits as dividends to shareholders and use subscribed capital for deficits whereas muts share profits amount policy holders.

Question 48

What is the purpose of reinsurance for an insurer

Answer 48

To transfer part of its rush to another insurer, thereby increasing capacity maintaining reversed balances and smoothing financial results.

Question 49

What is an insurance peril?

Answer 49

Fire damage to a residential property.

Question 50

Give an example of a physical hazard.

Answer 50

Slippery floors in a commercial building

Question 51

What is the meaning of proximate cause

Answer 51

The cause that in a natural continuous and unbroken chain. Produced and event that would otherwise not have occurred.

Question 52

What is the agents primary role.

Answer 52

Represent one insurer by helping arrange insurance between the insurer and the prospective insureds.

Question 53

What is an agents primary role?

Answer 53

Represent one insurer by helping arrange insurance contract between the insurer and prospective r insureds.

Question 54

What is a public adjuster?

Answer 54

A staff adjuster who works directly with the insurance company to settle claims.

Question 55

What is a product offered under general insurance?

Answer 55

Property and casualty insurance.