IF1 Full Flashcards
Insurance is a mechanism for:
A. Risk Management
B. Risk Measurement
C. Risk Transfer
D. Risk Control
Risk Transfer
Risk Management is a legal requirement for:
A. Companies on the stock market
B. Private customers
C. High net work individuals
D. Mortgagees
Companies on the stock market
A building survey by insurers is a method of:
A. Risk Identification
B. Risk Analysis
C. Risk Control
D. Risk Management
Risk Identification
The most effective method of risk control is:
A. Financial control measures
B. Elimination
C. Reduction
D. Physical control measures
Elimination
Insurance is classified as:
A. A physical control measure
B. A risk removal method
C. Financial control measures
D. Risk prevention method
A financial control measure
Betting on the Grand national is:
A. A pure risk
B. A speculative risk
C. A fundamental risk
D. A particular risk
A speculative risk
Which of these risks is insurable:
A. A fundamental risk
B. A speculative risk
C. A pure risk
D. A non-financial risk
A pure risk
For a risk to be insurable it must be:
A. Fortuitous
B. Non- fortuitous
C. Inevitably
D. Deliberate
Fortuitous
An excess is a form of:
A. Self insurance
B. Dual insurance
C. Co-insurance
D. Re-insurance
Co-insurance
Which of the following may be exempt from buying compulsory insurance:
A. Private individuals
B. Public bodies
C. Partnerships
D. Companies
Public bodies
A company wishing to transact insurance business must be authorised to do so by?
The PRA (Prudential Regulation Authority)
What type of insurance provider is owned by shareholders:
A. A proprietary company
B. Lloyd’s
C. A mutual company
D. A captive company
A proprietary company
ABC Insurance offer motor, fire and marine insurance cover, how would it be defined:
A. A reinsurance company
B. A mutual company
C. A composite company
D. A specialist company
A composite company
Which of these accepts risk on behalf of a syndicate in the Lloyd’s market:
A. A broker
B. An underwriter
C. An insurer
D. A managing agent
An underwriter
How can a non-Lloyd’s broker transact business in the Lloyd’s market:
A. Via an umbrella agreement
B. Via a sub-broker
C. After complying with Lloyd’s code of conduct
D. Either directly or via a Lloyd’s broker
Either directly or via Lloyd’s broker
Andy’s motor garage hands out leaflets for super motor car insurance but they don’t offer advice on the products. Therefore they are:
A. A principal
B. An introducer appointed representative
C. An authorised person
D. An appointed representative
An introducer appointed representative
What is the main activity of a consolidator?
To acquire brokerage firms
An internet site that collects a set of quotations from a number of different provider is called?
An aggregator
Arranging insurance on a single known risk is called?
Facultative re-insurance
When a reinsurer transfers a risk to another insurer it is called?
Retroceding
The practice of following a principle set down in a previous case is called?
Judicial precedent
What is the legal term for when a contract has the essential elements missing and is declared invalid from the beginning?
Void ab Initio
What case law established the principle that a valid contract is formed at the point of postage?
A. Household fire insurance company V Grant (1879)
B. Currie V Misa (1875)
C. Hyde V Wrench (1840)
D. Castellain V Preston (1833)
Household fire insurance company V Grant (1879)
How many days is the insured allowed to cancel payment protection insurance without a penalty?
30 days
Callum’s car is destroyed by a fire, his insurance policy is terminated as the subject matter no longer exists, this is called?
Fulfilment
When a person entrusts another with their goods and they need to protect it, this is agency by?
A. Necessity
B. Consent
C. Ratification
D. Authority
Necessity
The most usual way of creating agency by a legally enforceable contract is called?
Agency by consent
Which of these is the duty of a principal to an agent:
A. Obedience
B. Remuneration
C. Accountability
D. Due care and skill
Remuneration
When an agent has a TOBA with a principal, this is called:
A. Express authority
B. Apparent authority
C. Implied authority
D. Agency authority
Express authority
Paul has insurance on his car, the car is:
A. The subject matter of the insurance
B. The subject matter of the contract
C. His financial interest
D. The insurers insurable interest
The subject matter of the insurance
What principle of insurance includes the features of subject matter, legal relationship and financial value?
Insurable interest
In general insurance. What case illustrates the principle that an expectation of acquiring insurable interest at some time in the future may not create an insurable interest:
A. Currie V Misa (1875)
B. Hyde V Wrench (1840)
C. Lucena V Craufurd (1806)
D. Castellian V Preston (1883)
Lucena V Craufurd (1806)
When buying a an insurance policy for a car when must the insurable interest exist?
At inception of the policy.
At the start
What case established the principle of utmost good faith?
Rozanes V Bowen (1928)
What body issues the Statement of General Insurance Practice for those acting in a private capacity in cases of non-deliberate mistakes of disclosure?
The ABI (Association of British Insurers)
In the Carter V Boehm (1766) case, how did the judge argue an underwriter would act if an insured did not disclose a material fact?
Estimate the risk as it does not exist
When do insurers apply the doctrine of proximate cause?
If there is a chain of events leading to a loss
The proximate cause of a loss is always:
A. An insured peril
B. The dominant cause
C. The first cause
D. A named hazard
The dominant cause
The policy condition where the insurer makes an automatic allowance for uplift is to the sum insured declared at the policy inception and the policyholder pays a premium based on a modest increase is called?
A. Reinstatement memorandum
B. Day one reinstatement
Day One reinstatement
Manufacturers’ stock in trade insurance includes indemnity for raw materials and specifically?
Labour costs
What principle did the King and Queen Granaries case establish?
That both policies most cover a common interest in the subject matter.
What case defined the relationship between subrogation and indemnity?
A. Lister V Romford Ice and Cold Storage Ltd (1957)
B. Yorkshire Insurance Co. V Nisbet Shipping (1961)
C. Castellian V Preston (1883)
D. North British Mercantile V Liverpool and London and Globe (1877)
Castellian V Preston (1883)
Under common law, if a neighbour damages your property you can pursue compensation under:
A. Tort
B. Statute
C. Contract
D. Subrogation
Tort
Under the terms of the Riot (Damages) (Amendment) Regulations 2011, insurers may have rights of recovery against the police for riot damage within how many days of the riot?
42 days
What is the standard market limit of indemnity for Employers liability insurance?
£10 million
What amount does the FCA state must be held by insurance intermediaries for professional indemnity insurance?
£1 million
What is the minimum amount required for employers liability insurance?
£5 million
What act is the grey list associated with?
Consumer Rights act 2015
What does the term privity of a contact mean?
Only a person that is party to the contract can enforce it
Which body is responsible for the stability and resolvability of systematically important financial instructions?
The PRA (Prudential Regulation Authority)
As well as the the prudential regulation of small firms, what other regulatory role does the FCA have?
A. Regulation of conduct
B. Regulation of performance
C. Regulation of ethics
D. Regulation of profit
Regulation of conduct
Who may carry out a controlled function in a regulated firm?
A. Approved person
B. Controlled person
C. Authorised person
D. Delegated person
An approved person
To gain authorisation from the PRA to transact business in the EU, a company must be operated by:
A. Fit and proper persons
B. Diligent persons
C. Competent persons
D. Controlled persons
Fit and proper persons
Which two bodies must include their annual reports an account of how they have coordinated during the year?
The FCA and PRA
Under ICOBS, how long is the cooling-off period for a retail customer for most general insurance contracts?
14 days
Which body is primarily concerned with serious crime prevention and the recovery of the proceeds of crime?
The NCA (National Crime Agency)
What are the 3 stages of money laundering?
Placement
Layering
Intergration
The process of creating a series of transactions to conceal the origin of money is called:
A. Concealment
B. Legitimising
C. Layering
D. Integration
Layering
Which act made it a specific criminal offence to fail to disclose that someone else is engaged in money laundering?
The proceeds of crime act 2002
Which act makes it a criminal offence to tip off a person suspected of money laundering?
The criminal justice act 1993
For how long must client verification records be kept?
5 years
For firms advising on insurance, how long does the FCA require that records of training and competence are kept for?
3 years
Which one of the CII’s five central principles in its code of ethics focuses specifically on equality and diversity?
Treating people fairly
What percentage of level of claim or unused premium is protected by the FSCS for non-compulsory insurance compensation?
90%
What is the time limit within which the FCA expects that a complaint will be resolved?
8 weeks
What is the cooling off period for short term contracts (less than 1 month)?
There isn’t one
What are the main components of risk?
Uncertainty
Level of risk
Peril and Hazard
What type of risk has the possibility of loss, gain and breaking even?
A speculative risk
In terms of frequency and severity, an explosion on an oil rig is classed as?
Low frequency, high severity
A hazard is defined as?
Something that can adversely affect the risk to be insured.
In relation to insurance, what is a peril?
An event that may give rise to a loss.
When does dual insurance exist?
When more than 1 policy covers the same risk.
What type of insurance policy provides cover in the event of the misappropriation of goods by an employee?
A Fidelity Guarantee insurance policy
What are public limited companies who underwrite business within the Lloyd’s market otherwise known as?
Corporate members
What does the Institute and Faculty of Actuaries do?
Provides financial and statistical theories to management, including suggesting premium rating and the calculation of a company’s financial status.
Who receives the surplus of funds in a mutual insurer?
The policyholders.
Who will employ a loss assessor?
A policyholder or insured
Who would employ a loss adjuster?
The insurer.
Out of the below list, which insurer does not provide insurance to the general public?
A. A captive insurer
B. A mutual insurer
C. A proprietary insurer
D. A composite insurer
A captive insurer
P & I Clubs (protection and indemnity) within the London market underwrite which class of insurance?
Marine insurance.
If a principle agrees to be bound by the actions of an agent who acted outside the terms of agreement, what type of agency has been created?
A. Agency by consent
B. Agency by necessity
C. Agency by ratification
D. Agency by apparent authority
Agency by ratification
What are the 3 essential components of a valid contract of insurance?
Offer, acceptance and consideration
The ICOBS (Insurance Conduct of Business sourcebook) is issued and regulated by who?
The FCA
What financial indicator does the PRA monitor to determine the continued viability of an insurer?
The solvency margin.
The PRA’s principles for Businesses states that a firm must maintain financial resources that are…?
A. Good
B. Adequate
C. Surplus
D. Accurate
Adequate
What is current rate for IPT (insurance premium tax) for travel insurance?
20%
When money laundering has been validated by the firm’s MLRO (money laundering reporting officer), who does the MLRO report it to?
The NCA (National Crime Agency)
What act is this principle from? “To empower authorities to confiscate funds where it is believed that such funds have been obtained unlawfully”
The Proceeds of Crime act 2002
How long do private individuals/policyholders have to refer their complaint to the FOS (financial ombudsman service)?
Six months.
What are the main elements covered in the Chartered Insurance Institute’s Code of Ethics relating to provision of a high standard of service?
A. Accuracy, Transparency, sustainability
B. Accuracy, Transparency, suitability
C. Accuracy, Transparency, Cost effective
D. Accuracy, Transparency, competence
Accuracy
Transparency
Suitability
Is a fundamental risk insurable or non-insurable?
Non-insurable
What type of risk would a local flood be classified as?
A particular risk
Pecuniary insurance relates too:
A. Money
B. Liability
C. Theft
D. Property
Money
What type of liability do policyholders in mutual companies usually have?
Liability that is limited by guarantee.
In the Lloyd’s market, a broker will approach each underwriter and ask them to sign to accept an agreed percentage of the risk. What is this called?
A. Writing a line
B. Scratching a slip
C. Xchanging
D. Brokerage
Scratching a slip.
What organisation represents the international wholesale and re-insurance companies in the London Market?
A. LMBC
B. LUC
C. IUA
D. Lloyd’s
IUA
What is the agreement between an insurer and intermediary that deals with the contractual relationship called?
TOBA (Terms of Business Agreement)
What type of agency is it when a principal accepts the contract formed by an agent, where they have not been given authority?
A. Agency by necessity
B. Agency by consent
C. Agency by ratification
D. Agency by authority
Agency by ratification.
What type of authority does the law make provisions for when a third party is unaware of the extent of an agents authority?
Apparent authority.
What did the Carter V Boehm case (1766) explain?
The duty of disclosure in insurance contracts.
What is the legal term for the requirement of an insurer to state that they have invoked their right to cancel a policy?
Estoppel
The doctrine of proximate cause can be modified by:
A. Underwriters
B. The policyholder
C. Claims history
D. Policy wordings
Policy wordings
What is the policy condition called where the sum insured must be at least 85% of the full value of the item at reinstatement and the insured pays a premium based on this?
A. Reinstatement memorandum
B. Day one reinstatement
The reinstatement memorandum
What is it called when the sum insured is less than the full value of the property as it is unlikely that it will all be lost in one incident?
First loss
What two things must insurance policies have in common for contribution to exist?
Common peril and subject matter
What is the main advantage to the insured of market agreements between insurers?
A. Reduction in claim assessment time
B. Less administration
C. Avoidance of litigation
D. Reduction in premiums
Reduction in premiums
In the Yorkshire Insurance Company V Nisbet Shipping company, who was entitled to the extra money that was recovered?
The insured.
In contract, how can an insured waive their rights and their insurer’s rights to pursue a third party for damages?
A. Market agreement
B. Hold harmless clause
C. Contribution waiver
D. Subrogation waiver
Hold harmless clause
What is the agreement called between insurers and local authorities regarding damages to buildings by impact of a motor vehicle?
An immobile property agreement
For how long does an employer need to retain employer’s liability certificates for?
40 years
Who does the FSA answer to for the way it carries out its responsibilities?
The treasury
Which of these is NOT a type of financial crime the FSA focuses on?
A. Tax evasion
B. Money laundering
C. Fraud/dishonesty
D. Criminal market misconduct
Tax evasion
Under the SYSC principle in the FSA handbook, what kind of officer does the FSA have to appoint?
A MLRO (Money Laundering Reporting Officer)
What act made it a criminal offence is to launder gains from other crimes?
The Criminal Justice act 1993
How long must complaint files be retained from the date of complaint?
3 years
What act removed the requirement for a motor policyholder to return their certificate of motor insurance when cancelling their policy mid-term?
Deregulation act 2015
What insurance principle was summarised in the Roazanes V Bowen (1928) case?
Utmost good faith
What do the Insurance Conduct of Business Rules relate to?
A. Life assurance
B. Pensions
C. Investments
D. General insurance
General insurance
Which body is the lead regulator for Lloyd’s?
The PRA (Prudential Regulation Authority)
As well as consumer protection and competition, which of these is a strategic objective of the FCA?
A. Challenge
B. Profitability
C. Integrity
D. Mitigation of risk
Integrity
What type of customers may the FCA use its product intervention powers on?
Retail customers
Which body is the FCA accountable to?
The UK Government
What is the maximum financial award the FOS can make?
£150,000
A person who wishes to minimise risk is termed:
A. Risk seeking
B. Predictable
C. Unpredictable
D. Risk averse
Risk averse
Which type of insurance company is increasingly owned by large and international companies?
A captive insurance company.
The practise of assigning shares in a risk to different Lloyd’s syndicates is called:
A. Brokerage
B. Xchanging
C. Scratching a slip
D. Writing a line
Writing a line
In the Lloyd’s market, what kind of liability does a corporate member have?
Limited liability
In the Lloyd’s market, what kind of liability does a ‘name’ have?
They are liable for their share of the loss up to the full extent of their personal fortune.
Insurers can give intermediaries delegated authority to act on their behalf. Delegates authority schemes are also known as what?
Binders
What is cedant?
An insurer who buys re-insurance cover.
Insurers arrange facilities to enable them to place risks within agreed criteria. These arrangements are called what?
Treaties
What is the major trade association many insurance intermediaries belong to?
BIBA
What type of conviction does NOT need to be disclosed to an insurer?
A spent conviction
What principle did Lister V Romford Ice and Cold Storage Ltd (1957) establish?
That insurers cannot pursue employees of their insured for recovery of damages paid to other insurers employees that have been negligently injured.
What do the eleven principles (PRIN) in the FCA handbook relate to?
A. Ethics
B. Good business practice
C. Competition
Good business practise
What type of resources do the threshold conditions specifically relate to?
Financial and non-financial resources
What is the amount by which assets must be exceed liabilities called?
The solvency margin
Describe what the RMAR is?
It provides a framework for the collection of information required by the FCA as a basis for its supervisor activities.
What is the purpose of a Firm Systematic Framework (FSF)?
To assess a firm’s conduct risk.
What body is able to review and react to super complaints submitted by consumer groups?
The FCA
In what section of the FCA handbook would you find regulatory rules and guidance relating to prevention and detection of money laundering?
A. SIMR
B. PRIN
C. COND
D. SYSC
SYSC
What was the effect on SOCA and NCA when the Crime and Courts Act 2013 came in?
SOCA’s and NCA’s operations were merged.
What is the maximum penalty that can be imposed under the Money Laundering Regulations act 2007?
A fine plus imprisonment of up to 2 years.
Into which of the FCA’s risk categories do smaller firms, including most intermediaries, fall?
A. C1
B. C4
C. C2
D. C3
C4
What is a homogeneous exposure?
A sufficient large number of similar risks which enable the insurer to forecast future losses, correct premiums etc…
What is a specialist insurer?
An insurer that only offers one type of insurance.
What is Xchanging?
When a Lloyd’s slip is fully placed (100% of the risk signed off), the policy will be then prepared and signed. The organisation that carries out the functions is called Xchanging.
When must insurable interest exist for general insurance policies?
At both inception and the time of claim.
When must insurable interest exist for marine insurance policies?
At the time of claim but not necessarily at the time of inception.
When must insurable interest exist for life assurance polices?
At inception but not at the time of claim.
What was established in the Hyde v Wrench (1840) case law?
Relates to conditional acceptance and that if a counter offer is given it is seen as a rejection to the original offer.
What does the Kettlewell V Refuge Assurance Company (1909) establish?
The insurer’s duty of disclosure. Ensuring that they don’t mislead about the cover, notify the insured of premium discount and only taking risks and they are registered to take.
What did the Leyland Shipping V Norwich Union Fire Insurance Society (1918) case state?
Related to proximate cause.
“Causation is not a chain but a net.”
In this case, plates were insured in a shop, the next shop sets on fire, people gather, then riot and smash the plates, it was found the riot was the cause.
What case is this?
Marsden V City & County Insurance company (1865)
What did the Oei V Foster (1982) case set out?
That the policy wording can be modified to include or exclude a claim.
What is the standard rate for IPT (Insurance Premium Tax)?
12%
What are the 3 elements of Risk Assessment Framework?
Impact
Risk
Mitigating factors
What are the FCA’s 3 operational objectives?
Consumer protection
Integrity
Competition
What is AIRMIC related to?
A. Risk Control
B. Risk Management
C. Risk Elimination
D. Risk transfer
Risk Management
Is a pure risk insurable or un-insurable?
Insurable
