IF1 KEY POINTS

Question 1

People tend to be either Risk Seeking or Risk Averse

Answer 1

Risk averse dislikes risk and will seek to transfer risk

Risk seeking will have a relaxed attitude towards risk transfer

Question 2

Categories of risk

Answer 2

Financial and non-financial

Pure and speculative

Particular and fundamental

Question 3

Level of risk Frequency and severity

Answer 3

Frequency- how often something is going to happen

Severity- how bad something is going to be

Question 4

Level of risk Frequency and severity

Answer 4

High frequency and low severity example: Car crashes

Low frequency and high severity example: Oil rig exploding

Question 5

Co-insurance?

Answer 5

Multiple insurers insuring the same risk each taking a portion of the risk and a portion of the premium

Question 6

Dual insurance?

Answer 6

Two or more insurers covering the same risk for example a camera being covered by home insurance and travel insurance

Question 7

Self-insurance?

Answer 7

A company carries the risk themselves by self-funding

Question 8

Structure of the insurance market

Answer 8

Private individuals

Partnerships

Companies

Public bodies

Associations and clubs

Question 9

A proprietary company is owned by

Answer 9

shareholders

Question 10

A mutual company is owned by its?

Answer 10

Policy holders

Question 11

A captive company is owned by

Answer 11

owned by a non-insurance company with sole aim of insuring themselves

Question 12

Reinsurance is?

Answer 12

Insurance for insurance companies

Question 13

The purpose of reinsurance is

Answer 13

To smooth peaks and troughs in the claims experience

• To protect the portfolio (the balance sheet)
• To provide improved customer service
• To provide support for insurers entering new areas of business.

Question 14

ABI stands for?

Answer 14

Association of British Insurers

Question 15

IUA

Answer 15

International Underwriting Association of London

Question 16

BIBA

Answer 16

British Insurance Brokers Association

Question 17

A Loss Adjuster is appointed by the?

Answer 17

insurer

Question 18

A loss assessor is appointed by the ?

Answer 18

insured

Question 19

MIB stands for?

Answer 19

Motor insurers Bereau

Question 20

Agency by consent

Answer 20

most common type of agency both parties enter agency by agreement

Question 21

Agency by ratification

Answer 21

ratification is where the agent acts on the principals behalf without their prior consent but the principal agrees to the contract after the event

Question 22

Agency by necessity

Answer 22

this agency occurs when a person is trusted with someone else’s good and it becomes necessary to act in a certain way in order to preserve the property in an emergency

Question 23

For marine insurance insurable interst must be present at

A, Time of loss
B, Inception
C, Both

Answer 23

A Time of loss

Question 24

In life assurance insurable interest must be present at

A, Time of loss
B, Inception
C, Both

Answer 24

B, Inception

Question 25

In general insurance insurable interest must be present at? A, Time of loss B, Inception C, Both

Answer 25

C, Both

Question 26

Indemnity is?

Answer 26

Financial compensation sufficient to place the insured in the same financial position after a loss as they enjoyed immediately before the loss occurred

Question 27

Methods of indemnity are?

Answer 27

Cash payment * Repair * Replacement * Reinstatement

Question 28

What is an Agreed value policy?

Answer 28

Value of subject matter of the insurance is agreed at the start of the contract.

Question 29

Contribution is

Answer 29

The right of an insurer to call upon others similarly, but not necessarily equally, liable to the same insured to share the cost of an indemnity payment.

Question 30

Subrogation is

Answer 30

The right of an insurer, following payment of a claim, to take over the insureds right to recover payment from a third party responsible for the loss. It is limited to the amount paid out under the policy. Subrogation rights may arise in the three following ways: * Tort * Contract * Statute

Question 31

Compulsory insurances are?

Answer 31

Employers liability * Motor insurance * Public liability and riding establishment * Liability insurance – dangerous animals and dogs * Professional indemnity

Question 32

ICOBS 1 relates to?

Answer 32

Applications

Question 33

ICOBS 2 relates to?

Answer 33

General matters

Question 34

ICOBS 3 relates to?

Answer 34

Distance communications

Question 35

ICOBS stands for?

Answer 35

Insurance conduct of business source book (ICOBS)

Question 36

FSCS stands for?

Answer 36

Financial Services Compensation Scheme

Question 37

FOS stands for?

Answer 37

Financial Ombudsman Service