MAIN Final quiz 4

Question 1

.Your insured, a sole proprietor, purchased a building valued at $1 million. The insurance policy has a coinsurance clause based on the replacement cost value of 90%. Contrary to your advice, your insured insures the building for only $500,000. He suffers a windstorm loss totaling $150,000. How much will the insurer pay?

$75,000

$83,333

$150,000

$93,755

Answer 1

$83,333

Question 2

2.An insured property is covered by two separate commercial policies placed with two different insurers. Insurer A’s policy has a limit of $100,000 and Insurer B’s policy has a limit of $200,000. The insured suffers an insurable loss of $230,000. Assuming no deductibles apply, how much will each insurer pay?

Insurer A will pay $100,000. Insurer B will pay $130,000

Insurer A will pay $100,000. Insurer B will pay $200,000

Insurer A will pay $76,659. Insurer B will pay $153,341

Neither insurer will pay. Two policies on the same property are prohibited

Answer 2

Insurer A will pay $76,659. Insurer B will pay $153,341

Question 3

3.On a Commercial Building, Equipment, and Stock Form, that insures the building owner, which of the following would not be included under the “building” definition?

Growing plants and trees inside the building used for decorative purposes

Building maintenance supplies

Fixed structures pertaining to the building

Temporary fixtures and fittings

Answer 3

Temporary fixtures and fittings

Question 4

4.Under a Commercial Building, Equipment, and Stock insurance policy, the definition of “stock” includes:

merchandise of every description usual to the insured’s business, including packing and wrapping materials

advertising material usual to the insured’s business

all stock including similar property belonging to others for which the insured is obligated to insure

all of the above

Answer 4

all of the above

Question 5

5.The Commercial Building, Equipment, and Stock insurance policy identifies three types of equipment for which coverage is provided. Which of the following is NOT one of these three types?

Tenants’ improvements and betterments if the insured does not own the building

Packing materials used to ship stock

Property belonging to others for which the insured is legally liable

The contents usual to the business the insured is engaged in, other than stock

Answer 5

Packing materials used to ship stock

Question 6

6.The basic principle of business interruption insurance is

to arrange alternate employment for employees while the building is being repaired following an insured loss

to restore the premises to the condition they were in before the loss

to cover the cost of relocating the business

to restore the income that would have been earned had the business not been interrupted

Answer 6

to restore the income that would have been earned had the business not been interrupted

Question 7

7.On a commercial crime insurance policy, employee dishonesty insurance

is provided on a discovery basis

is also known as fidelity insurance

protects insured against dishonest acts committed by employees, alone or in collusion with others

all of the above

Answer 7

all of the above

Question 8

8.Which of the following losses normally excluded under a boiler and machinery policy can be added by endorsement?

Fire

Nuclear reaction or radioactive contamination

Increased costs due to the enforcement of a bylaw regulating building construction

War related losses

Answer 8

Increased costs due to the enforcement of a bylaw regulating building construction

Question 9

9.A surety bond

is a contract between two parties

protects the surety

provides security to a party entering into a contractual agreement with another

protects the insurer

Answer 9

provides security to a party entering into a contractual agreement with another

Surety has three parties It protects the Obligee so that they get paid if the Pricinpal (contractor) fails, paid by the Surety D is absolutely incorrect Think of surety like banking. The surety company is guaranteeing the work of the contractor, so that the owner gets the work done on time, on budget

Question 10

10.A marine insurance policy provides coverage for

the hull and cargo

the hull only

cargo only

property damage to third parties only, not the vessel itself

Answer 10

the hull and cargo

Question 11

11.Statutory conditions which are found in all fire policies

impose obligations on both the insured and the insurer

specify the coverages provided

state the rights of a third party

are not expressly required by law

Answer 11

impose obligations on both the insured and the insurer

Question 12

12.Actual cash value (ACV) is understood as the cost of replacing property, less any depreciation to it. Most insurers expand their definition to recognize that a fair estimate of depreciation at the time of loss depends on which of the following factors?

The property’s physical condition

The property’s resale value

The property’s obsolescence

All of the above

Answer 12

All of the above

Question 13

13.A “mortgagee” is defined as a person or organization that lends money to someone to buy property. The mortgagee under a mortgage clause on a property insurance policy has certain rights and obligations. Which of the following is a right of the mortgagee?

The right to share in the loss payment, as long as the insured owes something on the mortgage

The right to share in the loss payment, unless the mortgagor neglects the property

The right to share in the loss payment, unless occupation of the premises is for purposes more hazardous than those permitted by the policy

All of the above

Answer 13

The right to share in the loss payment, as long as the insured owes something on the mortgage

Question 14

14.In anticipation of building an addition to his home, which you insure under a homeowner package policy for $320,000, your client purchases and stores on his property $4,000 worth of lumber. A serious windstorm strikes the area and your insured’s lumber pile is destroyed. What coverage would be available under your policy?

None. The lumber is not yet part of the building

The lumber would be fully covered under Coverage A—Dwelling Building

The loss would be paid under the 10% extension of Coverage C—Personal Property for property outside the building

None. The policy excludes damage to property in the open caused by windstorm

Answer 14

The lumber would be fully covered under Coverage A—Dwelling Building

Question 15

15.Motorized vehicles are excluded under Coverage C—Personal Property of a homeowner policy. Coverage is provided as an exception to the exclusion for which of the following?

Mobility scooter

Lawn mower

Child’s motorized toy car up to a maximum speed of 10 kilometers per hour

All of the above

Answer 15

All of the above

Question 16

16.Stamp and coin collections are best insured by a/an

Personal articles floater

Fine arts floater

Homeowner package policy (Comprehensive Form)

Homeowner package policy (Basic Form)

Answer 16

Personal articles floater

Question 17

17.Under the Definitions section of a homeowners form, “data problem” is defined as

ability to receive data

ability to transmit data

erasure, destruction, or misinterpretation of data

all of the above

Answer 17

erasure, destruction, or misinterpretation of data

Question 18

18.Under a Homeowners Basic Form, the named peril “water damage” excludes loss or damage caused by freezing in an unheated portion of the building during the normal heating season if the insured is away for more than

24 hours

one week

three consecutive days

four consecutive days

Answer 18

four consecutive days

Question 19

19.Which of the following losses would be covered under the refrigerator or freezer food extension of coverage?

Food spoilage in the refrigerator because the insured’s child pulls the power cord out of the electrical outlet and it goes unobserved for a period of time

Expenses incurred to store freezer food in a cold storage unit while the freezer is being repaired

Food spoilage when a circuit breaker trips, disrupting the supply of power

Damage to the freezer due to food spoilage up to the full limit of insurance for Coverage C

Answer 19

Expenses incurred to store freezer food in a cold storage unit while the freezer is being repaired

Question 20

20.Your clients have been renting a unit in a condominium high-rise building and have carried a tenants package policy with your office. They have just purchased a condominium unit similar to the one they have been renting and will soon move in. What advice do you provide to meet their needs?

Transfer their existing policy (as is) to their new address. The buildings are similar, and they do not plan to buy any additional contents right away

Cancel the entire policy. They no longer have any need for insurance as the condominium corporation is required by law to insure all exposures for the owners of every unit

Get full details of the security arrangements and alarm systems in the building. You will then be able to recommend how much fire and theft insurance they should carry

Cancel their tenants policy and apply for a special package policy designed for condominium unit owners

Answer 20

Cancel their tenants policy and apply for a special package policy designed for condominium unit owners

Question 21

21.Which of the following is correct?

The condominium unit owner package purchased by a unit owner must provide sufficient insurance limits to cover the common elements of the building in addition to his/her contents and any improvements

A condominium corporation never owns the land on which the building stands

A condominium unit owner owns the space inside his/her unit, the contents, and any improvements bought or installed by him/her

The condominium unit owners package policy does not provide personal property insurance

Answer 21

A condominium unit owner owns the space inside his/her unit, the contents, and any improvements bought or installed by him/her

Question 22

22.Your client, Bill West, has purchased a farm. You advise Bill that he requires a farm insurance policy which will cover his dwelling and contents as well as the rest of his farm. You recommend an endorsement be added to cover his farm machinery and equipment. The typical coverage this endorsement will provide is

coverage for scheduled equipment only

all-risk coverage

subject to 100% coinsurance

all of the above

Answer 22

all-risk coverage

Question 23

23.Burglars enter the insured’s unlocked seasonal residence and steal some of the contents. Under the seasonal residence insurance policy, the loss is

covered, subject to the policy deductible

covered, only if the owners were away for less than 24 hours

covered, up to $500 only for building damage

not covered

Answer 23

not covered

Question 24

24.You inherit a valuable painting which you intend to exhibit periodically at various galleries. This would best be insured under a

Personal articles endorsement

Homeowner’s Broad Form policy

Fine arts endorsement

Tenants package policy

Answer 24

Fine arts endorsement

Question 25

25.With respect to mobile homes, when reasonable expenses are incurred to remove the building to protect it from an insured peril, the optional emergency removal expense extension allows the insured to use up to

5% of the amount of insurance under Coverage A

10% of the amount of insurance under Coverage A

15% of the amount of insurance under Coverage A

25% of the amount of insurance under Coverage A

Answer 25

5% of the amount of insurance under Coverage A

Question 26

26.Betty Smith has invited several friends over to join her in celebrating her birthday. She has purchased some alcohol from the local liquor store. After a guest had a drink, glass shards were found in a bottle of vodka. The guest required surgery to repair internal damages. The liquor store was found legally liable. This is an example of a/an _______________ liability exposure.

operations

products

contractual

premises

Answer 26

products

Question 27

27.A claims-made policy

triggers coverage when an accident occurs during the term the policy is in force

covers only claims made during the term of the contract

limits coverage to accidents that occur within a prescribed period

does not respond solely on the basis of liability

Answer 27

covers only claims made during the term of the contract

Question 28

28.Failure to do what an ordinary and reasonably prudent person would do under the same or similar circumstances is the definition of

proximate cause

intervening cause

assumption of risk

negligence

Answer 28

negligence

Question 29

29.The principle of indemnity requires that

insurance rates must be neither too high nor too low

the insured should be paid for the actual value of the loss sustained and not more

people who have accidents must pay for the losses that result

the insured must be paid the policy benefits that his or her premium has purchased

Answer 29

The insured should be paid for the actual value of the loss sustained and not more

Question 30

30.Section F on a homeowner policy provides coverage for

Personal liability

Voluntary compensation for residence employees

Voluntary medical payments

Voluntary payment for property damage

Answer 30

Voluntary medical payments

Question 31

31.Coverage E—Personal Liability on a homeowner policy defines “property damage” as

physical loss or damage to intangible property, including the loss of use of such property

physical loss or damage to tangible property, including the loss of use of such property

physical loss or damage to tangible property, excluding the loss of use of such property

damage to tangible or intangible property occurring on the premises of the insured

Answer 31

physical loss or damage to tangible property, including the loss of use of such property

Question 32

32.You are the broker for Speedy Trucking Ltd. They own 25 power units. The automobile insurance policy you would recommend to your client to protect their fleet of vehicles is the

Standard Policy Form 1—Owners Form

Standard Policy Form 4—Garage Automobile Policy

Standard Policy Form 6—Non-owned Automobile Policy

Standard Policy Form 9—Transportation Network Policy

Answer 32

Standard Policy Form 1—Owners Form

Question 33

33.An SPF4—Garage Automobile Policy provides coverage for physical damage to owned automobiles. The insured can choose the coverage from four available options. Which of the following is NOT one of these options?

All perils

Collision or upset

Comprehensive

Specified perils

Answer 33

All perils

Question 34

34.The SPF6—Non-owned Automobile Policy provides which of the following coverages?

Third party liability coverage

Physical damage coverage for owned vehicles

Accident benefits coverage

Physical damage coverage for customers’ vehicles

Answer 34

Third party liability coverage

Question 35

35.Automobile commercial fleet policies often include a Standard Endorsement Form (SEF) 30a— Excluding Attached Machinery endorsement pertaining to equipment such as a crane or a picker. The purpose of this endorsement is to

exclude liability arising out of the operation of such equipment under Sections A and B of the automobile policy

exclude physical damage to attached equipment

exclude both liability arising out of the operation of such equipment and physical damage to the equipment

exclude coverage under a Commercial General Liability (CGL) policy

Answer 35

exclude physical damage to attached equipment

Question 36

36.ABC Trucking is a client of your brokerage. From time to time, they have non-owned vehicles in their care, custody, and control. You recommend to ABC Trucking Ltd. that they add an SEF 27—Legal Liability for Damage to Non-owned Automobiles to their policy. Which of the following statements is TRUE about this endorsement?

Since ABC Trucking is a corporation, indemnity is provided to individuals named on the endorsement

The endorsement covers multiple vehicles and/or trailers

The endorsement provides a “good will” type of coverage and will respond whether the insured is responsible for any damage or not

The endorsement protects against third party liability but not physical damage

Answer 36

Since ABC Trucking is a corporation, indemnity is provided to individuals named on the endorsement

Question 37

37.Your insured has an SPF1—Owners Policy and asks if his policy will cover him while driving in New Mexico, Texas, Arizona, and Mexico. You advise that it will cover him

in all four areas

in Arizona and Texas only

in Texas, Arizona, and New Mexico, but not in Mexico

only in Canada

Answer 37

in Texas, Arizona, and New Mexico, but not in Mexico

Question 38

38.On an automobile application, the Particulars of the Described Automobile (SAF1) section includes all of the following details except

body type

lienholder

vehicle serial number

color of the vehicle

Answer 38

colour of the vehicle

Insurers care about the Year, Make, Model and Vehicle Identification Number (VIN #) We never care about the colour. This is an urban myth! Although, it is on your registration documents when you get your plates, so this is a bit confusing.

Question 39

39.The grid rating program in Alberta

was developed to set maximum premiums that insurance companies can charge for basic coverages for any driving record

applies traditional underwriting criteria such as age, gender, and marital status

does not consider the territory where the vehicle is used

does not base the grid step on past losses

Answer 39

was developed to set maximum premiums that insurance companies can charge for basic coverages for any driving record

A is the answer. This came out effective October 2004 to ensure that Brokers were not discriminating by overpopulating Facility Association or residual markets. The fair driving record for all, regardless of age, gender and marital status and is based solely on experience driving, in Canada, claims free

Question 40

40.Your insured calls to advise that he is leasing an automobile from an automobile dealer for three years and requires insurance. You should issue a/an

SPF6—Non-owned Automobile Policy, suitably endorsed

SPF1—Standard Owner’s Automobile Policy, suitably endorsed

SPF2—Driver’s Policy, suitably endorsed

SPF4—Garage Auto Policy, suitably endorsed

Answer 40

SPF1—Standard Owner’s Automobile Policy, suitably endorsed

Question 41

41.Residual markets, from an underwriting standpoint, refer to

special programs to ensure insurance availability for all uninsured drivers

special markets that are immediately available to brokers, agents, and the public

special programs to ensure insurance availability for less desirable or more hazardous risks

special programs to encourage insurance for the more desirable or less hazardous risks

Answer 41

special programs to ensure insurance availability for less desirable or more hazardous risks

This is another name for FACILITY marketplace, where it is illegal to drive without insurance, but the client may not qualify for GRID rating, or preferred insurance company rating. It can either be because of their driving record, or sometimes because of the vehicle that they drive. Residual market (Wikipedia) = The residual market is a segment of the auto insurance market that serves drivers who are considered high risk and are denied coverage by insurers. The residual market works by spreading the risk of insuring these drivers among the licensed insurers

Question 42

42.Under the third party liability section of the automobile policy, the insured agrees toHINT

pay up to the minimum limits of the jurisdiction

reimburse the insurer for all amounts the insurer has to pay because of the absolute liability law, but which the insurer would not otherwise be liable to pay

pay court costs taxed against him or her

pay to cover any defence costs, even if the action is groundless

Answer 42

reimburse the insurer for all amounts the insurer has to pay because of the absolute liability law, but which the insurer would not otherwise be liable to pay

Question 43

43.The purpose of the Total Disability Coverage (Section B, Subsection 2, Part 2) of the SPF1 is

to provide payment for any medical expenses which the insured may incur

to provide the insured with temporary funds for the period of injury until such time as all of the lost earnings are recovered from the responsible party

to provide a substitute for some of the earnings which an insured may lose as a result of injury in an automobile accident if the injury prevents the insured from working ry prevents the insured from working

to provide punitive damages if the insured suffers from total disability or dismemberment

Answer 43

to provide a substitute for some of the earnings which an insured may lose as a result of injury in an automobile accident if the injury prevents the insured from working ry prevents the insured from working

Question 44

44.SEF44—Family Protection Endorsement

protects the insured and eligible passengers in his or her automobile for liability of a third party whose own insurance is insufficient to cover their claims for bodily injury

is mandatory coverage in Alberta

provides the same coverage as uninsured motorist coverage while driving in Quebec, Manitoba, Saskatchewan, and British Columbia

provides protection to the insured for damage to his or her automobile, provided he or she does not have collision insurance, and is able to identify either the owner or the driver of the uninsured third party automobile

Answer 44

protects the insured and eligible passengers in his or her automobile for liability of a third party whose own insurance is insufficient to cover their claims for bodily injury

Question 45

45.Which of the following statements is TRUE with respect to travel insurance?

It replaces insurance provided by a government plan

It does not normally provide coverage where an illness existed prior to the trip commencing

It pays before any other coverage when the insured is travelling outside of Canada

It covers unexpected events as well as expected events, such as pregnancy

Answer 45

It does not normally provide coverage where an illness existed prior to the trip commencing

Question 46

46.What is the best definition of “pure risk” as used for insurance purposes?

Must always be dealt with through reduction or elimination

The chance of loss

A condition which may cause a loss to occur

The possibility of property being over-insured

Answer 46

The chance of loss

Question 47

47.It is your responsibility as a broker to assist individual insurance consumers to determine the best insurance program for them. A risk analysis is an effective tool to

retain, organize, and file your notes

clarify information provided by your client

determine property items at risk as well as the likelihood of events happening

describe the differences between named perils and all-risk wordings

Answer 47

determine property items at risk as well as the likelihood of events happening

Question 48

48.In insurance terms, a peril is frequently described as a cause of loss. Which of the following is NOT a peril?

Lightning

A wood-burning stove used for heating

Windstorm

Burglary

Answer 48

A wood-burning stove used for heating

Question 49

49.You have requested a flow chart from your client to assist you in identifying exposures to loss. A flow chart maps the sequence of business activities using graphic representation. One of the main benefits of a flow chart is its ability to

describe in detail the subjects of insurance

reveal bottlenecks in production which may be difficult to repair or replace in a timely manner

highlight any legal liabilities

identify appropriate insurance policies to address the exposure to loss

Answer 49

reveal bottlenecks in production which may be difficult to repair or replace in a timely manner

Question 50

50.For a risk manager, controlling a risk means

measuring the frequency and severity of the exposure accurately

developing a plan to address loss prevention and reduction strategies including loss assumption or risk transfer methods

identifying the exposures

purchasing insurance

Answer 50

developing a plan to address loss prevention and reduction strategies including loss assumption or risk transfer methods

Question 51

51.One of the most important rules for deciding what to do about an exposure to loss is the “large loss principle.” Which of the following statements is TRUE with respect to this principle?

Devastating exposures to loss should be retained

The best loss exposure treatment is always insurance

If possible, devastating exposures to loss should be transferred through non-insurance or insurance transfers

The technique to best handle devastating exposures is either loss control or avoidance

Answer 51

If possible, devastating exposures to loss should be transferred through non-insurance or insurance transfers

Question 52

52.The insurance market is dynamic and constantly changing. Your knowledge of current market conditions will be invaluable

in matching your client’s needs to the most appropriate insurance product being offered at the time

in understanding that an underwriter will be willing to cut prices in a hard market

in understanding that an underwriter will implement stricter terms and conditions in a soft market

all of the above

Answer 52

in matching your client’s needs to the most appropriate insurance product being offered at the time

Question 53

53.Why is it necessary to monitor and modify a risk management plan?

If it is determined that a technique is not effective, changes may be required

New exposures to loss may develop

Benchmarks used to measure outcomes may be unrealistic and require modification

All of the above

Answer 53

All of the above

Question 54

54.There may be times when the premium you quote to a client from the rate manual and the final premium differ. It is important that you discuss the reason for this discrepancy with your underwriter so you can

have the discrepancy corrected

explain the reasons for the difference to your client

look for other solutions such as an increase in deductibles to lower the premium

all of the above

Answer 54

all of the above

Question 55

55.A premium

is not a primary motivator for clients in obtaining insurance coverage

in the rate manual is the final premium

is the amount of money an insurer charges to provide insurance coverage

if lower, is the sole factor in customer retention

Answer 55

is the amount of money an insurer charges to provide insurance coverage

Question 56

56.Agencies/brokerages must have efficient systems to handle reported claims. While it is not generally the function of producers to be involved in the handling of claims, they must do which of the following?

Promptly notify the insurer if a loss is reported and appears not to be covered by the policy

Recommend and appoint an adjuster

Monitor the progress of the claim and assist the client, adjuster, and insurer, whenever requested

All of the above

Answer 56

Monitor the progress of the claim and assist the client, adjuster, and insurer, whenever requested

Question 57

57.Brokers or agents do not normally adjust claims, but you are an advocate for the insured. To provide good claims service to your client, it is important to

promptly notify the insurer of the loss and explain the claims process to your client

monitor the progress of the claim

contact the client periodically to verify that the claim is progressing to his or her satisfaction

all of the above

Answer 57

all of the above

Question 58

58.The binding limits outlined in the agency agreement

represent the minimum amount an insurance company will entertain

grant the same degree of binding authority to an insurer’s brokers

act as a control on brokers’ binding powers

none of the above

Answer 58

act as a control on brokers’ binding powers

Question 59

59.Before an insurance agent may bind an insurer to a policy at the request of a client, he or she must always have

a signed application

a signed application and the premium must be paid in advance

authority from an insurer to bind the risk

the rest of the insured’s business

Answer 59

authority from an insurer to bind the risk

Question 60

60.When reviewing policy wordings, identify any conditions or warranties that require action or duties on the part of the insured in order to maintain coverage. Once identified,

contact the insurer and have them removed

contact the insurer and have them modified

bring them to the attention of the insured and explain the effect they would have on potential losses

all of the above

Answer 60

bring them to the attention of the insured and explain the effect they would have on potential losses

Question 61

61.Which of the following is NOT an example of private or personal information?

A client’s contact information

A client’s credit rating

A list of criteria for acceptable risk identification

Medical history for an identifiable client

Answer 61

A list of criteria for acceptable risk identification

Question 62

62.Customer profiles are useful tools for identifying clients and their insurance needs. Because information being collected is confidential, discretion and respect for the privacy of others is essential. A federal statute, the Personal Information Protection and Electronic Documents Act requires

information gathered for a specific purpose must only be used for that purpose

information requested must be relevant

information collected must be held in strictest confidence

all of the above

Answer 62

all of the above

Question 63

63.Privacy laws are in effect to provide consumers with confidence that their personal information will be kept confidential. A client’s financial history reveals a bankruptcy filing which took place seven years prior. You must not share this information with

the underwriter

others within your office

the marketing broker in your office helping you place the coverage

the customer service representative in your office assisting you in arranging adequate insurance coverage

Answer 63

others within your office

Question 64

64.The Personal Information Protection Act (PIPA) states that an organization may use personal information only for

arbitration or mediation purposes

purposes that are reasonable

30 days unless consent has been granted

purposes in relation to existing or proposed organizational programs

Answer 64

purposes that are reasonable

Question 65

65.A broker or agent has a fiduciary duty to the insurers they represent. A fiduciary duty

is a duty to act in trust and in the best interests of another

arises in the relationship between an agent and his or her principal

applies to monetary aspects of the relationship between the agent and his or her principal

all of the above

Answer 65

all of the above

Question 66

66.Brokers or agents usually have two bank accounts for their business, an operating account and a trust account. A trust account is one that is used to deposit

premiums collected to pay insurers for policies issued

commission earned

contingent profits earned

earned premiums only

Answer 66

premiums collected to pay insurers for policies issued

Question 67

67.Net premiums are

premiums after the producer’s commission has been deducted

premiums remaining after paying actual losses

premiums held for the trust account

premiums remaining after paying salaries, rents, and other operating costs

Answer 67

premiums after the producer’s commission has been deducted

Question 68

68.If an agent incorrectly tells an insured that a loss to his or her automobile is covered under his or her automobile insurance policy, the insurer

would never be required to pay such a loss because the loss was not covered under the insured’s policy

may be held liable for the loss by a court of law because under agency law, the agent’s acts are considered acts of the insurer

would never be required to pay such a loss if the agent was not authorized by the agency agreement to adjust losses for the insurer

would never be required to pay such a loss because a waiver must be in writing before it is valid

Answer 68

may be held liable for the loss by a court of law because under agency law, the agent’s acts are considered acts of the insurer

Question 69

69.An insurance agent or broker is responsible for providing the principal with all information that

they have on file about an applicant

might be of interest to the insurer

the market conditions impose on them

materially affects the insurer’s interest

Answer 69

materially affects the insurer’s interest

Question 70

70.The major cause of errors and omissions (E&O) claims is a failure to

comply with licensing regulations

file appropriate forms with Canada Revenue Agency

provide correct cover, in time

find an alternative market for a client, on request

Answer 70

provide correct cover, in time

Question 71

71.Which of the following statements describes an action that would be beneficial in preventing an E&O claim?

Act only within the scope of your authority and competence

Answer all questions posed by your client, even if it falls outside your area of expertise

If asked, explain the effects of exclusions and restrictions

Utilize good communication skills to ensure you fully understand your client’s requests

Answer 71

Act only within the scope of your authority and competence

Question 72

72.The financial guarantee under the Insurance Act of Alberta requires all insurance agents to have an errors & omissions policy. This policy

must be issued by a licensed insurer approved by the Ministry

must pay any claim proceeds directly to the insured

must contain a 14-day cancellation clause

must be for a minimum limit of $200,000

Answer 72

must be issued by a licensed insurer approved by the Ministry

Question 73

73.The errors & omissions insurance policy required by the Insurance Act for all holders of a Certificate of Authority must provide a per claim minimum limit of

$100,000

$200,000

$500,000

$1,000,000

Answer 73

$500,000

Question 74

74.PIPEDA sets out 10 privacy protection principles that must be followed by organizations. Which of the following is NOT one of these principles?

Personal information shall be accurate, complete, and up-to-date as is necessary for the purposes for which it is to be used

Personal information may only be gathered to write authorized types of business and must not exceed specified limits

Personal information shall be protected by security safeguards appropriate to the sensitivity of the information

The collection of personal information shall be limited to that which is necessary for the purposes identified by the organization

Answer 74

Personal information may only be gathered to write authorized types of business and must not exceed specified limits

Question 75

75.You have been asked to provide a commercial property quote for Blue River Construction Ltd. Some of the information you gather from them will be confidential, particularly financial data. In addition to reassuring your client that the information will only be used for the purposes they authorize and will be kept strictly confidential, you should also obtain

instructions on how to safeguard this documentation

written permission to share the information with various insurance companies you will ask to quote

written permission to shred the submission once the quote has been provided

detailed instructions on how they wish the information to be used

Answer 75

written permission to share the information with various insurance companies you will ask to quote

Question 76

76.A “conflict of interest” position means a situation where an intermediary

is charging an excessive rate of interest on a payment plan

is looking after the best interests of the client and other stakeholders

has an incentive to act other than in the best interests of the client

commits a civil wrong, other than a breach of contract

Answer 76

has an incentive to act other than in the best interests of the client

Question 77

77.Professional brokers’ associations have codes of conduct which specify brokers’ duties to clients, insurers, and fellow brokers. Which of the following is NOT a duty owed to fellow brokers?

To not harm their reputation

To adhere to the binding authority granted by the insurer

To cooperate in every reasonable way for the betterment of the industry

To encourage public respect for an endeavour to improve the practice of their vocation

Answer 77

To adhere to the binding authority granted by the insurer

Question 78

78.When recommending appropriate types of insurance to your client, you

have an ethical duty to advise of all coverages available through the insurers you represent (but not other carriers)

have an ethical duty to advise of all insurance available, even if it is beyond what your insurers can provide

have NO obligation to discuss risk control options with your client

need not explain the details of various options, but should encourage the client to read the policy wordings

Answer 78

have an ethical duty to advise of all insurance available, even if it is beyond what your insurers can provide

Question 79

79.You are a broker with a CIP designation in the commercial account department with Mateo Insurance Brokers Ltd. ABC Insurance Company has season tickets to NHL games. You are an avid fan of the Montreal Canadiens, and your underwriter has alluded to the fact that she might give you tickets to an upcoming game with the Canadiens if you place a large fleet account with ABC Insurance Company. Even though it is not the best market for the account, you strongly recommend ABC as the market of choice to the client. Which of the following ethical principles found in professional codes of ethics is being violated?

The requirement to facilitate the purchase of insurance

The requirement to provide the coverage best suited to the client’s needs, putting their interests first

The requirement to hold information in strict confidence

The requirement to stay within the terms of the broker agreement

Answer 79

The requirement to provide the coverage best suited to the client’s needs, putting their interests first

Question 80

80.Insurance documentation is a source of evidence of what took place with a certain policy. Should a dispute arise, consistent, accurate record-keeping can provide information about

privacy laws

policy retention standards

what instructions were given or what promises were made

commission structures

Answer 80

what instructions were given or what promises were made

Question 81

81.Which of the following is true about the form of organization that an insurer may take?

A joint stock company is owned by its policyholders

A farm mutual insurance company is owned exclusively by farmers who buy shares in the company

Lloyds of London is NOT an insurance company; it is a place where underwriters undertake to insure risks

Mutual insurance companies are NOT required to be licensed under the Insurance Act

Answer 81

Lloyds of London is NOT an insurance company; it is a place where underwriters undertake to insure risks

Question 82

82.Insurance allows people to live their lives and carry on their businesses without the fear that some single catastrophe or natural disaster could physically and financially ruin them. Which of the following best defines “insurance”?

It is the minimization of detrimental effects of risk

It is the method of sharing the losses of the few individuals in a group who suffer them among the many members of the group who do not

It influences the outcome of a loss

It is based on risk or uncertainty

Answer 82

It is the method of sharing the losses of the few individuals in a group who suffer them among the many members of the group who do not

Question 83

83.Many large insurers market their policies through the independent brokerage system. An independent broker is

one who has authority from a company to manage all of that company’s business within his or her territory

one who has authority from a company to appoint other agents and to settle claims

one who represents one company only

a business person who may place business with any number of insurers

Answer 83

a business person who may place business with any number of insurers

Question 84

84.The insurance industry manages large pools of money from premiums which are generally paid in advance. This capital has a positive influence on the economy. An example of this is

insurers invest in federal, provincial, and municipal bonds, thus recycling premiums into community development

the peace of mind that results when substituting a known premium payment for an uncertain loss payment

businesses must set aside reserves of money in case of a future loss or accident

insurance protects the insured’s interest in property, but excludes the lender’s investment

Answer 84

insurers invest in federal, provincial, and municipal bonds, thus recycling premiums into community development

Question 85

85.Reinsurance is an agreement between insurers and reinsurers. Which of the following is true of reinsurance? Reinsurance

directly affects the consumer

is insurance for insurance companies

is the primary link in the risk-spreading chain

cannot consist of more than one layer

Answer 85

is insurance for insurance companies

Question 86

86.The Facility Association

is an industry plan designed to guarantee availability of automobile insurance for automobile risks that cannot obtain coverage in the open market

is an industry plan designed to guarantee availability of automobile insurance for all personal automobile risks, but not commercial automobile risks

is run by the provincial government

is run by the Insurance Brokers Association of Canada

Answer 86

Is an industry plan designed to guarantee availability of automobile insurance for automobile risks that cannot obtain coverage in the open market

Question 87

88.The Insurance Act in the province of Alberta states that no insurer, insurance agent, or adjuster may engage in a tied selling practice prohibited by the Regulations. Tied selling is defined as

an illegal practice in which a company agrees to sell a customer some good or service only if the customer also buys some other good or service

the action or practice of selling an additional product or service to an existing customer

a sales technique whereby a seller induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale

selling a bond, debenture, note, or other evidence of indebtedness where secured or unsecured

Answer 87

an illegal practice in which a company agrees to sell a customer some good or service only if the customer also buys some other good or service

Question 88

89.If an individual does not successfully pass the Level 1 General Insurance Agent’s Certificate of Authority examination, he or she

is eligible for one re-write only, but must wait for 90 days from date of previous writing

is eligible for two re-writes, but must wait for six months from date of previous writing

is eligible for two re-writes, at any time, but must wait at least six months for a third attempt

is eligible for one re-write only, which must be attempted within one year from the date of the previous writing

Answer 88

is eligible for two re-writes, at any time, but must wait at least six months for a third attempt

Question 89

90.The insurance industry manages vast sums of money accumulated from premiums paid for the purchase of insurance policies. The money managed

can be invested in the stock market until it is needed to cover losses

cannot be invested but must be put aside in reserve funds

can be invested in both high and low risk stocks

can be invested in government specified secure and liquid investments

Answer 89

can be invested in government specified secure and liquid investments

Question 90

91.An underwriter is an insurance professional

employed by an insurer to accept or reject risk on their behalf

employed by an insurer to calculate rates for various classes of insurance

an independent business person who underwrites and sells insurance

all of the above

Answer 90

employed by an insurer to accept or reject risk on their behalf

Question 91

91.An underwriter is an insurance professional

employed by an insurer to accept or reject risk on their behalf

employed by an insurer to calculate rates for various classes of insurance

an independent business person who underwrites and sells insurance

all of the above

Answer 91

employed by an insurer to accept or reject risk on their behalf

Question 92

92.Which of the following functions are part of a staff adjuster’s duties?

They interview insureds, third parties, and witnesses

They listen and observe people’s reactions

They visit accident and/or loss scenes

All of the above

Answer 92

All of the above

Question 93

93.Salvage

is the portion of any property remaining after a loss that has value

belongs to the insured once the claim is settled

increases the cost of a claim

may be purchased by the insurer for a reasonable cost

Answer 93

is the portion of any property remaining after a loss that has value

Question 94

94.Joanna is a salaried employee of ABC Insurance Company. Her responsibilities include processing a large volume of claims that do not require face-to-face contact. What type of adjuster is Joanna?

An independent adjuster

A telephone adjuster

A field adjuster

A staff adjuster

Answer 94

A telephone adjuster

Question 95

95.In Alberta, all agents and brokers are licensed by the Alberta Insurance Council. To maintain their license, every agent and broker must

progress to the next level within three years

meet minimum mandatory continuing education credits annually

write and pass a renewal licensing exam annually

all of the above

Answer 95

meet minimum mandatory continuing education credits annually

Question 96

96.Obtaining an appropriate level of education and expertise is the responsibility of all brokers and agents. Why is this important?

To advance one’s career

To earn the trust and confidence of colleagues

To assist in understanding and performing one’s duties effectively and efficiently, ensuring that client and insurer needs are met

Better education leads to an increase in income

Answer 96

To assist in understanding and performing one’s duties effectively and efficiently, ensuring that client and insurer needs are met

Question 97

97.Complaints are a form of communication and may provide useful feedback. When handling complaints,

accept responsibility and admit fault; the customer is always right

always refer the client directly to the insurer

listen without making assumptions about the client or his/her concerns

try to dismiss it as quickly as possible or it may create a barrier with the client

Answer 97

listen without making assumptions about the client or his/her concerns

Question 98

98.When consumers or others submit a complaint to the Alberta Insurance Council, investigators from AIC’s Compliance Department will

refer the complainant to the appropriate insurance company for handling

gather relevant documentation to determine whether a violation of the Insurance Act has occurred

contact the broker or agent and insist that their license be suspended unless they immediately stop such behavior

assure the complainant that the broker, agent, or adjuster will be disciplined

Answer 98

Gather relevant documentation to determine whether a violation of the Insurance Act has occurred

Question 99

99.Provincial Brokers’ Associations

establish ethical and professional standards for their members

represent their members’ views to insurers and governments

provide licensing and professional designation courses to their members

All of the above

Answer 99

All of the above

Question 100

100.Which of the following is NOT an activity in which the Insurance Bureau of Canada (IBC) is involved?

Developing advisory model policy wordings for use by the industry

Handling claims with a high standard of ethics and claims arbitration

Providing insurance crime-related investigative services

Advocating industry positions with consumers, government, members, and other stakeholders

Answer 100

Handling claims with a high standard of ethics and claims arbitration