Mock questions - 2020

Question 1

What is the benefit to an insurer of having an insurance policy placed through an insurance broker?

A. Full disclosure of the policyholder’s material circumstances will always be made.

B. The insurance broker is responsible for paying the insurance premium in the event of non-payment by the policyholder.

C. The insurance broker will explain the technical aspects of the insurance policy to the policyholder.

D. The policyholder retention rate is always greater than that achieved for a direct placement.

Answer 1

C. The insurance broker will explain the technical aspects of the insurance policy to the policyholder.

Question 2

One of the main differences between a wholesale broker and a retail broker, involved in the same placement, is that only the retail broker

A. acts on behalf of the principal.

B. deals directly with the proposer.

C. is remunerated from the overall commission available.

D. will have access to the Lloyd’s market

Answer 2

B. deals directly with the proposer.

Question 3

In addition to traditional insurance services, what additional service may insurance brokers normally offer their clients?

A. A cost-effective distribution network.

B. Loss adjusting services.

C. A proposal form completion facility.

D. Risk management assistance.

Answer 3

D. Risk management assistance.

Question 4

When providing claims management support, to which party does the broker’s main responsibility lie?

A. The adjuster.

B. The insured.

C. The insurer.

D. The regulator.

Answer 4

B. The insured.

Question 5

What type of risks are placed by insurance brokers?

A. All types of risk.
B. Commercial risks only.
C. Global risks only.
D. Personal lines risks only.

Answer 5

A. All types of risk.

Question 6

Within an insurance brokerage, who is usually responsible for ensuring that mediation activities comply with the Financial Conduct Authority’s requirements?

A. An account executive.
B. The compliance officer.
C. The data protection officer.
D. The finance director.

Answer 6

B. The compliance officer.

Question 7

What action should an insurance broker immediately take upon realisation that it will be unable to fully meet a client’s demands and needs?
A. Inform the client of policy restrictions in coverage.
B. Insert any policy restrictions into the insurance policy.
C. Send the client a revised demands and needs statement.
D. Terminate the insurance placement.

Answer 7

A. Inform the client of policy restrictions in coverage.

Question 8

Who normally instructs a wholesale insurance broker to place an insurance policy?
A. An appointed representative.
B. An insured.
C. An insurer.
D. A retail insurance broker.

Answer 8

D. A retail insurance broker.

Question 9

A coverholder under a delegated authority agreement will normally be an employee of

A. an insurance broker.
B. an insurer.
C. the policyholder.
D. the reinsurer.

Answer 9

A. an insurance broker.

Question 10

If a proposer requests that an excess does NOT apply to his new insurance policy, the insurance broker should explain the

A. consequent limitations on cover.
B. effect on premium levels.
C. imposition of warranties.
D. restrictions on the policy term.

Answer 10

B. effect on premium levels.

Question 11

Which document would an insurance broker normally require a client to complete to establish the client’s demands and needs?

A. A delegated authority agreement.
B. An initial disclosure document.
C. A questionnaire.
D. A suitability statement

Answer 11

C. A questionnaire.

Question 12

Which document does a Lloyd’s insurance broker use to place business with Lloyd’s underwriters?

A. A bordereau.
B. A certificate of insurance.
C. A Market Reform Contract.
D. A Terms of Business Agreement.

Answer 12

C. A Market Reform Contract.

Question 13

When a Lloyd’s insurance broker uses the subscription market to place an insurance policy, this is a process of

A. co-insurance.
B. co-ordination.
C. consolidation.
D. contribution.

Answer 13

A. co-insurance.

Question 14

What characteristics does a Lloyd’s insurance broker look for in an insurer when selecting a leading underwriter to provide a quotation on a risk in the subscription market?

A. The ability to always underwrite the largest proportion of the insurance risk.

B. The ability to provide the lowest premium quotation which is then supported by following insurers subject to different terms and conditions.

C. The capacity to underwrite 100% of the risk which is then automatically reinsured to following insurers.

D. Specialised knowledge of the class of business to provide a quotation which will be supported by following insurers.

Answer 14

D. Specialised knowledge of the class of business to provide a quotation which will be supported by following insurers

Question 15

The principal of a reinsurance broker is the

A. insurance broker.
B. insured.
C. insurer.
D. reinsurer.

Answer 15

C. insurer.

Question 16

Why does an insurer normally use a reinsurance broker to place its property catastrophe worldwide reinsurance exposure?

A. To provide an enhanced claims service.

B. To reduce its administration expenses.

C. To use the reinsurance broker’s expertise to reinsure the exposure with one large reinsurer only.

D. To use the reinsurance broker’s expertise to reinsure the exposure with a number of financially strong reinsurers.

Answer 16

D. To use the reinsurance broker’s expertise to reinsure the exposure with a number of financially strong reinsurers.

Question 17

An insurance broker receives a request for a quotation from a potential new client. Who normally determines which insurers the broker will approach?

A. The British Insurance Brokers’ Association.
B. The client.
C. The Financial Conduct Authority.
D. The insurance broker.

Answer 17

D. The insurance broker.

Question 18

A proposal form is being completed in respect of a professional indemnity risk. What is the broker’s usual role in this process?

A. To advise the client on what material circumstances to disclose on the form.

B. To complete the form and ask the client to verify its accuracy before signing it.

C. To complete those questions where the client is unsure of the meaning.

D. To verify the accuracy of the information provided by the client before asking the client to sign it.

Answer 18

A. To advise the client on what material circumstances to disclose on the form

Question 19

Why might an insurance broker recommend a packaged insurance policy to a client?

A. To cover a number of risks under one policy.
B. Long-term insurance coverage is guaranteed.
C. A lower excess is always available.
D. To provide an individually-designed insurance policy.

Answer 19

A. To cover a number of risks under one policy.

Question 20

An insurance broker has regularly placed a certain type of risk with a leading insurer, but market trading conditions have changed. How should the broker approach the renewal?

A. Maintain continuity with this insurer.
B. Negotiate improvements in terms and conditions with this insurer.
C. Review breadth of cover across the market sector.
D. Review capacity across the market sector leaders.

Answer 20

C. Review breadth of cover across the market sector.

Question 21

What factor must an insurance broker take into account when deciding which insurers to approach for a quotation?

A. The amount of commission paid by the insurer.

B. The financial security of the insurer.

C. Whether a delegated authority agreement is in place with the insurer.

D. Whether the insurer offers monthly instalments for payment of the premium.

Answer 21

B. The financial security of the insurer.

Question 22

An insurance broker obtains quotations from a number of insurers for a client. In what circumstances may the broker take into account the amount of commission that will be paid when deciding which insurer to recommend?

A. Where no fee is charged in addition to the commission earned.

B. Where the approval of the regulator has been obtained.

C. Where the client’s interests are not prejudiced.

D. Where the policy is placed via Lloyd’s.

Answer 22

C. Where the client’s interests are not prejudiced.

Question 23

How does an insurance broker who has a claims advocacy role assist and advise the client?

A. It handles all aspects of the claim.

B. Only when problems arise which the client cannot resolve directly with the insurer.

C. Only if requested to by the insurer to expedite the claim process.

D. Only where specialist or complex risks are involved.

Answer 23

B. Only when problems arise which the client cannot resolve directly with the insurer.

Question 24

An insurance broker is appointing a loss adjuster to deal with a claim and will subsequently ask the insurer to make an offer in settlement. The broker is providing what level of claims service, if any?

A. No service.

B. Claims advocacy.

C. Delegated authority claims handling.

D. Full claims service.

Answer 24

D. Full claims service.

Question 25

What should an insurance broker encourage a client to do when considering risk management?

A. Employ a loss adjuster to advise on risk reduction.

B. Ensure all risks are transferred to an insurance company.

C. Ensure that the proposed risk management measures are cost effective.

D. Fully eliminate the risk concerned in order to improve insurance terms in respect of other perils.

Answer 25

C. Ensure that the proposed risk management measures are cost effective.

Question 26

A recognised advantage to a client of using an insurance broker’s risk survey service is that it can

A. guarantee access to insurance at a competitive premium.

B. identify risks of which the client may otherwise be unaware.

C. provide certainty of a cost-effective management solution.

D. simplify the process of obtaining cover for otherwise uninsurable risks.

Answer 26

B. identify risks of which the client may otherwise be unaware.

Question 27

An insurance broker is reviewing an insurance programme for a client at a time of increasing competition for restricted capacity in the market. What should the broker recommend in order to
maintain existing premium levels?

A. Improvements to risk management.
B. Payment of the premium in instalments.
C. A reduction in sums insured.
D. The removal of warranties and exclusions

Answer 27

A. Improvements to risk management.

Question 28

Which parties are likely to benefit from a specialist risk management service arranged by an insurance broker?

A. The client only.
B. The client and the insurer.
C. The insurance broker only.
D. The insurance broker and the insurer.

Answer 28

B. The client and the insurer.

Question 29

A firm of insurance brokers which establishes a network will seek to attract members who are

A. clients.
B. insurers.
C. other insurance brokers.
D. reinsurers.

Answer 29

C. other insurance brokers.

Question 30

An insurance broker underwrites risks on a full delegated authority basis. What duties does the broker perform?

A. Accept the business and calculate the premium only.

B. Accept the business and issue the documentation only.

C. Calculate the premium and issue the documentation only.

D. Accept the business, calculate the premium and issue the documentation

Answer 30

D. Accept the business, calculate the premium and issue the documentation

Question 31

Which party under a delegated authority agreement will normally be responsible for underwriting risks?

A. The coverholder.
B. The insurer.
C. The reinsurer.
D. The retail broker.

Answer 31

A. The coverholder.

Question 32

Which document is used to detail each party’s duties in the insurance placement process when a retail insurance broker and a wholesale insurance broker are both involved in placing an insurance policy?

A. A demands and needs statement.
B. An initial disclosure document.
C. An insurance policy.
D. A Terms of Business Agreement

Answer 32

D. A Terms of Business Agreement

Question 33

What must an insurance broker include within a policyholder’s suitability statement?

A. A financial report on the insurer that is being recommended to the policyholder.

B. As many quotations as possible so that the policyholder can make an independent review of all possible insurance options.

C. The reasons why it is recommending an insurance policy and how the insurance coverage meets the policyholder’s demands and needs.

D. Specific questions to establish the policyholder’s demands and needs

Answer 33

C. The reasons why it is recommending an insurance policy and how the insurance coverage meets the policyholder’s demands and needs.

Question 34

An insurance broker has two clients competing for limited market capacity. In order to manage a potential conflict of interest, what should the broker do?

A. Agree to receive a reduced fee or commission in respect of the placement of this business.

B. Disclose the details to both clients and obtain their agreement on how to proceed.

C. Disclose the details to potential insurers in order to negotiate increased capacity.

D. Report the situation to the Financial Conduct Authority for a ruling

Answer 34

B. Disclose the details to both clients and obtain their agreement on how to proceed.

Question 35

What type of task may an insurance broker outsource without seeking the client’s permission?

A. An additional service for which the client has paid a fee.

B. A service that requires a level of expertise outside the broker’s skill set.

C. One which requires no question of judgement or advice.

D. One which requires the safekeeping of client monies.

Answer 35

C. One which requires no question of judgement or advice.

Question 36

Which party(ies) may be the principal of an insurance broker when the broker is dealing with a claim?

A. The insurer only.
B. The policyholder only.
C. The third party only.
D. Both the insurer and the policyholder.

Answer 36

D. Both the insurer and the policyholder.

Question 37

What will be included in an insurance broker’s Terms of Business Agreement with a client concerning the duty of disclosure?

A. The broker confirms that all details disclosed by the insurer will be passed to the client.

B. The broker will always disclose the amount of commission to the client.

C. The client is assured that all material circumstances will be passed to the insurer.

D. The client is reminded of the potential consequences of non disclosure.

Answer 37

D. The client is reminded of the potential consequences of non disclosure.

Question 38

What will be warranted within the regulatory status section of a Terms of Business Agreement between an insurer and an insurance broker?

A. If either party becomes insolvent, it will notify the other party.

B. The date on which the insurance broker became authorised to transact business.

C. Whether the broker is a member of the Financial Ombudsman Service.

D. Whether the insurer is a member of the Association of British Insurers.

Answer 38

A. If either party becomes insolvent, it will notify the other party.

Question 39

A firm of motor insurance brokers receives notification of a motor claim in which two separate clients are involved, each insured with a different insurer. What must the claims handler consider?

A. Whether it is necessary to notify each insurer of the incident.

B. Whether the terms of the agency agreement with the insurer are breached.

C. Whether there is a conflict of interest.

D. Which client is at fault and should therefore lose its no claims bonus entitlement.

Answer 39

C. Whether there is a conflict of interest.

Question 40

The Financial Conduct Authority’s risk-based approach to the supervision of insurance brokers means that resources are directed to those firms

A. believed to pose the greatest risk to commercial clients.
B. believed to pose the greatest risk to consumers.
C. underwriting catastrophe exposures only.
D. with a high risk of financial failure only

Answer 40

B. believed to pose the greatest risk to consumers.

Question 41

Where an insurance broker carries out regulated activities without authorisation, this is

A. acceptable provided it is a Lloyd’s broker.
B. acceptable provided it only places reinsurance.
C. a civil offence.
D. a criminal offence.

Answer 41

D. a criminal offence.

Question 42

Which body is responsible for the regulation of Lloyd’s brokers?

A. British Insurance Brokers’ Association.
B. Council of Lloyd’s.
C. Financial Conduct Authority.
D. Prudential Regulation Authority.

Answer 42

C. Financial Conduct Authority.

Question 43

In order to comply with the Financial Conduct Authority’s Contract Certainty Code of Practice, within how many days should an insurance broker issue full documentation to clients?

A. 7 days for consumers and 14 days for commercial customers.
B. 7 days for consumers and 30 days for commercial customers.
C. 7 days for both consumers and commercial customers.
D. 30 days for both consumers and commercial customers

Answer 43

B. 7 days for consumers and 30 days for commercial customers.

Question 44

When incorrect documents are received from an insurer, in what circumstances, if any, can the insurance broker send them to the client to enable it to meet contract certainty timelines?

A. In all circumstances.
B. In no circumstances.
C. Only if the broker has manually amended the documents and kept a copy on file.
D. Only if the broker has obtained the insurer’s agreement to make any potential corrections.

Answer 44

D. Only if the broker has obtained the insurer’s agreement to make any potential corrections.

Question 45

A commercial client renews its property owner’s insurance policy and cancels the cover within 14 days as it has found a cheaper alternative. What premium refund, if any, is it most likely to receive?

A. A full refund in all circumstances.
B. A full refund, providing no claims have been notified.
C. A pro-rata refund, providing no claims have been notified.
D. No refund will be received.

Answer 45

C. A pro-rata refund, providing no claims have been notified.

Question 46

In which document does the Financial Conduct Authority require that an insurance broker discloses its address and authorisation status?

A. demands and needs statement.
B. initial disclosure document.
C. insurance policy.
D. statement of facts.

Answer 46

B. initial disclosure document.

Question 47

One of the requirements that the Financial Conduct Authority places on a firm of insurance brokers to ensure competency of employees dealing with consumers, is that they must

A. be supervised in their role for a period of no less than three months.

B. be supervised until they demonstrate the necessary level of competency to carry out the activity.

C. complete five hours of structured continuing professional development per month.

D. obtain an insurance qualification.

Answer 47

B. be supervised until they demonstrate the necessary level of competency to carry out the activity.

Question 48

A copy of a client’s passport has been obtained by an insurance broker for proof of identity checks. For what period of time, if any, should this be retained?

A. It should not be retained as this would be a breach of data protection regulations.

B. 12 months.

C. 5 years.

D. For the as long as the policyholder remains the insurance broker’s client.

Answer 48

C. 5 years.

Question 49

What penalty could be imposed on an insurance broking firm if it is found to be working with a sanctioned entity?

A. The loss of its Financial Conduct Authority authorisation only.
B. A large fine only.
C. A prison sentence only.
D. A large fine or a prison sentence.

Answer 49

D. A large fine or a prison sentence.

Question 50

What information does the Employers’ Liability Tracing Office (ELTO) require an insurance broker to obtain from a commercial client?

A. Claims experience.
B. Directors’ names and addresses.
C. Employer reference number.
D. Name of insurer.

Answer 50

C. Employer reference number.

Question 51

An insurance broker will maintain a gifts and hospitality register to comply with

A. bribery legislation.
B. data protection legislation.
C. Financial Conduct Authority requirements.
D. money laundering requirements.

Answer 51

A. bribery legislation.

Question 52

Under the Data Protection Act 2018, what is the maximum fine, as a percentage of global turnover that can be imposed on an insurance broker if there is a data breach?

A. 2%
B. 4%
C. 5%
D. 10%

Answer 52

B. 4%

Question 53

What action, if any, should an insurance broker take if requested by a policyholder for details of his personal data held within the broker’s files?

A. The data can be provided on the payment of a fee.

B. The data must be provided with no charge.

C. The policyholder must be asked to obtain permission from the Information Commissioner’s Office.

D. There is no obligation to disclose the data

Answer 53

B. The data must be provided with no charge.

Question 54

Which body requires insurance brokers to maintain the competency of their employees?

A. British Insurance Brokers’ Association.
B. Council of Lloyd’s.
C. Financial Conduct Authority.
D. Prudential Regulation Authority.

Answer 54

C. Financial Conduct Authority.

Question 55

The basis of how commission can be withdrawn by an insurance broker from an insurer’s money account is usually detailed in

A. a demands and needs statement.
B. a key features document.
C. the Client Assets Sourcebook.
D. a Terms of Business Agreement.

Answer 55

D. a Terms of Business Agreement.

Question 56

With what minimum frequency must earned commission be taken from insurer’s funds?

A. Every 5 business days.
B. Every 14 business days.
C. Every 25 business days.
D. Every 90 business days.

Answer 56

C. Every 25 business days.

Question 57

From which bank account would an insurance broker pay a return premium to a client?

A. Broker funds.
B. Client assets.
C. Contingency funds.
D. Insurer assets.

Answer 57

B. Client assets.

Question 58

In what circumstances, if any, is an insurance broker permitted to retain a client’s return premium?

A. In all circumstances.
B. Only if the broker is registered with the regulator.
C. Only if the client agrees.
D. In no circumstances.

Answer 58

C. Only if the client agrees.

Question 59

The requirements of the Insurance Distribution Directive 2018 enable the Financial Conduct Authority to regulate

A. all insurance contracts.
B. Lloyd’s brokers only.
C. the point of sale of consumer insurance products.
D. transactions relating to commercial insurance only

Answer 59

C. the point of sale of consumer insurance products.

Question 60

One of the key aims of the Insurance Distribution Directive 2018 is to

A. ensure that plain language is used in all contract terms.
B. increase the level of protection provided by the Financial Ombudsman Service.
C. make it easier for insurance broking firms to trade in another country.
D. reduce the level of reporting by insurance brokers to regulators.

Answer 60

C. make it easier for insurance broking firms to trade in another country.

Question 61

Under the Insurance Distribution Directive 2018, in what circumstances, if any, can the requirement for an insurance broker to disclose its commission to a client be waived?

A. In no circumstances.
B. Where the client is a consumer.
C. Where the client is a professional customer.
D. Where the client is a small commercial business.

Answer 61

C. Where the client is a professional customer.

Question 62

An insurance broker has a motor insurance portfolio with a high level of churn. What is the impact on its business?

A. Its turnover is likely to decrease.
B. Its turnover is likely to increase.
C. It will be involved in a higher number of claims.
D. It will receive a higher level of commission.

Answer 62

A. Its turnover is likely to decrease.

Question 63

What is represented by an insurance broker’s renewal retention figure?

A. The amount of commission the broker receives from renewed policies.
B. The number of clients that increase their premium on renewal.
C. The percentage of clients that remain with the same insurer.
D. The percentage of clients that renew their policies.

Answer 63

D. The percentage of clients that renew their policies.

Question 64

D. The percentage of clients that renew their policies.Whom does an insurance broker always approach when obtaining new business by cross-selling?

A. Commercial clients.
B. Consumers.
C. Existing clients.
D. New clients.

Answer 64

C. Existing clients.

Question 65

What action is an insurance broker most likely to take to generate new business?

A. Increasing excesses on insurance policies.
B. Increasing commission levels.
C. Investing in marketing.
D. Outsourcing all claims functions.

Answer 65

C. Investing in marketing.

Question 66

A firm of insurance brokers is concerned about conduct and cultural issues following several complaints from an insurer with which the firm regularly places business. The insurer alleges that it has discovered several instances where the firm’s employees have failed to ensure that clients disclose all previous
claims at inception. No delegated authority agreement exists.

The firm has an operating procedure manual and is taking remedial action to ensure full compliance with the prescribed practices following the insurer’s allegations.

The firm recognises that the processes and procedures established to enhance its reputation and brand, although understood by employees, are NOT being followed. Suitable remedial action is being identified and communicated to employees with particular regard to good conduct with clients. The firm expects that the steps taken will avoid further allegations from insurers, whilst enhancing the client
service excellence.

1. If previous claims are NOT being disclosed, what action is the insurer most likely to take affecting the firm’s existing clients?

A. Claims may be declined.
B. Commission will be reduced.
C. Cover will always be withdrawn.
D. Premiums may be reduced.

2. In what way could the firm of insurance brokers improve its delivery of service excellence to clients?

A. Avoiding peer review to speed up the service.
B. Ensuring procedures are in place to reduce mistakes.
C. Ensuring the lowest premium is always quoted.
D. Ensuring the widest coverage is provided whether required or not.

3. Bearing in mind the insurer’s allegations, in what main way may the firm have breached its operating procedures?

A. Acting without skill, care and diligence.
B. Bringing the financial services industry into disrepute.
C. Failing to ensure knowledge and expertise is kept up to date.
D. Failing to ensure transparency in each transaction.

4. What steps should be taken by the firm of insurance brokers to most appropriately enhance its brand and reputation?

A. Give higher rewards for successful achievement of sales targets.
B. Improve client communication and interaction.
C. Increase sales targets.
D. Offer restricted cover at a lower premium.

5. If the steps taken by the firm are successful, what is the most likely outcome regarding the firm’s relationship with the insurer?

A. Enhancement of market share.
B. Recognition of an increased sales focus.
C. Reduced insurance premiums.
D. Restoration of confidence.

Answer 66

1 - A

2 - B

3 - A

4 - B

5 - D

Question 67

Greg is an account handler in a firm of insurance brokers. He has received a verbal complaint which was triggered by a recent claim from a client who is classed as a consumer. The claim was refused by the insurer due to non-compliance with a policy condition. The client is adamant that he did NOT understand the potential implications of non-compliance.

The firm always tries to resolve complaints quickly to avoid an errors and omissions claim. Greg is reviewing the client file and is concerned that a potential errors and omissions situation may exist owing to a failure by the broker to explain the terms and conditions in full. He is aware that the firm has stringent procedures for dealing with claims.

The client has told Greg that he intends to take his complaint to the Financial Ombudsman Service (FOS) and demands compensation for his full loss of £3,000.

Greg recalls he had some involvement in placing the client’s household insurance policy and believes that this affects his ongoing involvement in the complaint process.

Greg is also aware of similar instances within the firm in recent months, as well as complaints about the selling of legal expenses cover for additional premium.

1. In this situation, a potential errors and omissions claim could be pursued against the firm of insurance brokers if Greg’s review shows that

A. the firm’s explanations to the client were not fully documented.
B. the firm had accepted the insurer’s standard terms without challenging them.
C. the firm had tried to resolve the issue before referring it to the professional indemnity insurer.
D. the policy condition was clearly stated within the policy wording.

2. How does Greg’s prior involvement in the case affect his ability to initially investigate and resolve this complaint within the regulator’s guidelines?

A. He may continue to investigate but must hand over the resolution process to a colleague.
B. He may continue to investigate and resolve the complaint providing the firm considers him competent.
C. He must be fully supervised during both the investigation and resolution.
D. He must take responsibility for resolving the complaint.

3. What action should the firm of insurance brokers take as a result of the complaint made against it?

A. A consultation must take place with the firm’s professional indemnity insurer to prevent ongoing risks.
B. A full report should be sent to the regulator detailing the circumstances.
C. A full review of the firm’s procedures should be undertaken to identify remedial action.
D. A review must be requested from the FOS to identify areas of improvement.

4. Greg’s initial response to the client’s verbal complaint should be to

A. explain that the case is being referred directly to the firm’s professional indemnity insurer.
B. explain the complaints procedure and ensure the client has a copy.
C. insist that the client submits the full details of the complaint to the firm in writing.
D. point out that a joint investigation with the client’s insurer is necessary.

5. What practice by the firm of insurance brokers could result in a mis-selling allegation?

A. Complaints handling being processed by account handlers.
B. Lack of explanation of policy conditions.
C. Non-payment of valid claims.
D. The sale of legal expenses cover.