Mock Test 1

Question 1

An insurer makes a payment of £9,000 to settle a first party claim after deduction of a £1,000 policy
excess. The insurer recovers £6,500 from a negligent third party. What amount is the insurer
entitled to retain?
A. £5,500
B. £5,850
C. £6,000
D. £6,500

Answer 1

D. £6,500

Question 2

When the aggregate limit on a commercial property insurance policy is exhausted, it can
A. always be reinstated without additional premium and usually for a limited number of
reinstatements.
B. never be reinstated and a new policy must always be taken out.
C. only be reinstated for compulsory classes of business.
D. sometimes be reinstated for an additional premium but usually for only a limited number of
reinstatements.

Answer 2

D. sometimes be reinstated for an additional premium but usually for only a limited number of
reinstatements.

Question 3

One of the Financial Conduct Authority’s principles for businesses which particularly has an impact
on an insurer’s claims staff is that the insurer must
A. arrange adequate protection for clients’ assets when it is responsible for them.
B. conduct its business with due skill, care and diligence.
C. only deal with the regulator when required.
D. organise and control its affairs in line with data protection legislation.

Answer 3

B. conduct its business with due skill, care and diligence.

Question 4

When the Financial Ombudsman Service is assessing a complaint from a policyholder in respect of
an insurance claim, which forms of redress are available to them?
A. A directions award only.
B. A money award only.
C. A money award and directions award only.
D. A money award, directions award and periodic payment order

Answer 4

C. A money award and directions award only.

Question 5

A claimant referred a case to the Financial Ombudsman Service (FOS) and accepted the
maximum award the FOS is permitted to make. The claimant’s total loss was £430,000. What
amount, if any, is the claimant now entitled to seek as redress via the courts?
A. Nil.
B. £30,000
C. £40,000
D. £80,000

Answer 5

A. Nil.

Question 6

An insurer would NOT typically reduce the claims reserve on a specific claim to take into account
A. interim payments made to the insured.
B. a policy deductible.
C. a policy excess.
D. possible subrogation from a negligent third party.

Answer 6

D. possible subrogation from a negligent third party.

Question 7

Under a proportional reinsurance treaty, how is the validity of a claim considered?
A. The claim is valid if liability attaches under the original policy and the settlement was arrived at
in a professional manner.
B. To be valid the claim must be transferred to the reinsurer to handle as per the claims control
clause.
C. The claim must fall within the terms of the original policy and the reinsurance policy to be valid.
D. To be valid the claim can be handled under the original policy but only settled with the
reinsurer’s agreement.

Answer 7

A. The claim is valid if liability attaches under the original policy and the settlement was arrived at
in a professional manner.

Question 8

Under the Consumer Insurance (Disclosure and Misrepresentations) Act 2012, what is the remedy
when an otherwise valid claim is made but there has been a misrepresentation by the policyholder,
despite the policyholder taking all reasonable care?
A. The insurer can void the policy from inception.
B. The insurer may refuse to pay the claim.
C. The insurer must pay the claim in full.
D. A proportionate redress applies based on what the insurer would have done had it known the
facts.

Answer 8

C. The insurer must pay the claim in full.

Question 9

A claim is presented by a consumer for the replacement of a fence, which has been damaged in
recent storm conditions. The claims handler needs to establish whether the damaged fence will be
covered. What course of action should next be pursued?
A. Offer to pay 50% of the claim.
B. Offer to pay the claim in full.
C. Refer to the Financial Ombudsman Service.
D. Refer to the policy definitions

Answer 9

D. Refer to the policy definitions

Question 10

A policyholder, who is a landlord, has notified his insurer of a claim for a break-in and theft. During
initial discussions, the claims handler is advised by the landlord that the premises were vacant at
the time of the loss. What must the claims handler now establish?
A. The crime reference number for the break-in and theft.
B. The length of time the property was unoccupied.
C. The name and forwarding address for the previous tenant.
D. When the next tenant will be moving into the premises.

Answer 10

B. The length of time the property was unoccupied.

Question 11

A claims handler is investigating claims for employers’ liability (EL) and public liability (PL)
insurances. On what basis are the policies normally written?
A. Claims made for EL and claims occurring for PL.
B. Claims occurring for EL and claims made for PL.
C. Claims made for both EL and PL.
D. Claims occurring for both EL and PL

Answer 11

D. Claims occurring for both EL and PL

Question 12

Within a liability insurance contract, where would you find the expressed promise to pay and a
description of the liabilities insured against?
A. Within the definitions.
B. Within the governing law and disputes.
C. Within the insuring clause.
D. Within the policy schedule.

Answer 12

C. Within the insuring clause

Question 13

Upon first notification of a claim, it would be typical for a claims handler to apply a reserve that
includes a reduction to reflect
A. any contributory negligence.
B. the litigation risk.
C. the policy excess.
D. recovery prospects against another party.

Answer 13

C. the policy excess

Question 14

A claims handler believes that a commercial customer’s fire claim may be fraudulent because of
arson. What facts would support the claims handler’s belief?
A. The business was in financial difficulty and all the stock was out of season.
B. CCTV was in operation and no forcible entry was in evidence.
C. Computer records had not been backed up and the business was losing money.
D. The fire alarm was in operation and the business had recently lost a major customer

Answer 14

A. The business was in financial difficulty and all the stock was out of season.

Question 15

A claims handler receives notification of a claim from a commercial policyholder and immediately
reviews the underwriting file. What is the purpose of this review?
A. To confirm the existence of any warranties and the outcomes of all historic claims.
B. To confirm the policy period and the broker commission.
C. To confirm the business activities disclosed and the risk presentation.
D. To establish the insured’s identity and whether any contribution is required from other existing
policies.

Answer 15

C. To confirm the business activities disclosed and the risk presentation.

Question 16

An insurance broker has presented a claim to the third party administrator (TPA) on behalf of its
client, XYZ Ltd. The TPA has a delegated authority to handle claims on behalf of XYZ Ltd’s insurer.
During the negotiation of the claim, on whose behalf, will the insurance broker act?
A. For the client only.
B. For the TPA only.
C. For the TPA and the insurer only.
D. Impartially for all parties.

Answer 16

A. For the client only.

Question 17

A claims handler would NOT typically negotiate and settle a claim for
A. general damages.
B. liquidated damages.
C. provisional damages.
D. special damages.

Answer 17

B. liquidated damages

Question 18

Five days after a claim for a stolen vehicle is made to an insurer, the vehicle is recovered in the local
area by the police. What two main factors would most likely indicate that the insurance claim was
potentially fraudulent?
A. The claim was made in the month the certificate of roadworthiness expired and only one of the
vehicle’s windows was broken.
B. The claimant did not collect the vehicle and there were no signs of forcible entry.
C. The only document readily available was the insurance certificate and no petrol remained in the
vehicle.
D. The vehicle was collected by a nominated third party and they were the spare keyholders.

Answer 18

B. The claimant did not collect the vehicle and there were no signs of forcible entry.

Question 19

In applying the Insurance: Conduct of Business sourcebook (ICOBS) rules in relation to a particular
insurance claim, the insurer is unsure whether the policyholder should be treated as a consumer or
as a commercial customer. In accordance with the regulations, the insurer should therefore
A. assume the policyholder is a commercial customer.
B. assume the policyholder is a consumer.
C. refer the matter to the Financial Conduct Authority for adjudication.
D. refer the matter to the Financial Ombudsman Service for adjudication

Answer 19

B. assume the policyholder is a consumer.

Question 20

When dealing with a first party commercial claim, the main reason a claims handler would refer
back to the underwriting file is to
A. ensure relevant information was disclosed.
B. establish the renewal date.
C. help set the reserve figure.
D. identify the proximate cause.

Answer 20

A. ensure relevant information was disclosed.

Question 21

To comply with industry guidelines, the claims handler dealing with a particular case was obliged to
provide the policyholder with a progress update at least every 20 business days. What does this
confirm?
A. The claims file was referred to the Financial Ombudsman Service.
B. The policy was effected in Australia.
C. The policy was effected in the UK.
D. The policy was effected in the US

Answer 21

B. The policy was effected in Australia.

Question 22

An insurer pays £4,500 to settle a first party claim after deduction of the £500 policy excess. The
insurer recovers £5,200 from the negligent third party which includes reimbursement of the claim
plus £200 due to currency rate fluctuations. How much of the £5,200 should the insurer pay to the
policyholder?
A. Nil.
B. £500
C. £600
D. £700

Answer 22

D. £700

Question 23

Upon initial notification of a claim of significant financial value, a claims handler will need to give
specific consideration to
A. any reinsurance applicable and the process for notifying the reinsurer.
B. the appropriate expert or experts required to investigate the claim.
C. whether the claim falls within the terms and conditions of the policy.
D. whether the claim includes any fraudulent aspects.

Answer 23

A. any reinsurance applicable and the process for notifying the reinsurer.

Question 24

The Financial Ombudsman Service will typically determine that an onerous or unusual term in a
personal lines insurance policy that is NOT clearly highlighted at the point of sale will
A. bind the policyholder.
B. not bind the policyholder.
C. require independent arbitration.
D. require legal interpretation.

Answer 24

B. not bind the policyholder.

Question 25

A policyholder submits an insurance claim to their insurer. The claim is reviewed by the insurer and
declined due to a coverage exclusion. The policyholder pursues a claim against the insurer in court
as they consider the coverage decision to be incorrect. The claim against the insurer will be
pursued under
A. contract.
B. Financial Conduct Authority requirements.
C. guidelines.
D. regulation.

Answer 25

A. contract

Question 26

Meg made a claim for the theft of her watch valued at £5,000. She received a settlement amount
which was significantly lower than the replacement value of the watch. What is the settlement
most likely to reflect?
A. The application of a pairs and sets clause.
B. The existence of a franchise.
C. The level of voluntary excess.
D. The policy limit on items not specifically insured.

Answer 26

D. The policy limit on items not specifically insured.

Question 27

Rhodri makes a claim under his home insurance for damage sustained during a storm. After taking
action to mitigate the loss what is the next action he should now take?
A. Appoint a loss assessor.
B. Contact his insurer to report the loss.
C. Contact the appropriate weather forecaster to establish exact wind speeds at the time of the
storm.
D. Engage building contractors directly and immediately to carry out full repairs to all damage.

Answer 27

B. Contact his insurer to report the loss.

Question 28

Under a policy covering fine art, a claim for irreparably damaged art work is usually settled at
A. the agreed value listed on the policy schedule.
B. a first loss figure.
C. an independent valuation by an expert.
D. a negotiated settlement with the policyholder.

Answer 28

A. the agreed value listed on the policy schedule.

Question 29

Bill’s new inexpensive camera was dropped and damaged whilst on a family outing. Bill notifies his
insurer of a claim via its email notification facility. The claims handler assigned to review the claim
will firstly establish
A. any contributory negligence by Bill.
B. if the camera was specified in the policy schedule.
C. the terms of any guarantee under which the camera was purchased.
D. that a receipt is available as evidence of purchase.

Answer 29

D. that a receipt is available as evidence of purchase.

Question 30

A personal lines policyholder has his expensive tablet computer stolen and presents a claim to his
insurer under his household insurance policy. In the absence of the purchase receipt, the insurer is
most likely to request
A. the actual tablet computer box and the charging cable.
B. a signed claim form evidencing value.
C. a statement of truth regarding the loss.
D. witness statements as to the circumstances of the loss.

Answer 30

A. the actual tablet computer box and the charging cable.

Question 31

When considering a claim for an unoccupied property under a personal lines insurance policy , the
claims handler be aware that
A. contents will not be covered.
B. a franchise will apply.
C. full cover will apply.
D. insured perils may be restricted.

Answer 31

D. insured perils may be restricted.

Question 32

A claims handler investigating a business interruption claim has informed the claimant that a
reservation of rights has been withdrawn. What does this indicate?
A. Additional investigations as to the validity of the claim have satisfied the handler’s initial doubts.
B. The full validity of the claim has been investigated and a settlement will now be offered in
respect of part of the claim only.
C. An identified misrepresentation is no longer considered sufficiently serious as to lead to
litigation.
D. Initial suspicions of underinsurance have been satisfied so the application of average is no longer
necessary

Answer 32

A. Additional investigations as to the validity of the claim have satisfied the handler’s initial doubts.

Question 33

A building has a sum assured of £100,000 under a commercial insurance policy. Following a fire, a
loss adjuster assesses the rebuild of the damaged property to be £150,000. A reinstatement clause
operates within the policy. When considering the settlement of the claim, the insurer is most
likely to settle on what basis?
A. Reinstatement with average applied.
B. Reinstatement with a franchise applied.
C. Full reinstatement value.
D. Reinstatement with deduction for wear and tear.

Answer 33

A. Reinstatement with average applied.

Question 34

A manufacturer suffers damage to stock under a standard fire policy. In support of the claim, a
series of figures are submitted to the insurer as follows:

Damaged raw materials £1,500,000
Damaged work in progress £1,000,000
Undamaged work in progress £500,000
Cost to complete work in progress £200,000
Damaged finished goods:
At wholesale price £1,500,000
At retail price £2,500,000

The claims handler for the insurer has verified the individual amounts. What total amount would
be paid to the manufacturer as indemnity for the loss?
A. £4,000,000
B. £4,200,000
C. £5,000,000
D. £5,200,000

Answer 34

B. £4,200,000

Question 35

As a result of investigating a fire damage claim submitted by the owner of a new business, the loss
adjuster discovers that the owner is a recently discharged bankrupt. However, business records
appear to be in order. Following this discovery, what is the next logical step a claims handler is
most likely to take?
A. Investigate the business records more deeply.
B. Refer the claim to the insurer’s fraud department.
C. Review the details supplied at policy proposal stage.
D. Search industry databases for evidence of historic claims.

Answer 35

C. Review the details supplied at policy proposal stage.

Question 36

Following a dispute over a commercial insurance claim, both parties have agreed to alternative
dispute resolution in the form of early neutral evaluation. From the insured’s perspective, it is
important to recognise that
A. both parties must agree in advance to be bound by the decision, but significant court costs can
be saved.
B. the case cannot now be heard in court.
C. the result is not binding on either party but would give an indication as to the likely outcome if
the claim continues to court.
D. should the evaluation result be disputed, the insurer’s costs may have to be paid

Answer 36

C. the result is not binding on either party but would give an indication as to the likely outcome if
the claim continues to court.

Question 37

A commercial policyholder has a deductible of £20,000 and an aggregate deductible limit of
£100,000. The policyholder suffers six losses in the policy year as follows
Claim 1 £33,000
Claim 2 £2,000
Claim 3 £18,000
Claim 4 £26,000
Claim 5 £22,000
Claim 6 £17,000
What is the insurer’s total outlay and the erosion of the aggregate respectively?

A. £18,000 and £100,000.
B. £21,000 and £97,000.
C. £97,000 and £21,000.
D. £100,000 and £18,000.

Answer 37

B. £21,000 and £97,000.

Question 38

A commercial company has a fire insurance policy, which is subject to an average clause. Company
stock insured to the value of £2,000,000 is destroyed in a fire. The company has paid £3,000,000 to
replace the destroyed stock. In these circumstances, the amount the company will receive from its
insurers for the stock will be
A. £1,333,333
B. £1,500,000
C. £2,000,000
D. £3,000,000

Answer 38

C. £2,000,000

Question 39

A claims handler is reserving an employers’ liability claim. When considering the number of years
on which future loss of earnings is normally reserved,the multiplier takes into account the number
of years from the date of
A. injury to anticipated retirement age based on the claimant’s normal occupation.
B. injury to State Pension age and ongoing ability to work in any job.
C. trial to anticipated retirement age based on the claimant’s normal occupation.
D. trial to State Pension age and ongoing ability to work in any job.

Answer 39

C. trial to anticipated retirement age based on the claimant’s normal occupation.

Question 40

A large firm of property management consultants has a professional indemnity insurance policy
with an insurer. The firm submits a professional indemnity claim relating to its alleged negligence
in the construction of a commercial building. In these circumstances, the insurer’s first action will
be to
A. establish if the policy definition of professional services includes the activity that is subject to the
claim.
B. instruct an expert to determine the level of professional expertise that the firm should have
adhered to.
C. request copies of all correspondence between the policyholder and the claimant.
D. seek witness statements from partners and senior managers in the firm.

Answer 40

A. establish if the policy definition of professional services includes the activity that is subject to the
claim.

Question 41

Mary works voluntarily at her local stables every Sunday under the guidance of the stable owner.
Recently Mary slipped and fell in the stable grounds due to ice, suffering a broken arm and
damaging her glasses. Mary instructs a solicitor to pursue a claim in negligence against the stable
owner. Which policy will Mary’s claim be against?
A. Commercial property.
B. Employers’ liability.
C. Personal accident.
D. Public liability.

Answer 41

B. Employers’ liability

Question 42

The claims procedure condition in a commercial liability policy allows the defence or settlement of
a claim to be controlled by
A. the insured only.
B. the insurer only.
C. both the insurer and the insured.
D. both the insurer and the insured after detailed agreement

Answer 42

B. the insurer only.

Question 43

The maximum financial award allowable, if any, under the Law Reform Act 1934 for pain suffering
and loss of amenity following an instant fatality is always
A. nil.
B. £12,980.
C. determined by a judge.
D. determined by a jury.

Answer 43

A. nil.

Question 44

An expert witness in a litigated personal injury case has an overriding duty to the
A. claimant.
B. Court.
C. insurer.
D. Judge.

Answer 44

B. Court

Question 45

A complex claim is estimated to be £20,000 but the trial is expected to take more than two days. In
accordance with the Civil Procedure Rules, to which track is the court most likely to allocate this
claim?
A. Fast track.
B. Multi-track.
C. Small claims track.
D. Standard track.

Answer 45

B. Multi-track.

Question 46

A claims handler investigating a third party personal injury claim has obtained an up-to-date
Compensation Recovery Unit certificate in respect of the third party. Why was this necessary?
A. To confirm the total cost of NHS treatment and the loss of earnings.
B. To establish the ongoing costs of treatment and the level of any compensation due from other
sources.
C. To review the reserve and identify the potential need for a periodical payment order.
D. To set the reserve and establish any payment due to the Department for Works and Pensions in
respect of State benefit payments.

Answer 46

D. To set the reserve and establish any payment due to the Department for Works and Pensions in
respect of State benefit payments.

Question 47

A claimant’s solicitor in a third party liability case valued above £25,000, nominated an expert in
the original letter of claim. Within what maximum total number of days from the date of posting
the original letter must the defendant register any objection to the named expert?
A. 14 days.
B. 21 days.
C. 28 days.
D. 35 days.

Answer 47

D. 35 days.

Question 48

An employee claims to have developed an industrial disease. He was first exposed to the risk in
May 2000, first noticed symptoms in April 2013, was formally diagnosed in March 2015 and
submitted a claim in June 2017. If the employers’ liability insurer for his company frequently
changed, market practice dictates that the claim will normally be co-ordinated by whoever was the
insurer in
A. May 2000.
B. April 2013.
C. March 2015.
D. June 2017

Answer 48

D. June 2017

Question 49

A claim proceeded to litigation without going through a mediation process and an adverse costs
order was awarded against one party. What are these circumstances most likely to indicate has
happened?
A. The judge awarded a lower settlement than could have been achieved through mediation.
B. The judge considered this party’s case to be weak.
C. This party suggested entering into mediation part way through the litigation process.
D. This party was considered to have been unreasonable in refusing to enter into mediation

Answer 49

D. This party was considered to have been unreasonable in refusing to enter into mediation.