Module 8

Question 1

Which of the following sections of the policy document do you feel is likely to contain all the variable information concerning the insured and details of the risks insured?

A. Recital clause
B. Policy schedule
C. Exclusions
D. Conditions

Answer 1

B. Policy schedule

Question 2

What component of the basic structure of an insurance policy does this describe:

The name of the insurer and, in some cases, the address and company logo.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clause

Answer 2

D. Heading

Question 3

What component of the basic structure of an insurance policy does this describe:

This sets the scene for what follows in the policy.

It refers to the two parties, insured and insurer (but not by name), coming together to form a contract whereby the insured has paid or agreed to pay a premium and the insurer undertakes to indemnify the insured in accordance with the cover detailed in the policy.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clauses

Answer 3

A. Recital Clause

Question 4

What component of the basic structure of an insurance policy does this describe:

The pre-printed signature of an official from the insurer.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clauses

Answer 4

F. Signature

Question 5

What component of the basic structure of an insurance policy does this describe:

The heart of the policy, specifying in detail what is covered.

There may be just one of these outlining cover or, more commonly, a number of these, as in the case of motor, household and liability policies, each dealing with a different aspect of the insurance and often containing exclusions which are specific to this.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clauses

Answer 5

G. Operative Clauses

Question 6

What component of the basic structure of an insurance policy does this describe:

In addition to these specifically stated in the operative clauses which apply to specific sections of cover, insurance policies of all kinds contain a number of these generally, which apply to the entire contract and, therefore, to all sections of the policy.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clauses

Answer 6

C. Exclusions

Question 7

What component of the basic structure of an insurance policy does this describe:

All policies have these attached to them. Some are implied by common law and do not need to appear in the policy to apply, others of these are express therefore, specifically stated in the policy.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clauses

Answer 7

B. Conditions

Question 8

What component of the basic structure of an insurance policy does this describe:

Until this point, everything in the policy is pre-printed or standardised. This is the place where the policy is made personal and specific to the individual insured.

A. Recital Clause
B. Conditions
C. Exclusions
D. Heading
E. Policy Schedule
F. Signature
G. Operative Clauses

Answer 8

E. Policy Schedule

Question 9

These apply to parts of the policy.

This describes a:

A. General Exclusion
B. Specific exclusion

Answer 9

B. Specific exclusion

Question 10

These apply to all sections of the policy. Some of these are common to all insurance policies and are referred to as market exclusions.

This describes a:

A. General Exclusion
B. Specific exclusion

Answer 10

A. General Exclusion

Question 11

Damage caused by the perils of war, civil war, etc. is a fundamental risk, applying to the community at large and, therefore, uninsurable. It is generally thought to be the responsibility of:

A. Charities
B. The state
C. The WHO

Answer 11

B. The state

Question 12

Riot and Civil Commotion is a common policy exclusion

A. True
B. False

Answer 12

A. True

Question 13

Suppose the inception of a commercial package policy is on 1st May. Remembering what you learnt earlier in the previous chapter about ‘promptly’ issuing policy documents, by what date does the ABI code of good practice say a certificate (and any other documents) should be issued for this policy?

A. 1st May
B. 2nd May
C. 31st May
D. 15th May

Answer 13

C. 31st May

Question 14

Which General condition does this describe:

The insured must observe and fulfil all the terms of the policy for cover to be valid.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a clam
G. Cancellation
H. Arbitration
I. Subrogation

Answer 14

D. Duties of the Policyholder/insured

Question 15

Which General condition does this describe:

This condition requires the insured to notify the insurer of any changes that increase the risk.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a clam
G. Cancellation
H. Arbitration
I. Subrogation

Answer 15

A. Alteration

Question 16

Which General condition does this describe:

Sets out the procedures, including the timescales, to be followed in the event of a claim.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 16

F. Action by the insured in the event of a claim

Question 17

Which General condition does this describe:

The insured must take all of these to minimise the risk of loss or damage or of incurring liability. The existence of insurance cover is not to be regarded as an excuse for carelessness or inactivity. It reinforces to the insured the need to act as if uninsured.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 17

E. Reasonable precautions

Question 18

Which General condition does this describe:

This condition deals with the situation where more than one policy is in force which covers the same loss.

This is the right of an insurer to call upon other insurers similarly, but not necessarily equally, liable to the same insured to share the claims cost.

The insured is obliged to claim proportionately from each insurer.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 18

C. Contribution

Question 19

Which General condition does this describe:

For property insurance, indemnity requires the insurer to pay the full value of the loss, but only on the basis that the insured has declared the full value of the insured risks and is, thus, paying the appropriate premium.

This condition has the effect of reducing claim payments under property insurance policies in proportion to the amount of under-insurance.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 19

B. Average

Question 20

Which General condition does this describe:

At common law, the insurer has the right to take over the insured’s rights, following a loss and payment of a claim, to recover the loss from the party responsible.

This policy condition allows the insurer to start to pursue recovery rights before payment of the loss (although the actual recovery of money must take place afterwards).

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 20

I. Subrogation

Question 21

Which General condition does this describe:

This states that any disputes regarding the amount to be paid in settlement of a claim will be judged by an independent arbitrator.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 21

H. Arbitration

Question 22

Which General condition does this describe:

This sets out the terms for this action of the contract, by either party during its currency.

A. Alteration
B. Average
C. Contribution
D. Duties of the Policyholder/insured
E. Reasonable precautions
F. Action by the insured in the event of a claim
G. Cancellation
H. Arbitration
I. Subrogation

Answer 22

G. Cancellation

Question 23

Mary’s shop insurer only pays part of her claim because they discover that she has another policy with a different insurer covering the same risk.

To which policy condition does this relate?

A. Subrogation
B. Average
C. Alteration
D. Contribution

Answer 23

D. Contribution

Question 24

Ian’s insurer writes to a car driver who hit his shop front, claiming reimbursement of money it will have to pay to repair the shop front.

To which policy condition does this relate?

A. Subrogation
B. Average
C. Alteration
D. Contribution

Answer 24

A. Subrogation

Question 25

Brenda’s shop contents are not insured for their full value and her insurer reduces the amount of a theft claim to allow for this.

To which policy condition does this relate?

A. Subrogation
B. Average
C. Alteration
D. Contribution

Answer 25

B. Average

Question 26

This is the first amount of each and every claim which is not covered by the policy.

Theoretically, the insured is really their own insurer for the value of this.

This may be:

Compulsory, being imposed on the insured by the insurer; or
voluntary, being accepted by the insured in return for a premium discount.

What is being described here?

A. Deductible
B. Franchise
C. Excess

Answer 26

C. Excess

Question 27

This is the name usually given to a very large excess. It is often found in commercial classes of insurance.

What is being described here?

A. Deductible
B. Franchise
C. Excess

Answer 27

A. Deductible

Question 28

This is a threshold that is used to decide whether a claim is to be paid at all. If the claim value exceeds this, it is paid in full.

What is being described here?

A. Deductible
B. Franchise
C. Excess

Answer 28

B. Franchise

Question 29

XYZ Ltd has a deductible of £10,000 on its commercial property insurance policy. An explosion in the factory causes £30,000 of damage.

Mary has a seven-day time franchise on her accident and sickness policy which pays a benefit of £50 for every week she is unable to work due to injury or illness. She has a fall which lays her up off work for four weeks.

How much will the insurer pay towards each claim?

A. XYZ £10,000; Mary £150
B. XYZ £10,000; Mary £200
C. XYZ £20,000; Mary £200
D. XYZ £30,000; Mary £200

Answer 29

C. XYZ £20,000; Mary £200

Mary’s injury keeps her off work for longer than the franchise period and so her claim is paid in full (£200).

Question 30

John’s package policy contains a warranty that no inflammable materials will be stored in his shop. When a fire occurs at the shop, the loss adjuster discovers that such materials were stored on the site, even though they did not cause the fire.

Do you think that the insurer will be able to reject John’s claim in these circumstances?

A. Yes
B. No

Answer 30

B. No

Question 31

The Insurance Act 2015 states that an insurer can no longer decline to pay a claim for breach of a warranty unless this is relevant to the type of loss that occurred.

A. True
B. False

Answer 31

A. True

Question 32

Which of the following policy conditions do you feel are most likely to fall into the category of conditions precedent to the contract?

A. Insurable interest
B. Notification of alteration to the risk
C. Claims conditions

Answer 32

A. Insurable interest

Question 33

Which party to the insurance contract must prove that an exclusion applies if it is to be relied upon?

A. The insured
B. The insurer

Answer 33

B. The insurer

Question 34

How many years after inception will the renewal invite include a statement that the customer has been with the provider for a number of years and may be able to get a better price if they shop around?

A. 2
B. 3
C. 4
D. 5

Answer 34

C. 4

Question 35

These are defined by the FCA as ‘any type of good, service or right purchased or provided with, or alongside a primary product’.

Transparency is being strengthened by customers actively having to choose to purchase these (unless the add-on is free and has no cost attached to it at renewal). Consent must be given before taking payment for any of these and customers must be provided with sufficient information to make an ‘informed decision’ during the sales process.

What is this describing?

Answer 35

Add-ons

Question 36

The FCA has recently introduced new rules in relation to renewal quotes for home and motor insurance. The aim is to improve competition and protect home and motor insurance customers from loyalty penalties. What do these rules aim to stop?

Answer 36

Price walking - The practice of increasing prices for existing customers each year at renewal.

Question 37

Define recital clause:

A. The heart of the policy, specifying in detail what is covered.
B. Sets the scene for what follows in the policy

Answer 37

B. Sets the scene for what follows in the policy

Question 38

What does sonic bangs exclusion refer to?

A. Damage from pollution
B. Damage from sonic the hedgehog
C. Damage caused by pressure waves from aircraft or other aerial devices travelling at sonic or supersonic speeds
D. Damage caused by sonic waves from the sea

Answer 38

C. Damage caused by pressure waves from aircraft or other aerial devices travelling at sonic or supersonic speeds

Question 39

Which types of insurance need to follow the price walking guidelines by the FCA?

A. Home and Motor

B. Motor and Travel

C. Travel and Home

Answer 39

A. Home and Motor

Question 40

When must a condition be carried out?

A. Once the contract ends
B. Before the contract begins
C. During the contract

Answer 40

B. Before the contract begins

Question 41

Define arbitration:

A. A dispute between different parties

B. This states that any disputes regarding the amount to be paid in settlement of a claim will be judged by an independent arbitrator

C. This states that the insurer has the right to stand in the place of the insured

Answer 41

B. This states that any disputes regarding the amount to be paid in settlement of a claim will be judged by an independent arbitrator

Question 42

Which of the following should be included in a policy schedule:

(Select all that apply)

A. Date of birth
B. Policy period
C. Territorial limits (if any)
D. Sum insured or limit of liability

Answer 42

B. Policy period
C. Territorial limits (if any)
D. Sum insured or limit of liability

Question 43

Define deductible:

A. The amount to be taken off of a claim

B. The threshold to decide whether a claim is to be paid at all

C. The name given to a very large excess

Answer 43

C. The name given to a very large excess

Question 44

What is the difference between a specific exclusion and a general exclusion?

A. General exclusions apply to parts of the policy and specific exclusions apply to the sections of the policy.

B. Specific exclusions apply to parts of the policy and general exclusions apply to the sections of the policy.

Answer 44

B. Specific exclusions apply to parts of the policy and general exclusions apply to the sections of the policy.