Notes From Chapter Review

Question 1

How regularly does electrical equipment need to be tested?

Answer 1

All new electrical installations must be inspected, the frequency normally being every one to five years, the inspection of portable electrical appliances is not required

Chapter 2C4

Question 2

What does it suggest if a material is stored away from a plant at a low temperature?

Answer 2

It has a low auto ignition temperature

Chapter 2A1

Question 3

Who needs to be consulted when assessing the reinstatement cost of a listed building?

Answer 3

The local planning authority

Chapter 2B2D

Question 4

What type of building will fire resistant flooring have the most impact on?

Answer 4

A building with many stories (concrete or hollow clay block will be used)

Chapter 2B2A

Question 5

Insurers will typically regard an adverse weather event as a storm only if …

Answer 5

A number of buildings in a specific area have sustained damage at the same time

Chapter 3B1

Question 6

How many able bodied people are required to transport cash?

Answer 6

£2500-£5000: 2 people
£5000-£8000: 3 people
£8000-£12000: 4 people
Above £12000: approved security organisation

Chapter 4F3

Question 7

What reporting should be undertaken by a surveillance tear?

Answer 7

When ever possible a watchman, guard, CCTV operator or security officer must have a fixed routine of reporting at set intervals during the surveillance

Chapter 4D3

Question 8

What is a hinge bolt?

Answer 8

A bolt fitted to thehinge of a door to prevent it from being lifted of its hinges. These will often be fitted on external doors to prevent access

Chapter 4D1A

Question 9

What is burglary?

Answer 9

Section 9 of the theft act defines burglary as entering any building as a trespasser and steal anything in the building or a part and inflicting or attempting to inflict on any person therein any grievous bodily harm.

Question 10

What sources can an insurer use to identify patterns of theft risk?

Answer 10

Their own loss records
Pooled insurance figures (e.g. ABI)
Statistics from research & surveys
Published crime figures

Chapter 4B1

Question 11

What is the definition of fire used by insurers?

Answer 11

In the absence of a legal definition insurers accept that fire must include:
Actual ignition
Something on fire that should not have been on fire
An event which must be accidental or fortuitous as far as the insured is concerned

Chapter 5A1A

Question 12

Why is premium charged in the UK to insure earthquake & subterranean fire relatively high?

Answer 12

Because these events have a large potential geographic impact

Question 13

If a window is knowingly left open will a claim be accepted?

Answer 13

No, any claim for lossor damage is likely to be denied. This is in line with the reasonable precautions policy condition, which means the insured is expected to act as if uninsured is always implied.

Chapter 5D3B

Question 14

What is the intruder alarm condition?

Answer 14

The condition does not state an alarm must be fitted, but if one is fitted it must be used

Question 15

What is floating insurance?

Answer 15

Insurance on stock belonging to an insured which is at various locations. Stock is insured at all or any location in one overall amount. An inner limit may be applied stating no more than £x will be paid for a single loss at one location

Chapter 6D4

Question 16

What inflation index is used by insurers when looking at the effects of inflation on building items?

Answer 16

Inflation values provided by the royal institute of chartered surveyors

Question 17

If a building is insured on a reinstatement basis with a rebuild time of 18 months, the sum insured should be based on rebuild costs how many months in the future?

Answer 17

30 months: 12 month policy + 18 months rebuild

Chapter 6A3

Question 18

What is reinstatement to match?

Answer 18

A clause that caters to the fact it May not be possible to replace items as a like for like basis. The insurer will provide new similar equipment & also cover ang costs associated with compatibility

Question 19

What is inadvertent omission to insure?

Answer 19

Provided the insurer is made aware of any omissions or errors in the sum insured as soon as it is discovered & provided Ag additional premium is paid full cover will apply retrospectively

Question 20

What is the typical limit for money stolen during the day?

Answer 20

£5,000

Question 21

A factory would take eight months to rebuild and a further two months before the factory was working at full capacity. Assuming they increase advertising on completion of the repairs, it is further estimated that profits would be restored to pre-incident levels after six months. What should the indemnity period be?

Answer 21

14 months (8 months rebuild + 6 months to return to profit)

Question 22

What are business interruption policies based on?

Answer 22

Turnover of the business

Chapter 8B1

Question 23

A furniture manufacturer sells 25% of its goods through its own shops with the balance sold through other retailers. If a fire at its factory halts production for three months, its business interruption insurance will cover the insured profits of the:

Answer 23

Manufacturer and it’s own shops

Chapter 8E

Question 24

A manufacturer suffered a fire which resulted in the partial closure of its factory for two months. During that time, turnover reduced from £100,000 to £70,000 per month, but expenses only reduced by 12.5% from £24,000 per month due to overtime payments. Ignoring any excess, how much will the firm receive from its insurers for business interruption?

Answer 24

£54,000

Chapter 8A

Question 25

What highly competitive trades benefit from the additional increased cost of working?

Answer 25

Bakers, farmers, publishers etc

Question 26

What is the motor vehicles extension on a BI policy?

Answer 26

To extend BI coverage to interruption caused by damage to a vehicle that is away from its own site.

Question 27

An extension that covers ‘specified disease, food poisoning, vermin pests and defective sanitation, murder or suicide’ will typically:

Answer 27

Set a maximum indemnity period, and sometimes set a monetary limit in addition.

Typically 3 months and either 10% of the sum insured or £100,000 (whichever is less)

Chapter 9B3O

Question 28

For which businesses is the BI transit extension most appropriate?

Answer 28

Companies where there could be a reduction in turnover following damage of goods in transit to a customers site or where machinery is sent from one factory to another

Question 29

What is EML widely used for?

Answer 29

Widely used by insurers to determine their retention and reinsurance arrangements

Chapter 10C

Question 30

With business interruption insurance, what is likely to be a ‘requirement’ in a survey?

Answer 30

Replace locks on all doors and windows before the policy commences.

Chapter 10A2A

Question 31

If an insured would like to reduce its building insurance premiums, which measure on its own is likely to result in the greatest discount?

Answer 31

Installation of sprinklers

Chapter 11D2

Question 32

When a security survey has been carried out and the risk requires alarm protection, insurance cover will be conditional on:

Answer 32

The installation & operation of the alarm from policy inception

Question 33

What trades will typically not be accepted, due to historical claims activity or inherent risk presented?

Answer 33

Dealers in used tires
Waste warehouses (textiles etc)
Multi-storey multi-tenure risks with wooden floors
Specialist audio/visual photographic and computer dealers
Unoccupied buildings

Chapter 11A1

Question 34

What are burning costs and how are they calculated?

Answer 34

Used to assess risk performance and level of premium required. They consider past claims values, inflation, expenses and profit.

Take a loss average (3 years or greater). Multiply by 100 and divide by the difference between 100 and the expense (i.e. 100-35 = 65) finally add the inflation

Question 35

Which two elements will usually have the most impact on the basic premium charged?

Answer 35

The extent of losses suffered by the insurer and its overall management efficiency

Chapter 11C

Question 36

What three factors is fire insurance rating based on?

Answer 36

Classification: grouping according to trades or section of trades
Discrimination: the differentiation of individual risks in a specified classification with regard to the particular features present in any one risk
Experience: relationship of losses to premiums in any given classification over a period of years (loss ratio)

Question 37

A wholesaler was forced to move from its existing premises, surrendering its property under a compulsory purchase order. Before the transaction is complete, the empty factory was destroyed by fire from a lightning strike. Under normal circumstances, to what extent are its insurers liable for the cost of the damage?

Answer 37

They are not liable for damage to the building, as the wholesaler no longer has an insurable interest in the property.

Question 38

The insured imports vodka and other spirits. A fire broke out at its warehouse destroying its entire stock, including a large quantity of rum which had been brought into the UK via an agent and not declared to HMRC. Under the rule in Geismar v. Sun Alliance and London Insurance Co Ltd [1977], how is the insurer likely to treat the claim?

Answer 38

They are unlikely to pay out for losses relating to the rum, or any other non-declared items, but may accept the claim for the remainder of the stock.

Question 39

A hard insurance market is most likely to result in what?

Answer 39

increased reinsurance premiums, reduced commission, and higher premium levels

Question 40

Why does a housing development nearing completion pose a specific underwriting risk?

Answer 40

Attractiveness of building materials

Question 41

How many people must be using/threstening evidence for it to be deemed a riot under the Public order act 1986?

Answer 41

12

Question 42

The regulatory reform (fire saftey) order 2005 does bot apply to private houses or what?

Answer 42

Offshore installations

Question 43

What crime is committed if a person esters a shop & uses threatening behaviour to force the proprietor to open the safe & steal goods?

Answer 43

Robbery

Question 44

What 2 exclusions are always applied to the riot & civil commotion section of an insurance policy?

Answer 44

Nationalisation & work stoppages

Question 45

When the special condition of average applies to a policy, it will typically be used where the sum insured declared is less than

Answer 45

75% of the value of the property at the time of damage

Question 46

Under pool re the categories of commercial risk which May be reinsured are

Answer 46

Completed buildings & other property only

Question 47

What is the typical maximum an insurer hill pay under a capital additions clause?

Answer 47

£500,000

Question 48

For a business interruption policy arranged on a declaration linked basis, to what extent, if any, does average apply?

Answer 48

It applies if the estimated insured profit is less than 50% of the rate of insured profit applied to the annual turnover.

Question 49

A business continuity plan could be of assistance to an insurer with underwriting and

Answer 49

Estimating maximum loss assessment

Question 50

Why would an insurer, having been offered a large multi-tenure risk, primarily decide to coinsure the risk rather than fully use its reinsurance treaty, despite reinsurance capacity being available?

Answer 50

To avoid over exposing its treaty reinsurers

Question 51

To which contingency of a business interruption insurance will an insurer typically apply to a franchise?

Answer 51

Accidental failure of utilities