Paper 1 Flashcards
What is the relationship between a peril and a hazard?
A. A peril gives rise to a loss and a hazard influences the operation of the peril.
B. A peril is an insured loss and a hazard is an uninsured loss.
C. A peril is the end cause of a loss and a hazard is the proximate cause of a loss.
D. A peril is the physical nature of a risk and a hazard is the moral nature of a risk
A peril gives rise to a loss and a hazard influences the operation of the peril
A material circumstance is best described as a circumstance that
A. has no bearing on physical hazard.
B. has no bearing on moral hazard.
C. may influence an underwriting decision.
D. must be on the Association of British Insurers’ approved list
C. may influence an underwriting decision
An insurer may occasionally delegate underwriting in order to
A. speed up the process and reduce administrative costs.
B. reduce the risk of non-disclosure.
C. comply with the requirements of the Association of British Insurers.
D. ensure that only good quality risks are accepted
A. speed up the process and reduce administrative costs
At the renewal of an insurance policy, policyholders are always obliged under common law to
A. renew the policy with the same insurer.
B. increase the sum insured in line with inflation.
C. disclose any changes to material circumstances.
D. complete a new proposal form
C. disclose any changes to material circumstances
In relation to fire insurance and the consideration of hazard, metal fire doors and fire resistant walls are considered to be A. good moral hazards. B. good physical hazards. C. poor moral hazards. D. poor physical hazards
B. good physical hazards
During the period that a quotation was valid, the proposer accepted the quoted terms in writing. In
what circumstances, if any, is the insurer legally permitted to withdraw these terms?
A. Only if the basis of the risk has changed.
B. Only if the insurer decided to withdraw from this section of the market.
C. Only if this type of cover is widely available in the marketplace.
D. In no circumstances
A. Only if the basis of the risk has changed.
When the annual premium for a motor insurance policy is payable by instalments using direct debit,
what payment frequency is most likely to be involved?
A. Weekly.
B. Monthly.
C. Quarterly.
D. Half-yearly
B. Monthly.
In a proposal form, risk specific questions are those
A. that are common to most general insurance risks.
B. that pertain to the particular details of a proposed risk.
C. that relate to matters evaluating whether information is material or not.
D. where the proposer warrants the answer to be correct
B. that pertain to the particular details of a proposed risk.
What is the main consequence of an insurer offering a high standard sum insured under a
household contents insurance policy?
A. It reduces the possibility of underinsurance.
B. It increases reliance on the average clause.
C. It reduces the number of claims that are handled.
D. It increases the incidence of subrogation
A. It reduces the possibility of underinsurance.
What is the usual premium base for an employers’ liability policy? A. The limit of indemnity. B. The sum insured. C. The turnover. D. The wage roll.
D. The wage roll.
What is the most common basis of premium calculation for public liability insurance and products liability insurance? A. Business value. B. Limit of indemnity. C. Profit. D. Turnover.
D. Turnover.
Michael has a household contents policy and makes a claim early in the period of insurance. Why is
it NOT necessary that he has received a copy of the policy to make a claim?
A. Consumer Insurance (Disclosure & Representations) Act 2012 specifies that it is not necessary.
B. A cover note would have been issued.
C. The policy is only evidence of the contract, not the contract itself.
D. This is not a requirement with compulsory insurances
C. The policy is only evidence of the contract, not the contract itself.
When a premium is paid by monthly direct debit why is an additional charge usually levied by the
insurer?
A. To cover the loss of interest.
B. To cover the risk of non-payment.
C. The Consumer Credit Act 1974 requires it.
D. The Insurance Act 2015 requires it
A. To cover the loss of interest.
A valid employers’ liability insurance certificate must contain the insured’s A. address. B. name. C. number of employees. D. occupation
B. name.
For a contract of insurance to be valid the premium must A. be quoted. B. be paid or agreed to be paid. C. be shown on the certificate. D. include Insurance Premium Tax
B. be paid or agreed to be paid.
Who pays Insurance Premium Tax? A. Both the insurer and the insured. B. The insured only. C. The insured’s intermediary. D. The insurer only.
B. The insured only.
What is the current rate of Insurance Premium Tax, if any, for the majority of insurance policies? A. Nil. B. 6% C. 12% D. 20%
C. 12%
In a proposal form, what type of questions would a proposer’s name, address and occupation be classified as? A. Express. B. General. C. Objective. D. Specific
B. General.
Which Act regulates the payment of insurance premiums by instalments?
A. The Consumer Credit Act 1974.
B. The Financial Services and Markets Act 2000.
C. The Sale and Supply of Goods to Consumers Regulations 2002.
D. The Sale of Goods Act 1979
A. The Consumer Credit Act 1974.
Chris is completing a proposal form and has been advised that he is legally obliged to declare all
material circumstances. If he is unsure whether information is material or not, he should
A. disclose it fully.
B. not disclose it.
C. only disclose it if it is specifically addressed by one of the questions.
D. only disclose it if it relates to a criminal offence
A. disclose it fully.
What can an insurer of frozen food apply to exclude a loss arising from a short failure of the
electricity supply lasting 30 minutes or less, but which will cover the whole loss if the supply failure
exceeds 30 minutes?
A. An aggregate.
B. A deductible.
C. An excess.
D. A franchise
D. A franchise
Which component of a policy is personal and specific to an insured? A. The operative clause. B. The policy conditions. C. The policy schedule. D. The recital clause
C. The policy schedule.
The main purpose of the recital clause in a household insurance policy is to
A. list all of the general exclusions of the contract.
B. make the proposal form the basis of the contract.
C. show the details of cover provided by the contract.
D. state the renewal date of the contract
B. make the proposal form the basis of the contract.
Conditions that are covered by common law and therefore do NOT need to appear in an insurance policy are known as A. express conditions. B. general conditions. C. implied conditions. D. legal conditions
C. implied conditions.
An exclusion in an insurer’s household insurance policy is deemed a general exclusion, but NOT a
market exclusion. This means the exclusion
A. applies to a particular section of the policy, but does not apply across the entire policy.
B. applies to all sections of the policy, but has not generally been adopted by other insurers.
C. relates to a pure risk rather than to a speculative risk.
D. operates under case law precedent rather than under the provision of statute
B. applies to all sections of the policy, but has not generally been adopted by other insurers.
An insurer is advised that a break-in has occurred but the insured has failed to report the incident
to the police. What part of the insurance policy has been breached?
A. The conditions.
B. The exclusions.
C. The preamble.
D. The schedule.
A. The conditions.
An insured property suffers extensive water damage. A claims handler notes that the insured has
NOT complied with the minimum security requirement. What action would be taken?
A. The claim would be paid but the policy would be cancelled.
B. The claim would be avoided and the policy would be cancelled.
C. The claim would be paid and the policy would remain in force.
D. The claim would be avoided but the policy would remain in force.
would be cancelled.
C. The claim would be paid and the policy would remain in force.
In which section of an insurance policy does an insurer provide details of the different sums insured under the policy? A. The heading. B. The operative clause. C. The policy schedule. D. The preamble
C. The policy schedule.
The amount of any claim which is the responsibility of the insured and which the insurer will deduct from any claim payment is known as A. a condition. B. an excess. C. a franchise. D. a warranty
B. an excess.
What is the usual length of the notice period, if any, under a standard cancellation clause of a household policy? A. There is no notice period. B. 7 days. C. 14 days. D. 28 days
B. 7 days.
