Revision mate questions Flashcards
An insurance broker decides to apply a fee in addition to the policy premium in order to reflect the extra work involved on a case. Which of the following assumptions is incorrect?
a. Fees are paid by the insured to the broker for the service they provide.
b. The fee would generally not be reimbursed to the client following a mid-term adjustment.
c. As the fee is for the broker’s service, it does not need to be separately shown on an invoice.
d. The fee should be agreed prior to the contract.
c. As the fee is for the broker’s service, it does not need to be separately shown on an invoice.
According to common law, everyone who acts on behalf of another person is:
a. a principal.
b. an adviser.
c. an agent.
d. an introducer.
c. an agent.
Larger insurance brokerages often have a number of departments, each with a different function. Which would be best described as a ‘back office’ function in a large broker office situated in a five-storey building?
a. The IT department on the ground floor which enables all other departments to function.
b. The new business department where staff are located at the rear and middle of the top floor.
c. The client service department which is located at the front of the building on the first floor.
d. The claims department which is located at the rear of the second and third floors.
a. The IT department on the ground floor which enables all other departments to function.
A reinsurance broker arranges reinsurance cover for a client who is a reinsurer [ABC Reinsurance Ltd.]. Cover is arranged with another reinsurer [XYZ Reinsurance Ltd.]. In this example, XYZ Reinsurance Ltd. would be the:
a. primary insurer.
b. retrocessionaire.
c. client.
d. cedant.
b. retrocessionaire.
Although insurance brokers receive income from a variety of sources, the usual source of income is from commission [or brokerage]. Which option best describes commission?
a. Commission does not form part of the insurer’s premium.
b. Commission is earned by securing business and is fully retained even if the policy is later cancelled.
c. Commission is the fee the client pays a broker for the work involved in transacting business as agent.
d. Commission is a reimbursement of an agreed percentage of the premium by the insurer.
d. Commission is a reimbursement of an agreed percentage of the premium by the insurer.
Although insurance brokers can engage in a wide range of financial services activities, nowadays the term is generally used to describe organisations that:
a. offer independent advice.
b. function as tied agencies.
c. assist with insurance claims.
d. introduce customers to other intermediaries.
a. offer independent advice.
A broking account executive successfully negotiates some revised terms with the head underwriter at the holding insurer on behalf of a client. The broker has used their broking network facility to arrange a 5% discount. The principal in this relationship is the:
a. underwriter who agreed to the policy terms.
b. client who instructed the broker to arrange the cover.
c. insurer who carries the risk and agrees to accept the cover.
d. network which arranged the 5% discount.
b. client who instructed the broker to arrange the cover
Identify which of the following statements is NOT true of Lloyd’s of London?
a. Lloyd’s consists of numerous syndicates.
b. The Council of Lloyd’s can approve any broker to deal with Lloyd’s.
c. Lloyd’s is a subscription market.
d. Lloyd’s is an insurer.
d. Lloyd’s is an insurer.
Which of these is a benefit to both a client and their insurer of using an insurance broker?
a. Technical expertise to explain products in full.
b. The delegation of tasks such as premium collection.
c. Time and money saved in relation to administration.
d. The ability to quote from a range of insurers.
a. Technical expertise to explain products in full.
Insurance brokers often offer a range of ‘Added Value Services’ to assist with the needs of their clients. Can you identify which of the following options would NOT be typical of an ‘Added Value Service’ offered by a broker?
a. Health and safety consultation.
b. Specialist tax advice.
c. Property survey.
d. Business continuity planning.
b. Specialist tax advice.
Broking firms whose principal method of growth is through mergers and acquisitions which result in a smaller number of larger firms are known as:
a. wholesale brokers.
b. global firms.
c. aggregators.
d. consolidators.
d. consolidators.
A Lloyd’s broker finds that a slip submitted to underwriters has become oversubscribed. To correct the matter, what action should the Lloyd’s broker take?
a. Liaise with the Council of Lloyd’s to correct the matter.
b. Submit the slip ‘as is’ to the Bureau for amendment.
c. Proportionately reduce each underwriter’s line.
d. Cancel the slip, create a new one and start again from the beginning.
c. Proportionately reduce each underwriter’s line.
Most insurance brokers will deal with retail customers, however what type of broker specifically has other brokers as its clients?
a. A wholesale broker.
b. A general insurer.
c. An aggregator.
d. An online broker.
a. A wholesale broker.
Although insurance brokers can engage in a wide range of financial services activities, nowadays the term is generally used to describe organisations that:
a. introduce customers to other intermediaries.
b. function as tied agencies.
c. offer independent advice.
d. assist with insurance claims.
c. offer independent advice.
A broking account executive successfully negotiates some revised terms with the head underwriter at the holding insurer on behalf of a client. The broker has used their broking network facility to arrange a 5% discount. The principal in this relationship is the:
a. network which arranged the 5% discount.
b. insurer who carries the risk and agrees to accept the cover.
c. underwriter who agreed to the policy terms.
d. client who instructed the broker to arrange the cover.
d. client who instructed the broker to arrange the cover.
Which of these is a benefit to both a client and their insurer of using an insurance broker?
a. The ability to quote from a range of insurers.
b. The delegation of tasks such as premium collection.
c. Technical expertise to explain products in full.
d. Time and money saved in relation to administration.
c. Technical expertise to explain products in full.
Identify which of the following statements is NOT true of Lloyd’s of London?
a. Lloyd’s consists of numerous syndicates.
b. Lloyd’s is an insurer.
c. Lloyd’s is a subscription market.
d. The Council of Lloyd’s can approve any broker to deal with Lloyd’s.
b. Lloyd’s is an insurer.
The Consumer Insurance [Disclosure and Representations] Act 2012 is designed to offer better protection to:
a. consumers.
b. business customers.
c. company directors.
d. commercial organisations.
a. consumers.
What can a broker issue to help them to meet their duty to fully explain their recommendations and how these will deliver the client’s demands and needs?
a. A suitability statement.
b. An acceptance letter.
c. A proposal form.
d. An initial disclosure document.
a. A suitability statement.
To which situation would the Consumer Insurance [Disclosure and Representations] Act 2012 apply?
a. A shopkeeper looking to insure stock in the basement.
b. A homeowner looking to insure their new-build family home.
c. Disclosure of a significant trading loss in the last financial year for a design company.
d. A roofing company requiring employers’ liability cover for employees working at height.
b. A homeowner looking to insure their new-build family home.
Which instance best summarises why a customer would want to use an insurance broker?
a. When a client is unclear about the product they need.
b. When a client is interested in a range of products offered by a tied agent.
c. When a client needs to spread insurance costs using instalments.
d. When a client needs to arrange cover sooner rather than later.
a. When a client is unclear about the product they need.
According to the Consumer Insurance [Disclosure and Representations] Act 2012, consumers should at all times:
a. disclose every material circumstance that would influence the judgment of a prudent insurer.
b. follow the principal of utmost good faith in their dealings with insurers.
c. make a fair presentation of the risk to the underwriter.
d. take reasonable care to answer insurers’ questions fully and accurately.
d. take reasonable care to answer insurers’ questions fully and accurately.
Which of the following is a ‘limiting factor’ which will affect a broker’s choice of insurer?
a. Financial security.
b. Ease of payment.
c. Reputation and experience.
d. Credit facilities.
a. Financial security.
Risks are presented to London Market underwriters on a standard form known as the:
a. Market Reform Contract.
b. London Underwriting Contract.
c. London Market Form.
d. Lloyd’s submission form.
a. Market Reform Contract.
The Financial Conduct Authority’s [FCA’s] Contract Certainty Code of Practice requires the full policy wording to be delivered to customers within a certain time frame. Can you identify the correct time frame in which a commercial customer should receive full documentation?
a. 7 days.
b. 21 days.
c. 28 days.
d. 30 days.
d. 30 days.
A statement of fact is usually used:
a. when a risk requires a survey or inspection.
b. when a risk is reasonably straight forward.
c. with the broker’s initial quote request to the insurer.
d. as soon as a signed proposal form has been submitted.
b. when a risk is reasonably straight forward
After assessing a client’s needs and wants, a broker puts forward a recommendation to the client on the basis of a ‘fair analysis’. What could the client expect this analysis to include?
a. A summary of the products of a household-name insurer.
b. A risk survey summary with appropriate recommendations.
c. A financial review of the sector in which the client operates.
d. Consideration of a sufficiently large number of relevant insurers.
d. Consideration of a sufficiently large number of relevant insurers.
The final stage in the standard process of providing insurance products is to:
a. source the appropriate product[s].
b. complete an appropriate proposal form.
c. formally arrange cover and bring the insurer and the client to contract.
d. confirm the client’s demands and needs.
c. formally arrange cover and bring the insurer and the client to contract.
The Consumer Insurance [Disclosure and Representations] Act 2012 is designed to offer better protection to:
a. commercial organisations.
b. consumers.
c. company directors.
d. business customers.
b. consumers.
According to the Consumer Insurance [Disclosure and Representations] Act 2012, consumers should at all times:
a. disclose every material circumstance that would influence the judgment of a prudent insurer.
b. make a fair presentation of the risk to the underwriter.
c. follow the principal of utmost good faith in their dealings with insurers.
d. take reasonable care to answer insurers’ questions fully and accurately.
d. take reasonable care to answer insurers’ questions fully and accurately.
What can a broker issue to help them to meet their duty to fully explain their recommendations and how these will deliver the client’s demands and needs?
a. An initial disclosure document.
b. An acceptance letter.
c. A suitability statement.
d. A proposal form.
c. A suitability statement.
After assessing a client’s needs and wants, a broker puts forward a recommendation to the client on the basis of a ‘fair analysis’. What could the client expect this analysis to include?
a. A risk survey summary with appropriate recommendations.
b. A summary of the products of a household-name insurer.
c. Consideration of a sufficiently large number of relevant insurers.
d. A financial review of the sector in which the client operates.
c. Consideration of a sufficiently large number of relevant insurers.
With regards to the specific terminology used in relation to delegated authority schemes, which of the following gives an accurate description of the role of the coverholder?
a. The report provided by the entity delegated to of the risks and claims provided.
b. An insurance broker or wholesaler that underwrites risks.
c. An entity to which an insurer can give delegated authority.
d. The contract under which delegated authority is given.
c. An entity to which an insurer can give delegated authority.
In your role as an insurance broker you receive a number of client calls. Which of the following options best describes a risk control scenario?
a. A client informs you that they are thinking about whether some extension work at their busy high street shop is necessary.
b. A client informs you that they are likely to receive a penalty notice for speeding.
c. A nursery client informs you that the insurer’s requirement for their child protection policy is now in place.
d. A client informs you that they are looking to change their car to a newer model.
c. A nursery client informs you that the insurer’s requirement for their child protection policy is now in place.
As lead underwriter with an insurer, you approve a delegated authority agreement. In thinking through your strategy, can you identify an advantage of the agreement?
a. Increased potential for funds to be mismanaged.
b. Coverholder could sub-delegate without authorisation.
c. Reduced levels of control in underwriting each risk.
d. Reduction in operating costs per risk.
d. Reduction in operating costs per risk.
A captive insurance company is best described as:
a. an insurer based outside of the UK that specialises in employers’ liability risks in the UK.
b. an insurance company which is primarily set up to insure the risks of its parent.
c. a proprietary company which uses a range of other insurers to cover its risks.
d. an overseas branch of a composite ‘household name’ insurer.
b. an insurance company which is primarily set up to insure the risks of its parent.
You are asked to evaluate a risk to predict the likelihood of future losses. What best describes the activity you are engaged in?
a. Risk control.
b. Risk avoidance.
c. Risk implementation.
d. Risk analysis.
d. Risk analysis.
As part of an insurance company’s claims team, you are tasked with clarifying the correct name of a client who is insured under a delegated authority agreement. Your manager instructs you to speak with the coverholder. Who should you call?
a. The end client who has paid their premium in full but has not received full documentation.
b. The underwriter who regularly audits the delegated authority agreement.
c. The end client who has paid their premium in full and has received full documentation.
d. The organisation or persons that are in receipt of the delegated authority facility.
d. The organisation or persons that are in receipt of the delegated authority facility.
Of the methods of risk control available, which of the following is most effective at eliminating risk?
a. Reduction.
b. Minimisation.
c. Transfer.
d. Avoidance.
d. Avoidance.
Glen owns a number of out of town warehouses and is considering commercial risk management so that he can make informed decisions about the risks faced by his business. What is the final stage of the risk management process?
a. Risk analysis.
b. Risk control.
c. Risk identification.
d. Risk perception.
b. Risk control.
The final stage in the process of operating a delegated authority scheme can be described as the:
a. operation of the agreement.
b. presentation of the business case.
c. drawing up of the agreement and procedures.
d. auditing and monitoring of procedures.
d. auditing and monitoring of procedures.
What term is used to describe the report detailing the risks written and claims reported by an entity to which an insurer has given delegated authority?
a. Binding.
b. Coverholder.
c. Delegated.
d. Bordereau.
d. Bordereau.
In accordance with the law of agency, which of the following statements is correct?
a. A delegated authority relationship permits more than one principal at any one time.
b. An agent can have only one principal at any one time.
c. An agent can have more than one principal at any one time, providing all parties agree.
d. An insurance broker has both client and insurer as their principal at the same time.
b. An agent can have only one principal at any one time.
Although agents are bound by their principal’s instructions, insurance brokers are usually permitted to delegate tasks that:
a. involve speculation regarding the principal’s legal status.
b. involve guesswork of a principal’s circumstances.
c. are purely mechanical in their nature.
d. require decisions of judgment on the principal’s behalf
c. are purely mechanical in their nature.
An insurance broker secures cover on behalf of their principal – the customer. The broker receives the completed policy documents which are held in trust before being sent to the customer. This relationship is best described as a:
a. trusting relationship.
b. fiduciary relationship.
c. holding relationship.
d. temporary relationship.
b. fiduciary relationship.
In your role as an insurance broker, you have a range of legal duties. Under the law of agency, each of the following is a key legal duty that is required of you with the exception of the duty of:
a. due skill and care.
b. accountability.
c. good faith.
d. remuneration.
d. remuneration.
