RIBO - TEST Flashcards
Which type of private insurance company provides the cheapest insurance?
A - Stock Company
B - Mutual Company
Mutual Company (B)
Mutual companies are owned by their policy holders and not profit oriented.
What is the major function of insurance?
A - To make sure you are protected
B - To spread risk
C - To prevent losses
D - For peace of mind
To spread risk
Insurance spreads out the financial consequences of a risk amongst many parties. The idea is that everyone pays into the pool every month and claims are paid out from that pool when a member has a loss.
What type of losses do insurance companies pay for?
A - Catastrophic losses
B - Accidental losses
C - Intentional losses
D - Losses that occur in the regular course of business
Accidental losses
Insurance pays for accidental losses only, not intentional ones caused by the insured or ones that are expected to occur.
Is money the only form to payment an insurance company can use?
Yes
No
No
Indemnity can come in the form of cash, repair or replacement
What are the 3 types of insurance coverage available?
1) Automobile Insurance: these policies insure licensed motor vehicles. Automobile insurance is required by law and therefore generates the largest volumes.
2) Property Insurance: this insurance protects personal and business property and represents the 2nd largest insurance market.
3) Liability Insurance: this insurance provides financial protection when the insured is found legally responsible for causing injury or damage.
What are 2 ways insurance is distributed in Canada & give a brief explanation of each
1) Direct Writer: this is where an insurance company will employ their own sales force to sell their own products.
2) Independent Broker: with this, a 3rd party called a broker is responsible for selling insurance products in exchange for earning a commission. A broker may represent more than one insurance company and all clients belong to the broker.
If an insurance company turns out to be insolvent, who steps in to indemnify policy holders?
Property & Casualty Insurance Compensation Corporation
When an insurance policy is cancelled by the insurance company, refunds are processed on a pro-rate basis. Your client paid $2400 in premiums for an annual policy in January. At the end of June, their policy was cancelled by the insurance company. How much money will be refunded to your client?
A - $2400
B - $1200
C - $2000
D - $1000
$1200
Half the policy was used so the insured is entitled to half of the premium paid since half the policy remains unused.
What is the fiduciary responsibility of a broker?
A - To use their client’s money responsibly
B - To forward all premiums collected to the insurance company
C - To return any unearned commissions
D - To invest it wisely so that it grows
To return any unearned commissions
Any unearned premiums/commissions must be held in trust to be returned should the policy be cancelled part way. If 60% of the policy term has passed, 60% of the premium/commission has been earned.
According to the Insurance Act, which of the following need to be included on the declarations page? Check all answers that apply.
Choose ALL answers that apply.
A - Parties to the contract
B - Policy period
C - Loss payee(s)
D - Coverage & amounts of insurance
E - Rates
F - Subject matter of insurance
ALL!
Parties to the contract
Policy period
Loss payee(s)
Coverage & amounts of insurance
Rates
Subject matter of insurance
What is the statutory condition of “salvage” entail?
A - The insurance company has the right to your wrecked vehicle after they pay out a total loss
B - The insured must take reasonable steps to protect their property from further loss
The insured must take reasonable steps to protect their property from further loss
Which type of fire loss is insurable?
A - Hostile fire
B - Friendly fire
Hostile fire
Friendly fire means fire that is contained and used for beneficial purposes. Once that fire escapes, it become hostile fire.
Which of the following are types of misrepresentation? Check all that apply.
A - Misrepresentation of a non-material fact
B - False description of property to the prejudice of the insurer
C - Fraudulent omission of a material fact
D - Accidental omission of a material fact
B - False description of property to the prejudice of the insurer
C- Fraudulent omission of a material fact
Misrepresentations of non-material facts (facts that don’t influence an insurance company’s decisions) are tolerated and not really considered “misrepresentations”.
What is Removal Clause
With an insurance policy, protection is usually only available while the property is on the stated premises but sometimes, it is necessary to move that property to an unnamed premises in order to protect it from further loss.
In that case, insurers have agreed to offer coverage at a location that is not named on the policy for up to 7 days (or until policy expiry).
When we talk about Fire insurance, it insures 2 additional perils on top of fire. List them and give a brief explanation of each.
1) Lightning: insures damage to property caused by lightning
2) Explosion of natural gas, coal or manufactured gas: this excludes explosions of boilers or other devices subject to internal pressure.
An insurer has different duties based on whether they want to repair or replace the insured’s damaged property. What are they responsible for in each case?
If the insurer opts to pay in cash for the damaged property, they must issue payment within 60 days of receiving proof of loss.
If the insurer is repairing or replacing the property, they must provide the insured written notice of their intent to do so within 30 days of receiving proof of loss and start with the repairs or replacement within 45 days of receiving proof of loss.
What is the difference between a broker and an agent?
A - The agent represents the interests of the insurer and brokers represent the interests of the insured
B - The agent represents the interests of the insured and brokers represent the interests of the insurer
The agent represents the interests of the insurer and brokers represent the interests of the insured
Which of the following are an underwriter’s duty?
A - Rate making
B - Client relationship management
C - Risk selection
D - Policyholder services
Rate making
Risk selection
Policyholder services
Is it true that an underwriter only considers the application when looking at a risk?
A - Yes
B - No
No
Is “housekeeping” considered a physical or a moral hazard?
A - Moral
B - Physical
Physical
Briefly explain the broker’s duty to clients & insurers.
A broker is required to exercise reasonable skill, care and diligence when dealing with or advising clients.
A broker is also required to be completely truthful when dealing with insurance companies.
If a broker fails at any of these duties, there is grounds for an E&O claim.
What are the 3 activities performed by an underwriter?
1) Risk Selection: they want to choose the risk that is most likely to be profitable for the insurance company (ie. the insured who will pay premiums on time but hardly ever claim).
2) Rate Making: they are also responsible for setting prices for each piece of business they receive.
3) Policy Holder Services: they are also responsible for doing the paperwork: issuing quotes, policy changes, etc.
