Test Questions Flashcards
This type insurer accepts many different classes of business and may deal with fire, accident, motor and liability. Many are public limited companies such as Aviva. A) specialist insurer B) composite insurer C) captive insurer D) direct insurer
C) captive insurer
What type of insurer offers a very limited range of insurance, often a single type of cover such as life insurance? May also provide insurance to members of the general public directly or through intermediaries or both? A) composite B) specialist C)direct D) captive
B) specialist
What type of insurer only deals directly with the public and most transactions are telephone or web based? Commonly operate in the motor or house hold market.
A) Takaful
B) direct
C) composite
D) specialist
Insurance which has its roots in the Islamic financial services industry. Based on the rulings of the Islamic law concerning financial and commercial transactions. Works on the principal that any transaction risk and profit is shared between the participants
A) Captive
B) Composite
C) Takaful
D) Specialist
C) Takaful
Insurers need to buy protection for very large losses of significant events. What’s it called when insurers by insurance for this protection?
A) dual insurance
B) reinsurance
C) Lloyd’s
D) specialist
B) reinsurance
What type of insurer does not offer insurance to the general public?
A) Captive
B) Composite
C) Takaful
D) Specialist
A) Captive.
Because this if formed by the parent company to underwrite certain risks for that parent company only.
What is a managing agent?
A managing agent is responsible for the day to day running of a syndicate
What is a member agent?
A member agent is an agent usually appointed by a member of a lloyd’s to perform duties and services on their behalf
Who regulates insurance intermediaries and financial advisory firms?
a) the financial conduct authority
b) the association of british insurers
c) financial ombudsman
a) the financial conduct authority
who regulates loss adjusters?
The Financial Conduct Authority
A call center is an example of what type of marketing?
A) Direct Marketing
B) Indirect Marketing
A) Direct Marketing
What does the term financial risk mean?
The term ‘financial risk’ relates to the outcome rather than the nature of the risk itself
What is pure risk?
Where there is no possibility of making a profit
What is a particular risk?
They’re personal or local in their effect. They arise from causes that affect individuals or local communities in their consequences
what does it mean for something to be a fortuitous event?
Accidental and not inevitable - not in control of the insured.
Can you insure against public policy?
Yes
No
No. It is commonly recognized in law that contracts must not be against public policy or go against what society considers to be the right moral thing to do.
Can you insure a driver for legal expenses to defend a drink drive conviction?
No as it’s against public policy. It would encourage the public to break the law.
What is meant be the term ‘Homogeneous’
of the same kind; alike.
Can Non-Financial risks be insured?
No
Can Speculative Risks be insured?
No
Can Fundamental Risks be insured?
No
What is the definition of a non-financial risk?
When no value can be placed on the outcome. When the outcome is not measurable.
What is meant by a speculative risk?
Speculative risks may involve three possible outcomes. Loss, Break-Even or Gain. Insurers do not insure speculative risks as they’re not undertaken voluntarily.
What is an example of a speculative risk?
Gambling
What is meant by a fundamental risk?
It’s a risk which arises from a cause outside the control of any one individual or group of individuals and its effects are usually widespread. Such risks may arise out of social, economic, political or natural causes.
Examples of fundamental risks?
War
Earthquake
Economic Recession
Can consequences from fundamental risks be insured?
Yes. Fundamental Risks may have particular consequences for individuals which can be insured.
What are the 3 main components of risk?
Uncertainty, Level of Risk and Peril and Hazard
What is Peril defined as?
A Peril can be defined as that which gives rise to a loss
What is Hazard defined as?
A Hazard can be defined as that which influences the operation of the peril
What are the two types of hazards?
Physical and Moral
What is a physical hazard?
Physical Hazard relates to the dimensions and physical characteristics of the risk.
What is a moral hazard?
Moral hazard arises form the attitude and conduct of people. In insurance, this is usually the conduct of the person insured.
What is meant by the term co insurance?
When not one insurer wishes to take on board all of the risk being offered. Several insurers can be involved.
When is self insurance most effective?
Self insurance is most effective for high severity low frequency risks.
What is dual insurance?
When there are two or more policies in force which cover the same risk.
What is reinsurance?
Reinsurance is an extension of the fundamental concept of insurance, namely the sharing of risk. It is another risk transfer mechanism, in that insurers insure the risk again.
What is meant by Good Faith in Insurance?
Good faith means that disclosure must be made in reasonably clear and accessible manner and material representations of fact, expectation or belief must be substantially correct.
What is the definition of indemnity?
Indemnity can be defined as financial compensation sufficient to place the insured in the same financial position after a loss as enjoyed immediately before the loss occurred.
What are the insurers four options of providing indemnity?
Cash Payment, Repair, Replacement, Reinstatement
