In the hot seat

Regulation

1. Your customer is sitting alongside you in your office while you are working on screen to produce quotations for him. You return to the customer list page and your customer points at the screen and says: "That chap owes me money. So that is where he lives. I'm going round to see him." What must you do?

a. Give the client a printout of the information if he would like one.

b. Offer any further assistance in recovering his money.

c. Ask him to contact the person by phone rather than a personal visit.

d. Prepare a report and notify the Data Protection Registrar.

2. A mail order company has offered you a substantial sum for a copy of your customers' contact details. What should you do?

a.Treat personal information as private and confidential, and decline the offer.

b. This information is a business asset belonging to you and is yours to sell if you wish.

c. Offer the mail order company details of former customers who are no longer customers.

d. Approach other mail order companies to see if you can get a better price.

3. One customer asks you for the telephone number and address of another. What should you do?

a. Give him the information as it is "in the public domain".

b. Explain that you are unable to disclose that information without the owner's permission.

c. Ask him to put his request in writing.

d. Show him the information on your computer.

4. What is the main purpose of the Data Protection Act 1998 ?

a. To regulate the use of computer data.

b. To regulate the storage, processing and transfer of personal data.

c. To prevent software piracy.

d. To uphold intellectual property rights and copyrights.

5. Following your annual financial audit, it emerges that you have more money in your insurance bank account (IBA) than you need to meet liabilities.

Seven years ago a substantial return of premium for a customer arose and you have been unable to trace him. You decide this money would be better off in your office trading account and your IBA will still be in credit if you lay claim to this money. What should you do?

a. As it is unlikely that the customer will come forward to claim the money, it can be removed from the IBA.

b. If you remove the money from the IBA, you would be committing a criminal offence.

c. This money must stay in the IBA until your business is wound up.

d. You must transfer the money to a separate account nominated trustee account for untraced customers.

Household

6. Your customer is concerned that wedding presents worth £2,500 for the forthcoming marriage of her daughter are not insured while at home.

As you do not have the actual policy handy, what would you tell her is the likely situation under her policy?

a. On many household policies, the sum insured is automatically increased within certain limits to cover wedding presents.

b. She must pay an additional fee to the premium to cover the temporary sum insured increase.

c. She must notify the insurer what security arrangements are in place.

d. It is not possible to increase the sum insured for such a short period.

7. Your customer has been offered the family legal protection extension on his household content policy. He asks you what cover this provides. What should you say?

a. It pays your excess if you are involved in a motor accident.

b. It pays compensation to third parties if you cause injury or damage.

c. It pays your solicitor's bill for the conveyance if you move house.

d. It pays your legal costs and expenses if you have to go to court for a non-motoring purpose.

8. Your customer submits a household policy claim for the loss of his wage packet containing £200, which was destroyed in a fire at his house. What should you tell him?

a. Money is not insured under the household policy.

b. Money in the house is only insured for theft, not fire.

c. The customer must pursue his claim against his employer.

d. The claim will be passed to his insurers immediately.

9. Jill's household content policy is extended to cover loss of rent owing to the property being uninhabitable. Which of the options below is a feature of the cover provided under this section?

a. A maximum indemnity period of 28 days applies.

b. Additional expenses incurred by the insured staying at an hotel are included as part of the cover.

c. The amount of cover provided is restricted to the sum insured for the contents.

d. Cover applies in respect of loss owing to any cause.

10. A "contingency loading" within an insurance premium is the amount charged:

a. To cover the expected cost of the risk.

b. As a contribution to the claim reserve.

c. To recover the costs of advertising the product.

d. To allow for a return to the owners of the company.

Public liability

11. You have been approached by a company from the US which produces widgets for safety cut-outs in washing machines in the UK. What would be the attitude of a prudent underwriter in the modern insurance market if asked to consider cover for worldwide liability risks?

a. US producers may be underwritten at a lower rate than UK producers.

b. A more cautious approach is taken with US producers.

c. US producers may be underwritten at a lower rate than UK producers if the cover is limited to US and UK only.

d. US producers may be underwritten at a lower rate than UK producers if the cover is limited to US and EC countries only.

12. George, an interior designer, lent his cutter to his friend Kate.

The cutter broke and lacerated Kate's right hand. George asks you if he is liable to be sued and should you notify his business' public liability insurer of a potential claim. Which is the best reply to give?

a. Yes, a claim is possible and the insurer should be notified quickly.

b. No, there is no need to take any action as it must have been Kate's fault.

c. No, as the tile-cutter was not supplied in the course of business, no liability can ensue.

d. Yes, a claim could be made and he should contact Kate to find out the extent of the injury.

13. Your customer asks the extent of "bodily injury" cover under a modern liability policy. What is the answer?

a. It is restricted to tangible bodily injury.

b. It covers tangible bodily injury and may include libel and slander.

c. It is restricted to tangible and visible bodily injury.

d. It is restricted to tangible bodily injury where the proximate cause is violent and visible.

14. A commercial customer who runs a fleet of buses has laid down very strict rules on how drivers must behave on the road. You notice in the high street one day that two of his drivers are "racing" against one another.

This is specifically forbidden in writing by the employer. You place the customer's motor and liability insurance policies. Does this give you cause for concern?

a. No, the customer has absolved himself from liability by forbidding the activity.

b. No, the customer would not be held liable when the act is not connected to what the conductor is employed to do.

c. Yes, this was simply an improper method of the conductor carrying out her duties.

d. Yes, because all liability policies exclude cover for reckless acts by employees.

15. A prospective client contacts you regarding a contract she is tendering for. The contract is for the supply of snack meals to a cut-price airline and this will involve the delivery of products to the aircraft. She wishes to know if it is necessary for her firm to take out public liability (PL) cover as she has been told that this is not a compulsory cover. You advise her:

a. She is correct, there is no compulsion by law to have PL cover.

b. While there is no compulsion for PL cover generally, the airport authorities must be satisfied that anyone working "airside" (adjacent to an aircraft) does carry third-party liability insurance.

c. It would be sensible to have some cover just in case.

d. Her product liability (for the snacks she produces) will be sufficient cover.

Goods in transit

16. Your client's Goods in Transit policy covers removal of debris costs. What does this mean?

a. Expenses incurred in reloading on to the vehicle property which has fallen from the vehicle.

b. The costs in disposing of the vehicle if it is destroyed by fire.

c. Fines imposed by the police if goods fall off the vehicle.

d. Expenses for the removal of damaged goods from the area where the damage occurred.

17. Your client manufactures toys and despatches them to UK customers using haulage contractors, parcel couriers and parcel post. Your client asks which methods should be insured and the amount. What would you recommend?

a. Insure all three methods to the full value of the goods.

b. Insure parcel post to its full value. The haulier and parcel courier will insure to £1,300 per tonne so just insure the balance more than that amount.

c. Insure goods sent by haulier and parcel post to the full value but not the parcel post because that has to be insured by the Post Office.

d. Don't insure any because whoever carries the goods is responsible for them.

18. Your client is a kitchen fitter and you arrange commercial vehicle insurance. He tells you he is using his van to carry both kitchen units for fitting in customers' premises and also his own tools. He asks whether these items are covered under his commercial vehicle policy. What answer would you give?

a. The commercial vehicle policy automatically covers the kitchen units and the tools.

b. The commercial vehicle policy automatically covers the tools but not the kitchen units for which separate cover is required.

c. Neither is covered by the commercial vehicle policy and separate cover can be taken out on both.

d. Neither is covered by the commercial vehicle policy. The tools can be covered but not the units which are the customers' responsibility.

19. Your client has a goods in transit policy covering his goods in his vehicle. He manufactures machinery. The policy insures "loading and unloading". What would this cover when the client is delivering machinery to a customer?

a. Damage caused to the customer's premises during unloading.

b. Damage to the machinery while being lifted off the vehicle up to the machinery's final position in the customer's premises.

c. Damage to the machinery while being lifted off the vehicle but only until it is placed on the road outside the customer's premises.

d. The costs of installing the machinery in its final position in the customer's premises.

20. Your client sells goods "ex works". What do you understand by this term?

a. This means the client sells goods at a reduced price because they are "factory seconds".

b. This means the buyer is responsible for all charges but excluding insurance for the entire transit.

c. This means the client sells goods from a factory retail outlet.

d. This means the buyer is responsible for all charges including insurance for the entire transit.

Business interruption

21. Which of the following documents would you find information to help you estimate the sum insured?

a. Within the profit and loss sections of the company accounts.

b. From the directors' returns supplied to Companies House.

c. In the company's accounts from the balance sheet.

d. From the firm's sale and purchase ledgers.

22. In discussing business interruption cover with a client who runs a fish and chip shop, the client states that he would be able to reopen within nine months following a fire or other serious damage. So he only wishes to insure for that period rather than 12 months. How do you respond?

a. Reduce the BI sum insured by 25% and get insurers to issue on a nine-month indemnity period.

b. Offer to arrange cover on an increased costs of working basis instead.

c. Explain that it is likely to take longer than the reinstatement period for turnover to return to its former level and a longer indemnity premium is therefore prudent.

d. Negotiate a discount on the premium based on the lower period of exposure.

23. How would you set the sum insured if a client required an indemnity period of 24 months?

a. Same as 12 months - the premium would be doubled.

b. Same as 12 months - premium would be doubled and a discount given for the longer period.

c. To reflect 24 months' trading with an adjustment for future growth.

d. Based on most recent annual trading figures and doubled.

24. Which type of insurance is specifically designed to cover the consequential financial losses following a fire or other insured damage?

a. Credit insurance.

b. Business interruption insurance.

c. Money insurance.

d. Workmen's compensation insurance.

25. Which class of insurance is indemnity calculated according to a policy formula?

a. Marine cargo insurance.

b. Business interruption insurance.

c. Employers' liability insurance.

d. Fire insurance (wholesalers' stock-in-trade).

Material damage

26. Your customer has been reading his fire insurance policy but does not understand what is meant by "automatic reinstatement of sum insured". How would you explain this to him?

a. The claim payment will be reduced to pay the extra premium on reinstating your sum insured to its full value following a loss.

b. It is a mechanism that ensures you cannot be under-insured.

c. A loss will reduce the amount of property remaining so the sum insured will fall in line. When you replace the lost property, it is automatically covered up to the original sum insured.

d. If you reinstate the property yourself rather than putting in a claim for loss, your sum insured is not affected.

27. Following a break-in, stock worth £10,000 is stolen from your customer's shop. It emerges that his sum insured was £25,000 and the stock level during the loss was £50,000. He asks you to explain how his claim will be affected.

a. As the amount of the loss £10,000 is within the £25,000 sum insured, the claim will be paid in full.

b. The claim will be turned down as only a total loss would be insured in these circumstances.

c. As the stock was insured for half of its value, only half the amount claimed will be paid, i.e. £5,000.

d. The insurer will pay the full amount, £10,000, if the customer agrees to upgrade his burglar alarm.

28. Your customer asks you why his insurer has declined his claim for money that was stolen from him. Which of the following would be the likely reason?

a. The loss occurred outside the premises as the customer was taking the money to the bank.

b. The loss exceeds £50.

c. The loss was in the form of traveller's cheques, not cash.

d. The loss was not reported to the police.

29. What is the purpose of a material damage warranty on a business combined policy?

a. So that a business interruption claim cannot be made if there is no material damage cover in respect of the loss.

b. It warrants that if there is no material damage, claims are subject to average.

c. It warrants that if there is no material damage (fire, perils, theft and/or all-risk cover) then the other sections are not operative.

d. It is a type of first-loss cover for material damage to stock.

30. In a survey report on a property proposed for fire insurance, what do the letters MPL signify ?

a. Minimum Premium Loading.

b. Maximum Premium Level.

c. Major Potential Loss.

d. Maximum Probable Loss.

Marine

31. Marine hull policies are subject to a deductible clause. What is its purpose?

a. It allows the insurer to reduce a claim settlement if the ship is not fully insured.

b. It removes the possibility of numerous small claims for minor damage.

c. It restricts the insurer's liability to 75% of any claim for collision damage.

d. It allows the insurer to make a reasonable deduction for wear and tear when the ship is repaired using new parts.

32. What are the three main areas of risk covered under a marine insurance policy ?

a. Accidental damage; third party liability; passenger liability.

b. Cargo; collision at sea; loss of use.

c. Passenger liability; collision damage; freight

d. Hull; cargo; freight.

33. Under the Marine Insurance Act [1906], when, if at all, is insurable interest required in a marine insurance contract?

a. At inception of the contract only.

b. At the time of a loss only.

c. Both at inception and at the time of a loss.

d. Insurable interest is not a requirement for marine insurance contracts.

34. In marine insurance, when will a sue and labour clause take effect?

a. A ship is insured for less than its full value and the insurer reduces a claim settlement to compensate for this.

b. The insurer has made an indemnity payment and seeks to recover its outlay from a responsible party.

c. The insured incurs expenditure in trying to avert or minimise a loss.

d. A collision occurs and the insurer is required to meet a third party liability claim.

35. Protection and indemnity clubs are primarily associated with which area of marine insurance?

a. Cargo.

b. Hull.

c. Freight.

d. Collision liability.

Contractors' all risks

36. A new supermarket is to be built. Who would normally effect the contract works insurance?

a. The landowner.

b. The main contractor or the principal.

c. A consortium involving the main contractor and the sub- contractors.

d. The intended tenant, if there is one.

37. When a property is being renovated, who is responsible for insuring the existing structure?

a. The principal.

b. The main contractor.

c. Main contractor and principal jointly.

d. The architect.

38. An existing client who manufactures double-glazing units calls to advise that he is expanding the business to include installation. He asks you to extend his business combined policy to cover double-glazing units while on customers' premises before they are fitted. What action do you take?

a. Client will now need a contractor's all risks policy to cover these goods.

b. As this is a small extension to the existing business, insurers will be able to agree this extension.

c. You will need to obtain full details of how many jobs are likely in the year and the maximum value each time to get an indication of cost.

d. Cover will apply under the goods temporarily removed clause of the business combined policy's material damage section.

39. A builder client who has just started to build a block of flats phones to say that during the previous night's severe windstorms, a partly-built wall has blown down. He wants to know how his contract works policy would respond to a claim. What would you tell him?

a. He can make a claim, subject to any policy excess.

b. He will not be able to make a claim as weather-related risks are excluded until any new structure has the roof on.

c. Any resultant damage to third-party property would be covered.

d. A partly-built wall being blown down in such conditions would constitute inevitable damage, which would therefore not be covered.

40. How are materials brought on to site by sub-contractors normally insured under a contract works insurance?

a. It is usual for the policy to be arranged to cover materials brought on to site by sub-contractors.

b. Each sub-contractor will need to arrange his own contract works policy.

c. The sub-contractor will need to advise main contractor of the value of his goods and pay a rateable proportion of the premium in order to be covered.

d. In order for sub-contractor's materials to be covered, his name will have to be specifically endorsed on to the policy.

Travel

41. What does the "legal expenses" section of a personal accident (PA) policy cover?

a. The cost of pursuing actions against negligent parties following bodily injury.

b. The cost of defending actions brought against the insured for accidents which are his fault.

c. The legal costs involved in moving to a more suitable dwelling in the event of permanent disablement.

d. The legal costs involved in administering a policyholder's estate following his/her death in an accident.

42. What age ranges normally apply to inception of PA and sickness cover?

a. 16 - 65.

b. 18 - 65.

c. PA 16 - 65; Sickness 16 - 55.

d. PA 16 - 55; Sickness 16 - 65.

43. The sickness section of a PA and sickness policy excludes sickness which ...?

a. Occurs within 21 days of the start of cover.

b. Arises out of employment conditions.

c. Is categorised as an epidemic.

d. Results in permanent disablement.

44. In personal accident insurance, what is meant by the "continental scale"?

a. Lower capital benefits are paid for accidents which occur overseas.

b. Lower weekly benefits are paid if the insured resides outside the UK.

c. A fixed percentage of the capital sum is paid for different types of permanent disablement.

d. Weekly benefits reduce during rehabilitation according to a sliding scale

45. At a recent broker directors' forum you heard that all records kept on your travel and personal accident clients in your firm had to be kept as hard copies. You are concerned about this as you operate a paperless office and your records are held electronically and so you contact the regulator. What does he tell you?

a. That hard copies of all records must be kept for a minimum of seven years.

b. That hard copies of all records must be kept for a minimum of three years.

c. That there is no need to keep hard copies of any record provided you have electronic records.

d. That you may keep records in an electronic format provided you have taken reasonable steps to ensure that the records are accurate and that the electronic records have not been subject to unauthorised or accidental alteration.

Health

46. Complete the following statement by choosing the correct answer from below. For a risk to be insurable, the outcome must be ...

a. Unpredictable.

b. Speculative as far as the insured is concerned.

c. Measurable in financial terms.

d. Physical loss or damage.

47. Graham Smith is a client of your company and has already taken out life cover, permanent health insurance and a mortgage. He is now considering using your firm for motor insurance and asks if he will have to produce his passport and utility bills as he did with his previous dealings. In reply you tell him:

a. That only his passport is needed.

b. That you will need his passport and driving licence.

c. That proof of identity and address are not required.

d. That driving licence and utility bills are required.

48. A private client submits a claim under his public liability section of his household policy as he faces a charge under the Public Health Act [1936] and a suit for nuisance when he allows his cesspit to repeatedly overflow into his neighbour's garden. What do you advise him about the likelihood of the insurer handling his claim?

a. They will accept the claim but not legal costs.

b. They will accept the claim and his legal costs.

c. They will reject the criminal prosecution but deal with the civil claim for nuisance but not pay legal costs.

d. They will reject the criminal prosecution but deal with the civil claim for nuisance and pay legal costs.

49. The main rating factor for a personal accident and sickness policy is the proposer's:

a. Age at inception.

b. State of health.

c. Occupation.

d. Home address.

50. Andrew is self-employed and as the main earner needs to protect his mortgage payments. What product can he arrange which will provide him with a long-term monthly income if he is unable to work through illness or injury?

a. Critical illness insurance.

b. Personal accident insurance.

c. Permanent health insurance.

d. Level term assurance.