To start the new year here is a typical 20-question multiple choice test on general insurance principles, assembled by Robin Wood. What are your training needs?

Note: Only one answer (A,B,C or D) is correct for each question.

These questions are for the use of IT readers only and may not be reproduced or used in connection with any commercial purposes.

1. Which of these statements is untrue in relation to a breach of policy conditions under a personal insurance contract?

A. It is irrelevant if the breach is deliberate

B. There can only be a breach if something is done or not done within the precise wording of the policy

C. Ignorance of the precise terms of the condition is generally a defence

D. A breach of condition precedent to liability at least allows an insurer to reject a claim that has been made.

2. Under The ABI Statement of General Insurance Practice under a personal insurance policy a breach of warranty the insurer might be expected to?

A. Repudiate liability to indemnify if the breach caused the loss

B. Repudiate liability to indemnify whatever the cause of the loss

C. Reject any claims from the date of discovery of the breach

D. Charge an additional premium to reflect the increased risk

3. The payment of premium by the insured?

A. Must be made before the policy commences

B. Must be paid in advance of the contract being agreed if it is a condition precedent

C. Must be paid in advance of the contract being agreed in any event

D. All outstanding premiums must be paid before a claim can be considered in any event.

4. An insurer has no duty to return premiums in which of the following circumstances?

A. If it avoids a policy for reasons of non-disclosure of material fact

B. If there has been an innocent fraud on the part of the insured

C. If it avoids a policy for reasons of misrepresentation

D. Premiums relating to a policy year prior to avoidance for non-disclosure of a material fact.

5. With reference to insurable interest which of these statements is true?

A. In marine insurance it must exist at the time of loss

B. In fire insurance it must exist only at the time of loss

C. In theft insurance it must exist at the time of inception and the time of loss

D. In money insurance it must exist at all times.

6. An insurance broker sends a quotation to a private client for her household insurance and a fire occurs before the premium is paid. The insurer refuses to accept the claim and the customer alleges that she thought the policy was on risk. Which of these is true?

A. The insurer must pay the claim under the ABI Statement of General Insurance Practice

B. The broker may be liable if nothing was said or communicated to the customer confirming that the quotation did not confirm cover

C. The broker has no responsibility as the quotation was prepared by the insurer

D. The insurer may avoid the policy for lack of insurable interest.

7. In relation to a fire insurance policy renewal which of the following is not true?

A. The original proposal generally remains the basis for the contract

B. The duty of disclosure is renewed up to the date of renewal

C. Mis-statements made at inception no longer give the right to the insurer to avoid if they become true before the renewal in question

D. A renewal is a continuation of the original contract.

8. Which of these statements is true?

A. An insurance contract must be in writing

B. An insurer must give 14 days of grace at renewal

C. There must be consideration by both parties to an insurance contract

D. An insurance broker is always the agent of the insured.

9. Which of these types of policy would be most likely underwritten with a regard to morbidity?

A. Fire insurance of a house

B. Personal accident insurance for a milkman

C. Theft insurance for a record collection

D. Travel insurance for a trip to Africa.

10. "Grossing Up" is a term used to describe what form of broker malpractice?

A. Adding a fee to the premium charged by the insurer

B. Charging the insured a higher premium than the premium set by the insurer

C. Charging fees for assisting in the settlement of claims

D. Adding reinsurance premiums to the policy premium to create a gross premium.

11 Which of these is a clear definition of an agent?

A. An agent is a person who works for commission only

B. An agent is someone who sells products on behalf of another

C. An agent is a person who has the authority or power to contract on the part of a principal

D. An agent is a person who has the authority or power to act on behalf of another.

12 Which of these is not a duty of an agent to a principal?

A. To exercise proper care and skill

B. To obey a principal's instructions at all times

C. To account for monies on behalf of a principal

D. To perform duties personally.

13 An agent must not make any form of secret profit from their agency duties. Which of these if not disclosed would not come into that category in the insurance industry?

A. Charges made by a broker in addition to permium.

B. Over-ride commissions not disclosed on request

C. Commissions from premium credit agencies

D. Very high commissions paid by insurers.

14 Wear and tear is a term commonly used in property insurance. What does it mean?

A. The depreciation of an item in its open market value

B. The depreciation of an item due to its usage

C. The reinstatement of an item as new

D. The value of an item after allowing for any damage caused by the insured.

15. What does the term `ab initio' mean?

A. Completely

B. From now on

C. From the beginning

D. Forever.

16. What is the most correct definition of an all risks policy?

A. A policy covering a specific list of risks

B. A policy covering all but a specific list of exclusions

C. A policy that covers everything but fundamental risks

D. A policy designed to cover all the risks that might be faced by an insured.

17. As a broker, you may be faced with the situation of someone apparently wishing to insure a risk of which they are not the legal owner. Remembering that insurable interest must exist, which of these relationships does not confer an immediate legal insurable interest?

A. People living together

B. Landlord and tenant

C. Business partners

D. Executors and trustees.

18. Which of these is not a term that you would automatically associate with the duty of disclosure?

A. Uberrimae fides

B. Non-disclosure

C. Caveat emptor

D. Reciprocal duty.

19. Which of these could not be a material fact or facts?

A. A substantial loss falling outside the period of loss experience requested by the underwriter

B. All criminal convictions

C. A loss arising under a private policy of a director of the proposer for commercial insurance.

D. The sex of the proposer.

20. What is meant by the term `pairs and sets' clause?

A. The clause provides for the loss of one of a pair to be valued one half of the value of the two items together (eg a pair of Ming vases)

B. The clause limits the loss of one of a pair to the value of the item in its own right.

C. The clause provides for the reinstatement of the `pair'

D. The clause creates a legal interest in items owned by unmarried couples.

Answers will be published next week.

  • Robin Wood is the proprietor of RW Associates

  • This page is edited by RW Associates, specialists in training, compliance and competence.


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