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Basic Insurance Concepts & Principles (Fourth Edition - 2013) Mock Paper

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1_Basic Insurance Concepts & Principles (Fourth Edition - 2013) from SCI website

Question 1 of 40

1

________ are set up primarily to insure the risks of their parent and related companies.

Select one of the following:

  • Reinsurers

  • Direct insurers

  • Captive insurers

  • Composite insurers

Explanation

Question 2 of 40

1

Insurers are using alternative distribution channels to market their insurance products. Which one of the following is NOT an alternative distribution channel?

Select one of the following:

  • Post offices

  • The Internet

  • Credit card providers

  • Marketing staff of the insurer.

Explanation

Question 3 of 40

1

A vehicle collision that causes a driver to suffer personal injury and physical damage to his vehicle is an example of a:

Select one of the following:

  • pure risk

  • speculative risk

  • non-financial risk

  • fundamental risk

Explanation

Question 4 of 40

1

________ is NOT a speculative risk.

Select one of the following:

  • Running in a marathon

  • Betting on a horse race

  • Venturing into a food business

  • Investing in stocks and securities

Explanation

Question 5 of 40

1

________ are uninsurable.

Select one of the following:

  • Pure risks

  • Financial risks

  • Particular risks

  • Speculative risks

Explanation

Question 6 of 40

1

The potential loss of an insurable risk must be:

Select one of the following:

  • caused intentionally

  • indefinite in terms of time and amount

  • large enough to create a financial burden for the insured

  • certain to happen to a large number of insureds at the same time

Explanation

Question 7 of 40

1

The lightning that caused the factory owned by Adrian to be burnt down is referred to as the:

Select one of the following:

  • peril

  • hazard

  • damage

  • non-financial risk

Explanation

Question 8 of 40

1

Betsy has a fear of drowning, so she chooses not to swim. This is an example of risk:

Select one of the following:

  • transfer

  • control

  • phobia

  • avoidance

Explanation

Question 9 of 40

1

Strict enforcement of safety rules in construction sites is an example of loss:

Select one of the following:

  • transfer

  • reduction

  • avoidance

  • prevention

Explanation

Question 10 of 40

1

As specified in Session 57(1)(b) of the Insurance Act (Cap. 142), insurable interest is NOT present when the:

Select one of the following:

  • husband purchases insurance on the life of his wife

  • creditor purchases insurance on the life of his debtor

  • grandmother purchases insurance on the life of her grandson

  • father purchases insurance on the life of his son below 18 years old

Explanation

Question 11 of 40

1

Which one of the following insurance policies does NOT require proof of insurable interest in the event of a claim?

Select one of the following:

  • Life Insurance policy

  • Marine Insurance policy

  • Liability Insurance policy

  • Property Insurance policy

Explanation

Question 12 of 40

1

Under the doctrine of utmost good faith, the parties to an insurance contract have the duty to disclose all:

Select one of the following:

  • commonly known facts

  • facts only when asked for

  • material facts relating to the risk being proposed

  • material assumptions relating to the loss reduction

Explanation

Question 13 of 40

1

In his proposal form for Fire Insurance, Donald states that his warehouse is installed with fire extinguishers when it is not. This is an example of ________ misrepresentation.

Select one of the following:

  • innocent

  • negligent

  • fraudulent

  • speculative

Explanation

Question 14 of 40

1

Under the principle of indemnity, there are a number of methods by which an insurer can provide the necessary indemnity to the insured in the event of a loss. Which one of the following is NOT a method of providing indemnity?

Select one of the following:

  • Replacement

  • Cash payment

  • Reinstatement

  • Policy renewal discount

Explanation

Question 15 of 40

1

The principle of indemnity applies to ________ Insurance policies.

Select one of the following:

  • Life

  • Pecuniary

  • Critical Illness

  • Personal Accident

Explanation

Question 16 of 40

1

Max Hardware Storage, a warehouse, caught fire recently. Its owner claimed a loss of S$80,000 (hardware stock) against its Fire Insurance policy that included an Average Clause. The loss adjuster appointed by the insurer was satisfied that the quantum of loss claimed was correct. However, the lost adjuster was of the opinion that there was at least S$160,000 in stock, but only S$120,000 was insured. As such, on application of average, the insurer's liability for loss under the policy amounts to

Select one of the following:

  • S$30,000

  • S$60,000

  • S$90,000

  • S$120,000

Explanation

Question 17 of 40

1

An explosion at his neighbour's factory caused a fire which spread to Calvin's factory and caused extensive damage. The insurer having paid the claim to Calvin under his Fire Insurance policy assumes his rights to recover the loss from his neighbour, who was responsible for the fire. This legal doctrine is known as:

Select one of the following:

  • excess

  • average

  • indemnity

  • subrogation

Explanation

Question 18 of 40

1

The principle of contribution arises when there is a loss that involves two or more insurance policies covering:

Select one of the following:

  • different perils

  • the common interests

  • different subject matters

  • the same amount of sum insured

Explanation

Question 19 of 40

1

Which one of the following statements about a general insurance agent is NOT correct?

Select one of the following:

  • He procures new business for the insurer.

  • He services his existing business for the insurer.

  • He is also the principal party in an agency agreement.

  • He is essentially an intermediary acting for the insurer.

Explanation

Question 20 of 40

1

________ authority is the power that is granted to an agent by the principal in specific terms in the agency agreement.

Select one of the following:

  • Usual

  • Actual

  • Implied

  • Apparent

Explanation

Question 21 of 40

1

The situation where the principal accepts its agent's actions that are made outside the scope of the agency agreement is known as:

Select one of the following:

  • estoppel

  • ratification

  • reinstatement

  • ostensible authority

Explanation

Question 22 of 40

1

Which of the following statements relating to the Law of Contract is CORRECT?

Select one of the following:

  • Undischarged bankrupts have the legal right to enter into contracts.

  • Mutual agreement of a contract can be evidenced by the making of an offer either orally or in writing.

  • A contract is enforceable by law without a consideration being passed from the promisee to the promisor.

  • All of the others.

Explanation

Question 23 of 40

1

Which one of the following insurance policies is an example of a "master contract" that is effected by a company to offer optional employee benefits?

Select one of the following:

  • Marine Hull

  • Building and Contents

  • Group Personal Accident

  • Directors' and Officers' Liability

Explanation

Question 24 of 40

1

Which one of the following documents does NOT form part of an insurance contract?

Select one of the following:

  • Declaration

  • Cover Note

  • Claim Form

  • Certificate of Insurance

Explanation

Question 25 of 40

1

In the proposal form for Fire Insurance, the information that has a material bearing on the potential hazards of the risk is the:

Select one of the following:

  • insured's address

  • period of insurance cover

  • insurer's warning statement

  • insured's means of identification

Explanation

Question 26 of 40

1

Which one of the following statements BEST describes a cover note?

Select one of the following:

  • It can be used as a renewal notice.

  • It replaces the lost policy document.

  • It has the same legal status as the actual policy.

  • It forms the basis of risk assessment by the insurer.

Explanation

Question 27 of 40

1

A Certificate of Insurance is typically NOT required for ________ Insurance.

Select one of the following:

  • Liability

  • Marine Cargo

  • Private Motor Car

  • Commercial Vehicle

Explanation

Question 28 of 40

1

An implied condition is one that must be complied with, but does not appear in the policy document. Which one of the following is an example of an implied condition?

Select one of the following:

  • Warranties

  • Subrogation of rights

  • Notification of claims

  • Existence of subject matter

Explanation

Question 29 of 40

1

Which one of the following question is NOT usually included in a check list used to perform a preliminary validation of a Property Insurance claim by an insurance company?

Select one of the following:

  • Is the claimant entitled to the payment?

  • Is the property covered under the policy?

  • Did the loss occur in a place covered by the policy?

  • Is the loss the indirect result of a hazard covered under the policy?

Explanation

Question 30 of 40

1

In the event of a loss or damage, the onus of proving that the loss has occurred rests solely with the:

Select one of the following:

  • agent

  • insured

  • lawyers

  • reinsurer

Explanation

Question 31 of 40

1

A "Sue and Labour" clause enables the insured to recover expenses incurred in averting or minimising a loss under a policy. This clause is commonly found in a/an ________ Insurance policy.

Select one of the following:

  • Marine Cargo

  • Product Liability

  • Commercial Vehicle

  • Errors and Omissions

Explanation

Question 32 of 40

1

________ are independent intermediaries who can help policyholders to ensure that the eventual claim settlement recommended to the insurers is fair to both parties within the terms of the policy.

Select one of the following:

  • Enginners

  • Risk surveyors

  • Loss adjusters

  • Forensic scientists

Explanation

Question 33 of 40

1

In Singapore, Section 24A of the Limitation Act (Cap. 163) provides for legal actions pertaining to damages for negligence, nuisance or breach of duty in respect of personal injuries to commence before the expiration of a certain limitation period from the date on which the course of action accrued. The limitation period in Singapore is ________ years.

Select one of the following:

  • one

  • three

  • six

  • nine

Explanation

Question 34 of 40

1

The common method of settlement of the loss of a jewellery under a Theft Insurance policy is by:

Select one of the following:

  • repair

  • avoidance

  • replacement

  • reinstatement

Explanation

Question 35 of 40

1

________ is a risk transfer mechanism whereby the reinsurer transfers part of a risk to another reinsurer.

Select one of the following:

  • Insurance

  • Contribution

  • Retrocession

  • Co-insurance

Explanation

Question 36 of 40

1

Which one of the following regarding treaty reinsurance is FALSE?

Select one of the following:

  • It may be placed on a proportional basis.

  • The reinsurers are obliged to accept all risks ceded.

  • Surplus Reinsurance is one example of treaty reinsurance.

  • It is more costly to administer as compared to facultative reinsurance.

Explanation

Question 37 of 40

1

A contract of reinsurance is strictly between the ________ and the reinsurer.

Select one of the following:

  • direct insurer

  • original insured

  • insurance agent

  • reinsurance broker

Explanation

Question 38 of 40

1

After retaining S$3,000,000 on a risk with an original sum insured of S$5,000,000, Gold Insurer reinsured the balance with Silver Reinsurer on a Proportional Facultative Reinsurance basis.
If there is a loss of S$2,000,000 on the risk, Silver Reinsurer will be liable to pay its share of loss amounting to:

Select one of the following:

  • S$200,000

  • S$400,000

  • S$600,000

  • S$800,000

Explanation

Question 39 of 40

1

The Monetary Authority of Singapore (MAS) Guideline No: FSG-G01 sets out fit and proper criteria applicable to all relevant persons in relation to the carrying out of any activity regulated by MAS. Examples of relevant persons are:

Select one of the following:

  • director of a registered insurer

  • broking staff of a registered insurance broker

  • substantial shareholder of a registered insurer

  • all of the others

Explanation

Question 40 of 40

1

Which of the following statements relating to the Singapore General Insurance Code of Practice ("The Code") is FALSE?

Select one of the following:

  • The objective of the Code is to ensure that the general insurance customer is treated fairly.

  • The Code covers how an insurance agent should maintain confidentiality of information relating to any of his customers.

  • The Code covers all types of general insurance products (including commercial lines) which are sold to corporate clients.

  • All of the others.

Explanation

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