MOCK EXAM QUESTIONS

WUE EXM
1. How does the legal principle of ‘let the buyer beware’ apply to insurance contracts?
a. It is central to an insurance contract
b. It applies to motor insurance policy only
c. It does not apply
d. It is applicable to certain contracts

2. Which of these is an example of a material fact of public knowledge?

a. The insured has fitted a CCTV to his premises
b. The insured property has been surveyed by a surveyor
c. The insured’s house is on a map of flood plain
d. The insured has criminal record

3. After policy inception, in which of these circumstances does the duty of disclosure does not
exist?
a. If it is a life insurance policy
b. At renewal of a non-life policy
c. If there is a specific policy condition that extend the duty into continuing one
d. If it is a consumer policy

4. When insured makes a statement that is substantially false, which relates to the subject
matter of the contract and has induced the insurer into entering into the contract, this is
called:
a. falsification
b. Non-disclosure
c. Disclosure
d. Misrepresentation

5. If a commercial customer is in breach of duty of disclosure, what can the insurer do?
a. Void the policy ab initio
b. Sue the policyholder
c. Fine the policyholder
d. Transfer the policyholder to a different policy

6. Which of these is not an element that must be present for an insurance contract to be legally
binding?
a. Consideration
b. Offer
c. Acceptance of Offer
d. Consultation
7. The Marine Insurance Act 1906 defined a material fact as something that would affect the
judgment of a:
a. Particular Insurer
b. Shrewd Insurer
c. Prudent Insurer
d. Prudential Insurer

8. Mike has burglar alarm fitted to his house. Does he have to disclose this to his insurer has
material fact?
a. No, it is not a material fact
b. Yes, it is not a material fact
c. No, but he may get a discount for doing so
d. It depends upon the type of alarm he has fitted

9. Fraudulent non-disclosure or misrepresentation is also known as:

a. Concealment
b. Inducement
c. Corruption
d. Laundering

10. Which of these is not something a risk survey can help to determine?
a. Description of the risk
b. Estimated Maximum loss
c. Assessment of the level of risk
d. Statement of fact

11. What is the usual premium base for an employers’ liability policy?
a. The limit of indemnity.
b. The sum insured.
c. The turnover.
d. The wage roll.

12. What is the main consequence of an insurer offering a high standard sum insured under a
household contents insurance policy?
a. It reduces the possibility of underinsurance
b. It increases reliance on the average clause
c. It reduces the number of claims that are handled
d. It increases the incidence of subrogation

13. What is the most common basis of premium calculation for public liability insurance and
products liability insurance?
a. Business value.
b. Profit.
c. Limit of indemnity
d. Turnover.
14. An insured property suffers extensive water damage. A claims handler notes the insured
has NOT complied with the minimum security requirement. What action would be taken?
a. The claim would be paid but the policy would be cancelled.
b. The claim would be avoided and the policy would be cancelled.
c. The claim would be paid and the policy would remain in force.
d. The claim would be avoided but the policy would remain in force

15. Cover for theft under a commercial insurance policy is usually subject to
a. forcible and violent entry only to a secured building.
b. forcible and violent entry to or exit from a secured building.
c. theft notwithstanding forcible and violent entry to or exit from a secured building.
d. forcible and violent exit only from a secured building.

16. What does products liability insurance principally cover?

a. The cost of recalling defective goods.
b. Claims made against the insured as a result of defective goods.
c. Claims made against the insured by employees for injuries received whilst at
work.
d. Financial damages incurred as a result of incorrect professional advice

17. For which class of insurance is an underwriter most likely to request a risk survey?
a. Commercial insurance.
b. Household buildings insurance.
c. Motor insurance.
d. Medical expenses insurance.

18. Which factor is usually the most important when an underwriter is determining whether he
will accept a proposal for professional indemnity insurance?
a. The location of the practice.
b. The claims history of the practice.
c. The fees charged by the practice.
d. The size of the practice.

19. For which class of insurance is it an underwriting requirement to know the length of the
indemnity period and the potential loss of revenue?
a. Business interruption insurance.
b. Products liability insurance.
c. Public liability insurance.
d. Theft insurance.

20. Standard Glass Insurance policy does not exclude following?

a. Fire
b. Lightning
c. Accidental Breakage
d. Explosion
21. A material fact is best described as a fact that
A. has no bearing on physical hazard.
B. has no bearing on moral hazard.
C. may influence an underwriting decision.
D. must be on the Association of British Insurers’ approved list.

22. At the renewal of an insurance policy, policyholders are always obliged under common law
to
A. renew the policy with the same insurer.
B. increase the sum insured in line with inflation.
C. disclose any changes to material facts.
D. complete a new proposal form.

23. What is the relationship between a peril and a hazard?

A. A peril gives rise to a loss and a hazard influences the operation of the peril.
B. A peril is an insured loss and a hazard is an uninsured loss.
C. A peril is the end cause of a loss and a hazard is the proximate cause of a loss.
D. A peril is the physical nature of a risk and a hazard is the moral nature of a risk.

24. In relation to fire insurance and the consideration of hazard, metal fire doors and fire
resistant walls are considered to be
A. good moral hazards.
B. good physical hazards.
C. poor moral hazards.
D. poor physical hazards.

25. An insurer may occasionally delegate underwriting in order to

A. speed up the process and reduce administrative costs.
B. reduce the risk of non-disclosure.
C. comply with the requirements of the Association of British Insurers.
D. ensure than only good quality risks are accepted.

26. In a proposal form, risk specific questions are those

A. that are common to most general insurance risks.

B. that pertain to the particular details of a proposed risk.
C. that relate to matters evaluating whether a fact is material or not.
D. where the proposer warrants the answer to be correct.
27. During the period that a quotation was valid, the proposer accepted the quoted terms in
writing. In what circumstances, if any, is the insurer legally permitted to withdraw these terms?
A. Only if the basis of the risk has changed.
B. Only if the insurer decided to withdraw from this section of the market.
C. Only if this type of cover is widely available in the marketplace.
D. In no circumstances.

28. Chris is completing a proposal form and has been advised that he is legally obliged to
declare all material facts. If he is unsure whether a fact is material or not, he should
A. disclose it fully.
B. not disclose it.
C. only disclose it if it is specifically addressed by one of the questions.
D. only disclose it if it relates to a criminal offence.

29. What is the main consequence of an insurer offering a high standard sum insured under a
household contents insurance policy?
A. It reduces the possibility of underinsurance.
B. It increases reliance on the average clause.
C. It reduces the number of claims that are handled.
D. It increases the incidence of subrogation.

30. What is the usual premium base for an employers’ liability policy?
A. The limit of indemnity.
B. The sum insured.
C. The turnover.
D. The wage roll.

31. What is the most common basis of premium calculation for public liability insurance and
products liability insurance?
A. Business value.
B. Profit.
C. Limit of indemnity.
D. Turnover.

32. Michael has a motor insurance policy and makes a claim early in the period of insurance. Why
is it NOT necessary that he has received a copy of the policy to make a claim?
A. A cover note would have been issued.
B. Road Traffic Act 1988 specifies that it is not necessary.
C. This is not a requirement with compulsory insurances.
D. The policy is only evidence of the contract, not the contract itself.
33. A valid employers’ liability insurance certificate must contain the insured’s
A. address.
B. name.
C. number of employees.
D. occupation.

34. For a contract of insurance to be valid, the premium must

A. be quoted.
B. be paid or agreed to be paid.
C. be shown on the certificate.
D. include Insurance Premium Tax.

35. When the annual premium for a motor insurance policy is payable by instalments using direct
debit, what payment frequency is most likely to be involved?
A. Weekly.
B. Monthly.
C. Quarterly.
D. Half-yearly.

36. When a premium is paid by credit card, why is an additional charge usually levied by the
insurer?
A. To cover the loss of interest.
B. To cover the risk of non-payment.
C. To meet the cost charged by the credit card company.
D. To cover the cost of additional administration.

37. Which Act regulates the payment of insurance premiums by instalments?

A. The Consumer Credit Act 1974.
B. The Financial Services and Markets Act 2000.
C. The Sale and Supply of Goods to Consumers Regulations 2002.
D. The Sale of Goods Act 1979.

38. Who pays Insurance Premium Tax?

A. Both the insurer and the insured.
B. The insured only.
C. The insured’s intermediary.
D. The insurer only.
39. What is the current rate of Insurance Premium Tax for the majority of insurance policies?
A. Nil.
B. 5%
C. 6%
D. 17.5%
40. In a proposal form, what type of questions would a proposer’s name, address and occupation
be classified as?
A. Express.
B. General.
C. Objective.
D. Specific.

41. Which component of a policy is personal and specific to an insured?

A. The operative clause.
B. The policy conditions.
C. The policy schedule.
D. The recital clause.

42. The main purpose of the recital clause in a household insurance policy is to
A. list all of the general exclusions of the contract.
B. make the proposal form the basis of the contract.
C. show the details of cover provided by the contract.
D. state the renewal date of the contract.
43. Conditions that are covered by common law and therefore do NOT need to appear in an
insurance policy are known as
A. express conditions.
B. general conditions.
C. implied conditions.
D. legal conditions.
44. What is the usual length of the notice period, if any, under a standard cancellation clause of
a household policy?
A. There is no notice period.
B. 7 days.
C. 14 days.
D. 28 days.

45. An exclusion in an insurer’s household insurance policy is deemed a general exclusion, but
NOT a market exclusion. This means the exclusion
A. applies to a particular section of the policy, but does not apply across the entire policy.
B. applies to all sections of the policy, but has not generally been adopted by other insurers.
C. relates to a pure risk rather than to a speculative risk.
D. operates under case law precedent rather than under the provision of statute.

46. What can an insurer of frozen food apply to exclude a loss arising from a short failure of the
electricity supply lasting 30 minutes or less, but which will cover the whole loss if the supply failure
exceeds 30 minutes?
A. An aggregate.
B. A deductible.
C. An excess.
D. A franchise.

47. The amount of any claim which is the responsibility of the insured and which the insurer will
deduct from any claim payment is known as
A. a franchise.
B. a warranty.
C. a condition.
D. an excess.
48. An insurer is advised that a break-in has occurred but the insured has failed to report the
incident to the police. What part of the insurance policy has been breached?
A. The conditions.
B. The exclusions.
C. The preamble.
D. The schedule.

49. An insured property suffers extensive water damage. A claims handler notes the insured has
NOT complied with the minimum security requirement. What action would be taken?
A. The claim would be paid but the policy would be cancelled.
B. The claim would be avoided and the policy would be cancelled.
C. The claim would be paid and the policy would remain in force.
D. The claim would be avoided but the policy would remain in force.

50. In which section of an insurance policy does an insurer provide details of the different sums
insured under the policy?
A. The heading.
B. The operative clause.
C. The policy schedule.
D. The preamble.

51. Alicia has a household insurance policy that is renewable on 1 July with 15 days of grace. If
Alicia paid the renewal premium on 9 July, from which date would the cover apply?
A. 1 July.
B. 9 July.
C. 16 July.
D. 24 July.

52. A customer’s buildings insurance policy is due for renewal in three months’ time. In what
circumstances, if any, is the existing insurer legally required to offer renewal terms?
A. In no circumstances.
B. Only if there is an associated mortgage.
C. Only if the insurer is a member of the Association of British Insurers.
D. In all circumstances.
53. Joe telephones his motor insurer to advise that he is selling his car in two days’ time. The
insurer asks for the certificate of insurance back and agrees to make a return of premium. The
cancellation rebate will be calculated from the date
A. on which the insurer processes the refund.
B. of the original telephone call from the insured.
C. on which the certificate is received by the insurer.
D. of the sale of the vehicle.

54. What limit, if any, is usually placed on the number of claims that can be made under a motor
insurance policy in any one policy year?
A. A limit that is always agreed at the start of the policy year.
B. A limit that is renegotiated at renewal depending on previous claims experience.
C. There is no limit on the number of claims that can be made.
D. A limit which can vary according to the age of the insured.

55. Under a standard travel insurance policy, what is the minimum level of cover usually provided
for medical treatment and expenses incurred whilst abroad?
A. £50,000
B. £100,000
C. £250,000
D. £1,000,000

56. Which type of insurance policy would cover an insured for the cost of repairs following an
electrical defect in a television?
A. A commercial all risks insurance policy.
B. A personal all risks insurance policy.
C. An extended warranty insurance policy.
D. A products liability insurance policy.
57. What is the implication of writing professional indemnity insurance on a claims made basis?
A. More than one claim is needed for the policy to be effective.
B. New claims must always be submitted to the current insurer.
C. Previous claims are the sole underwriting criteria.
D. New claims must always be submitted to the previous insurer.

58. Cover for theft under a commercial insurance policy is usually subject to
A. forcible and violent entry only to a secured building.
B. forcible and violent entry to or exit from a secured building.
C. theft notwithstanding forcible and violent entry to or exit from a secured building.
D. forcible and violent exit only from a secured building.

59. What does products liability insurance principally cover?

A. The cost of recalling defective goods.
B. Claims made against the insured as a result of defective goods.
C. Claims made against the insured by employees for injuries received whilst at work.
D. Financial damages incurred as a result of incorrect professional advice.

60. The main advantage to a motor insurer of operating an authorized repairer scheme is that it
A. can charge an additional premium for the scheme.
B. can reduce the liability of any third party who may have caused damage.
C. can refuse to release a vehicle until any excess has been paid.
D. will have more control over the costs incurred.

61. For which class of insurance is an underwriter most likely to request a risk survey?
A. Commercial insurance.
B. Household buildings insurance.
C. Motor insurance.
D. Medical expenses insurance.
62. Which factor is usually the most important when an underwriter is determining whether he will
accept a proposal for professional indemnity insurance?
A. The location of the practice.
B. The claims history of the practice.
C. The fees charged by the practice.
D. The size of the practice.

63. If an insurer wishes to check the claims history of an individual proposing motor insurance, it
would refer to the
A. Claims and Underwriting Exchange.
B. Financial Conduct Authority.
C. Motor Insurers’ Bureau.
D. Motor Insurance Database.

64. When an insurer is considering an income protection insurance (PHI) proposal, it will usually
place the applicant into a particular premium rating class based on his
A. age.
B. level of earnings.
C. lifestyle.
D. occupation.

65. An 18-year-old individual is applying for motor insurance. In relation to which type(s) of policy
cover is his age likely to influence the premium rating?
A. Third party cover only.
B. Third party, fire and theft cover only.
C. Comprehensive cover only.
D. All types of cover.
66. The buildings sum insured for a fire insurance policy should ideally be linked to the
A. purchase price only.
B. purchase price plus inflation.
C. rebuilding costs.
D. current market value.

67. For which class of insurance is it an underwriting requirement to know the length of the
indemnity period and the potential loss of revenue?
A. Business interruption insurance.
B. Products liability insurance.
C. Public liability insurance.
D. Theft insurance.

68. What is the main criteria for underwriting extended warranty insurance for domestic electrical
appliances?
A. Age of insured appliance.
B. Country of manufacture.
C. Postal code of insured.
D. Type and value of appliance.

69. What main source of information is used by motor insurers to discourage fraudulent claims?
A. The Claims and Underwriting Exchange.
B. The Driver and Vehicle Licensing Agency (DVLA).
C. The Motor Insurance Repair Research Centre.
D. The Motor Insurers’ Bureau.

70. What method of settlement does an insurer use to deter fraudulent household goods claims?
A. Agreed value.
B. Cash reimbursement.
C. First loss.
D. Replacement.
71. Under the Disability Discrimination Act 1995, an insurer is permitted to decline a travel
insurance application due to the proposer’s disability, but only if the
A. proposer is over State Pension age.
B. proposer is travelling alone.
C. decision is supported by appropriate risk-related data.
D. requested cover extends beyond EU limits.

72. For what reason will an insurance company appoint a data controller?
A. To enable the insurance company to use the various registers of claims.
B. To monitor the amount of data input by each employee.
C. To oversee the information technology department.
D. To satisfy the requirements of the Data Protection Act 1998.

73. A firm of solicitors is applying for professional indemnity insurance. When rating the risk, what
item of information is the underwriter most likely to find useful?
A. The age of the senior partner.
B. The location of the office.
C. The number of support staff.
D. The fees earned by the practice.
74. An insurer will usually make an insurance policy void without refunding the premium if the
policyholder
A. arranges identical cover elsewhere.
B. loses insurable interest.
C. submits a fraudulent claim.
D. receives a criminal conviction.

75. Claims data for a particular insurance policy is being grouped according to the date of loss,
with losses occurring in 2005 grouped separately from those occurring in 2004. What main type
of monitoring period is most likely to be in operation?
A. Accounting year.
B. Calendar year.
C. Policy year.
D. Underwriting year.
76. Operational data is mainly used by insurers to monitor the
A. organization’s overall business performance.
B. success of different departments within the organisation.
C. effectiveness of general procedures and practices.
D. control of the insurance risk.

77. What is the main source of data that will determine the rate for an insurer’s private car
portfolio?
A. Its own past claims history across similar risks.
B. Competitors’ terms, rates and excesses.
C. Driver and Vehicle Licensing Authority (DVLA) statistical information.
D. Motor Insurers’ Bureau claims experience.

78. Why is the accurate analysis of an insurer’s past claims so important?

A. It is essential for the profitability of the underwriting account.
B. It provides an analysis of the efficiency of claims service levels.
C. It provides indications of excessive risk accumulation.
D. The claims history guides reinsurance considerations.

79. What main factor influences the risk premium element of a set of insurance premium rates?
A. Claims costs.
B. Taxation liabilities.
C. Administrative expenses.
D. Investment return.

80. Regarding a risk profile that is high frequency and low severity, an insurer will expect
A. many high value claims.
B. many small value claims.
C. only a few high value claims.
D. only a few small value claims.
81. In terms of the frequency and severity of risk, an accident involving an aircraft carrier would
be classified as
A. high frequency, high severity.
B. high frequency, low severity.
C. low frequency, high severity.
D. low frequency, low severity.

82. An insurance policy shows a gross premium of £1,000, settled claims of £300 and outstanding
claims of £200. What is the incurred loss ratio?
A. 25%
B. 30%
C. 33%
D. 50%

83. Actual loss ratios relate to values that

A. have been adjusted for inflation.
B. have not had any adjustments factored in.
C. measure average losses over a given period.
D. take into account reinsurance costs.

84. How are claims allocated when monitored on a calendar year basis?
A. Proportionately depending on the time of year.
B. They are based on the date of loss.
C. They are based on unearned premium income.
D. To the next full year starting 1 January.

85. What factor would contribute to two different companies with identical wage rolls paying
significantly different premiums for employers’ liability insurance?
A. The geographical location.
B. Any no claims discounts.
C. The number of directors.
D. The type of business.
86. The ultimate cost in claims of a risk being accepted is defined as a
A. loss ratio.
B. material fact.
C. reinsurance.
D. risk premium.

87. An insurer transacting which class of insurance will need to account for Insurance Premium
Tax at the rate of 20%?
A. Health insurance.
B. Motor insurance.
C. Travel insurance.
D. Extended warranty insurance.

88. Which organization makes a charge to insurers to pay the claims from victims of uninsured
drivers?
A. The Claims and Underwriting Exchange.
B. The Financial Conduct Authority.
C. The Financial Services Compensation Scheme.
D. The Motor Insurers’ Bureau.

89. In relation to the premium, costs that alter depending on the nature of each risk are known as
A. calculated expenses.
B. fluctuating expenses.
C. proportioned expenses.
D. variable expenses.

90. A reduction in the availability of a particular type of insurance cover will generally cause ‘
A. a fall in premiums.
B. an increase in premiums.
C. a limit on reinsurance options.
D. a reduction in the insurer’s profits.
91. The underwriting cycle refers to the
A. administration process from proposal to policy issue.
B. training of underwriters to assess higher risks.
C. movement of underwriters between different roles in the company.
D. changes in market capacity and its bearing on underwriting acceptance criteria.

92. When assessing the maximum exposure for any one risk relating to fire damage, a surveyor
will calculate the
A. estimated maximum loss.
B. estimated minimum loss.
C. expected maximum loss.
D. expected minimum loss.

93. Which key method is used by an insurer to protect itself against loss exposures arising from
a single event?
A. Premium reviews.
B. Policy endorsements.
C. Reinsurance cover.
D. External risk surveillance.

94. XYZ Insurance Ltd wants to protect its fire insurance account against the impact of large one-
off losses. What form of reinsurance should it purchase?
A. Excess of loss.
B. Loss ratio coverage.
C. Quota share.
D. Stop loss.

95. An insurer wishing to accept a risk which exceeds its normal underwriting limits is most likely
to
A. exclude cover for catastrophic risks.
B. insist on a large excess.
C. make use of a reinsurance facility.
D. place special conditions on the policy
96. Why are material circumstances important to an insurer?
A. Declaration of material circumstances makes the contract binding.
B. Material circumstances are the sole basis of the premium calculation.
C. Material circumstances determine which perils are covered.
D. Material circumstances may influence the insurer’s judgment.

97. Janie has completed a household insurance proposal form to insure the property she has just
purchased. In respect of the insurance contract, apart from Janie, who else has a duty of
disclosure?
A. The estate agent.
B. The insurer.
C. The mortgage lender.
D. The solicitor.

98. A peril can be defined as

A. a combination of hazards.
B. something which gives rise to a loss.
C. something which influences the outcome of a loss.
D. the subject matter of the insurance.

99. When applying for household contents insurance, why might the address of the property be
particularly relevant?
A. The address is likely to form part of the rating process.
B. The insurer may wish to check the electoral register.
C. The property may be close to the insurer’s branch office.
D. The property may be subject to a mortgage.

100. Maurice submits a motor insurance proposal form to an insurer for a quotation. In the
proposal form, he discloses three previous convictions for motoring offences; two for speeding
and one for reckless driving. In terms of hazard, these convictions indicate that Maurice is a
A. good moral hazard.
B. good physical hazard.
C. poor moral hazard.
D. poor physical hazard.
101. In order to confirm the material circumstances relating to a complicated commercial
insurance risk, the underwriter will enlist the services of
A. an actuary.
B. a compliance officer.
C. a loss adjuster.
D. a risk surveyor.

102. An insurer provides Anna with a motor insurance quotation which states that it is valid for 14
days. When is the latest that Anna can accept the quotation?
A. During the 14‐day period only.
B. After the 14‐day period only.
C. After the 14‐day period, for as long as the material circumstances remain unchanged.
D. After the 14‐day period, until the quotation is specifically withdrawn by the insurer.

103. Under which class of insurance would an insurer ask the proposer for her annual gross
profit?
A. Business interruption insurance.
B. Employers’ liability insurance.
C. Money insurance.
D. Theft insurance.

104. When requesting a quotation for standard motor insurance, an individual will usually be
asked for
A. a copy of his driving licence.
B. a copy of the log book.
C. his previous claims history.
D. proof of the vehicle’s value.
105. An employers’ liability insurance policy is rated at £2.50% on declared wages of £100,000.
What is the annual premium for the policy before the application of Insurance Premium Tax?
A. £250
B. £2,500
C. £25,000
D. £250,000

106. When calculating the premium for a large manufacturer’s products liability insurance policy,
which factor is most relevant?
A. The number of employees.
B. The sum insured.
C. The turnover.
D. The wage roll.

107. An insurer calculates household insurance premiums on the basis of 2% for the initial
£100,000 of the sum insured and £1.30 per mille for any additional sum insured above
£100,000. Excluding Insurance Premium Tax, what will be the premium for a sum insured of
£150,000?
A. £2,065
B. £2,650
C. £4,950
D. £6,700

108. Luke has arranged a household contents insurance policy with a direct insurer and paid the
premium, but has NOT received the policy documentation. In the event of a claim, what is Luke’s
legal position?
A. A copy of the proposal form will be required before the claim will be considered.
B. He cannot make a claim without producing the policy documentation.
C. Proof of premium payment will be required.
D. The claim will be met subject to the usual claims processes.
109. Which document can provide the legal evidence that a motor insurance policy is in force?
A. The cover note.
B. The policy booklet.
C. The proposal form.
D. The quotation.

110. Insurance premium payment, or a promise to pay the insurance premium, forms which part
of an insurance contract?
A. The acceptance made by the insured.
B. The agreement made by the insured.
C. The consideration made by the insured.
D. The offer made by the insured.

111. If an insured is allowed to pay his insurance policy premium by instalments, what is the
method that is normally used by an insurer to collect the agreed premium?
A. Direct debit.
B. Postdated cheques.
C. Regular credit card payments.
D. Standing order.

112. Insurance Premium Tax applies to most general insurances when the insured risk is located
A. in the UK, excluding Northern Ireland.
B. anywhere in the UK, excluding the Channel Islands and the Isle of Man.
C. anywhere in the EU.
D. anywhere in the world.
113. Maria works as an accountant and wishes to buy professional indemnity insurance for her
business. In order for an insurer to assess the premium and terms required she will need to
submit a completed
A. claim form.
B. medical questionnaire.
C. proposal form.
D. statement of fact.

114. An insurer provides a quotation for motor insurance, which is valid for 14 days, on a vehicle
with a 1.4 litre engine. On day 10, the proposer changes the vehicle to one with a 1.6 litre engine
and accepts the original quotation the following day. What is the insurer’s legal position?
A. The insurer is bound to honour the original quotation.
B. The insurer is bound to honour the original quotation, but may charge an additional premium.
C. The insurer is not bound to honour the original quotation, unless the proposer submits a new
proposal form.
D. The insurer is not bound to honour the original quotation.

115. Samantha has a personal accident insurance policy that provides a temporary total
disablement benefit of £200 per week. The policy has a compulsory one week excess. If
Samantha breaks her ankle in a riding accident and is disabled for six weeks, how much benefit,
if any, will she receive?
A. None.
B. £200
C. £1,000
D. £1,200

116. Which part of an insurance policy contains a detailed account of the extent of cover?
A. The heading.
B. The operative clause.
C. The recital clause.
D. The schedule.
117. The declaration on a proposal form states that
A. all disputes in respect of cover will be referred to mediation.
B. the information provided is correct to the best of the proposer’s knowledge and belief.
C. the proposer and the insurer are forming a contract for cover in return for a premium.
D. the proposer has an insurable interest in the property to be insured.

118. An exclusion that applies to only part of an insurance policy is known as a

A. general exception.
B. market exception.
C. market specific exception.
D. specific exception.

119. Why is there a contractual liability exclusion under all general insurance policies?
A. Contractual liability extends an insured’s position beyond the common law position.
B. Contractual liability should be specifically insured elsewhere.
C. The exclusion limits an insurer’s liability to a proportion of any claim with any other insurer that
also excludes the risk.
D. The exclusion provides an insurer with recovery rights against its own insured.

120. In which part of the UK will insurers NOT cover damage caused by a riot?
A. England.
B. Northern Ireland.
C. Scotland.
D. Wales.

121. What policy condition allows the insurer to take over and deal with the recovery of monies
from a negligent third party, prior to the settlement of any claim, in the name of the policyholder?
A. Cancellation.
B. Contribution.
C. Notification.
D. Subrogation.
122. A clothes manufacturer has a theft insurance policy which contains a requirement from the
insurer that the manufacturer will keep a security guard at the premises from 6pm to 6am, 7 days
a week. This undertaking is known as
A. a condition precedent to the contract.
B. an express warranty.
C. an implied warranty.
D. a representation.

123. Under a contract of insurance, good faith is an example of

A. an arbitration condition.
B. an express warranty.
C. an implied condition.
D. a written representation.

124. In which part of a standard household insurance policy will details of the risk address be
found?
A. The operative clause.
B. The policy conditions.
C. The policy schedule.
D. The recital clause.

125. A company obtains a quotation for engineering insurance which states that cover is subject
to a deductible of £50,000. This means that
A. a deposit premium of £50,000 is required.
B. any claim over £50,000 would be paid in full.
C. all claims are subject to a maximum payment of £50,000.
D. the company would be liable for the first £50,000 of any claim.
126. What is an insurer’s obligation, if any, with regard to the issue of renewal notices?
A. An insurer is not legally required to issue renewal notices.
B. An insurer has a statutory duty to issue renewal notices for all insurance policies.
C. An insurer has a statutory duty to issue renewal notices only for compulsory insurance.
D. An insurer must issue renewal notices within one month of the renewal date.

127. Policy renewal is more cost‐effective for an insurer than new insurance business because
A. discounts can be offered.
B. it can be conducted over the telephone.
C. premiums will always be increased annually.
D. there are no marketing costs involved.

128. Ahmed has a private motor insurance policy that is due for renewal in two months’ time. He
sold his car three weeks ago, but forgot to notify his insurer. If he telephones his insurer today,
when will the cancellation take effect?
A. From the date of the sale of the car.
B. From the time Ahmed telephones the insurer.
C. From the time that Ahmed receives payment from the purchaser of the vehicle.
D. From the date the current certificate of motor insurance expires.

129. An amateur football team wants to insure its players in case they are injured in one of its
football matches. What type of insurance policy will be required?
A. An employers’ liability insurance policy.
B. A group income protection insurance policy.
C. A group personal accident insurance policy.
D. A public liability insurance policy.
130. What is the minimum level of insurance cover that is required to protect an insured’s car
against malicious damage?
A. Road Traffic Act only.
B. Third party only.
C. Third party, fire and theft.
D. Comprehensive.

131. From whom would an insurer specializing in extended warranty insurance obtain the majority
of its new business?
A. Independent financial advisers.
B. Insurance brokers.
C. Lloyd’s underwriters.
D. Retailers.

132. A standard all risks insurance policy covers all perils that are insurable under a standard fire
and special perils policy and
A. accidental damage.
B. earthquake.
C. malicious damage.
D. riot.

133. A farmer specifically wants cover for loss of income should a fire destroy his grain store.
Which insurance policy would meet his needs?
A. A business interruption insurance policy.
B. A creditor insurance policy.
C. A fidelity guarantee insurance policy.
D. A money insurance policy.
134. Steve is a solicitor who could be sued for damages if he gives wrongful advice to a client.
What compulsory insurance must he have in order to protect himself against such claims?
A. Fidelity guarantee insurance.
B. Legal expenses insurance.
C. Professional indemnity insurance.
D. Public liability insurance.

135. The main function of an uninsured loss recovery service is to recover

A. motor vehicles that have been involved in an accident on behalf of the insured.
B. uninsured losses from a third party on behalf of the insured.
C. uninsured losses from an insurer on behalf of another insurer.
D. unpaid insurance premiums on behalf of an insurer.

136. Identification, evaluation and control are the three stages involved in risk
A. eradication.
B. management.
C. premium.
D. transfer.

137. Apart from the destination, what is the most important underwriting factor when considering
annual travel insurance?
A. The cost of the anticipated travel.
B. Any pre‐existing medical conditions.
C. The travel agency used.
D. The value of the personal items to be taken on the trip.
138. When considering a proposal for fire insurance, the two most important underwriting factors
are the
A. age and design of the building.
B. construction and use of the building.
C. geographical location and size of the building.
D. occupation and previous claims history of the proposer.

139. Carl is completing a proposal form for insurance for his laundrette. The proposal includes a
question requesting details of whether the laundrette could operate from another site in the event
of an insured peril occurring. To which type of insurance is the proposal form referring?
A. Business interruption insurance.
B. Extended warranty insurance.
C. Money insurance.
D. Professional indemnity insurance.

140. What is the principal consideration when underwriting employers’ liability insurance for a
company?
A. The company’s degree of contact with the public.
B. The number of employees working for the company.
C. The trade of the company.
D. The turnover of the company.

141. For which class of insurance is the premium calculation most influenced by the risk of an
electrical breakdown?
A. Business interruption insurance.
B. Commercial theft insurance.
C. Extended warranty insurance.
D. Property all risks insurance.
142. Within what period of time must an insurance company usually provide a response to a data
subject access request?
A. 7 days.
B. 21 days.
C. 1 month.
D. 3 months.

143. Under a household insurance policy, the insurer generally dissuades the insured from
making a claim for an item that does NOT exist by
A. asking for proof of purchase of the item.
B. insisting on photographic evidence of the item.
C. stipulating that a loss adjuster will always be appointed.
D. stipulating that a loss assessor will always be appointed.

144. Other than the use of the building, what is the main underwriting consideration for glass
insurance?
A. The construction of the building.
B. The geographical area.
C. The level of security in the building.
D. The previous claims history of the proposer.

145. What is the Claims and Underwriting Exchange?

A. A call centre that provides claim forms and proposal forms.
B. A committee through which insurers exchange claims and underwriting information.
C. A database that contains information on personal lines claims.
D. A register of stolen artefacts.
146. An insurer realizes that a receipt, submitted in connection with a claim, has been tampered
with by the insured to increase the amount shown. In this situation the insurer is most likely to
A. pay the original amount and ignore the tampering by the insured.
B. report the matter to the Financial Conduct Authority.
C. take no action and pay the amount claimed.
D. void the insurance policy and refuse to make any payments.

147. How do fraudulent claims have an adverse effect on an insurer?

A. Fines can be imposed by the Financial Ombudsman Service if it has made insufficient effort to
combat fraud.
B. Its claims costs will rise, impacting on its premiums and making it less competitive.
C. It will be blacklisted by the Financial Conduct Authority.
D. It will be subject to time‐consuming investigations by the Financial Action Task Force.

148. The Equality Act 2010 stipulates that insurers are only able to impose special underwriting
terms or decline an insurance risk when
A. agreed individually with the Financial Conduct Authority.
B. data or information provided by a reliable source justifies the action taken.
C. the insured has incurred a claim during the period of insurance as a direct result of a disability.
D. the previous insurer provided restricted cover to reflect a disability.

149. What document would an underwriter use to obtain key information during the underwriting
process?
A. A certificate of insurance.
B. A cover note.
C. A policy document.
D. A proposal form.
150. Before quoting for a motor insurance policy, the underwriter is most likely to research the
database of the
A. Association of British Insurers.
B. Financial Conduct Authority.
C. MIAFTR2.
D. Motor Insurers’ Bureau.

151. Lapse flow analysis relates to

A. business that has been lost.
B. declined proposals.
C. policies renewed after the renewal date.
D. proposals currently being processed.

152. An insurer may examine a company’s financial accounts when considering a proposal for
which class of business?
A. Business interruption insurance.
B. Fire insurance.
C. Medical expenses insurance.
D. Motor fleet insurance.

153. What information will an underwriter usually require to assess profitability for a specific class
of business?
A. The geographical spread of claims.
B. The loss ratio of his portfolio.
C. The number of claims.
D. The investment income accounts.
154. Why is it important that an insurer accurately reserves for claims?
A. To ensure that future premiums are paid.
B. To ensure that future claims costs are met by the premiums.
C. To prevent fraudulent claims.
D. To reduce the number of claims.

155. A ship travelling across the Atlantic Ocean suffers an explosion on board and sinks. In terms
of frequency and severity, how would the risk be described?
A. High frequency, high severity.
B. High frequency, low severity.
C. Low frequency, high severity.
D. Low frequency, low severity.

156. If an insurance policy has a loss ratio of 103%, how much will be paid out in claims by the
insurer for every £100 of premium received?
A. £3
B. £30
C. £97
D. £103

157. An insurer calculates a claims loss ratio by dividing the

A. claims incurred by the premium received and converting the result to a percentage.
B. claims incurred by the sum insured and converting the result to a percentage.
C. premium received by the claims incurred and converting the result to a percentage.
D. sum insured by the claims incurred and converting the result to a percentage.
158. Patrick has an insurance policy with a renewal date of 1 July each year. In 2018, the renewal
premium was £1,500 and in 2019 the renewal premium was £2,000. What was the total premium
paid during the 2019 underwriting year?
A. £1,500
B. £1,750
C. £2,000
D. £3,500

159. The period of cover for a single insurance policy from its inception through to its first renewal
date is called
A. an accounting year.
B. a calendar year.
C. a policy year.
D. an underwriting year.

160. Under which main class of insurance is the risk premium most likely to be adjusted to allow
for the cost of latent claims?
A. Business interruption insurance.
B. Fire insurance.
C. Health insurance.
D. Liability insurance.

161. An insurer expects premium income of £1,000,000 for a class of insurance. Future claims
are expected to be £250,000 with an incurred but not reported (IBNR) of 10%. Based on this
information, what is the risk premium?
A. £275,000
B. £350,000
C. £725,000
D. £1,000,000
162. With regard to the risk premium, to what does frequency refer?
A. The average time between claims.
B. The number of claims which are forecast.
C. The number of instalments in which the premium is paid.
D. The number of policies written.

163. An insurer has a return on capital employed of 10%. What does this mean?
A. Claims are 10% of the capital employed.
B. Investment income is 10% of the capital employed.
C. Premiums are 10% of the capital employed.
D. Profit is 10% of the capital employed.

164. An insurer has a premium income of £250,000 and claims totalling £100,000. If the capital
employed by the insurer is £1,000,000, what is the return on capital employed?
A. 10%
B. 15%
C. 25%
D. 40%

165. In the event of an increased capacity for underwriting risks, the price of insurance would be
expected to
A. fall.
B. remain the same.
C. fluctuate.
D. rise.
166. If an insurer’s maximum retention is based on the estimated maximum loss of a risk, and if
a risk is valued at £500,000 with an estimated maximum loss of 60%, what amount of the risk
would the insurer be able to retain?
A. £100,000
B. £300,000
C. £500,000
D. £800,000

167. A large factory complex is insured against fire with a total sum insured of £1,000,000. The
complex comprises of factory A and factory B, which are half a mile apart. Factory A is insured
for £600,000 and factory B is insured for £400,000. In percentage terms, what is the insurer’s
estimated maximum loss for any one fire?
A. 40%
B. 50%
C. 60%
D. 100%

168. If an insurer wishes to protect its insurance portfolio from the effects of a large claim, the
insurer should
A. aggregate.
B. reinsure.
C. retrocede.
D. self‐insure.

169. What is the earliest stage that an insurer can claim under a reinsurance contract?
A. After dealing with all third party liability claims.
B. Following payments made for losses.
C. Once a loss adjuster has been appointed.
D. Prior to payments made for losses.
170. An insurer has arranged reinsurance on a risk. This means that the insurer has
A. issued an excess of loss.
B. reinstated a lapsed policy.
C. renewed a policy.
D. transferred part of its risk exposure.