Insurable Risk Management Quiz Questions
When you want to ensure something against a risk, some insurance companies may not want to cover it rendering insurable, and risk is therefore insurable if it is immeasurable, not definable or certain. Take up the quiz below and get to test out your knowledge on insurable risk management by taking up this quiz. Be sure to share your score!
- 1.Under a proportional facultative reinsurance, the direct insurer insures a risk of sum assured $1million. His retention on this risk is $600,000 and the rest is absorbed by the reinsurers, if a loss of $200,000 arises, what would be the reinsurers's share?
- A.
$80,000
- B.
$120,000
- C.
$30,000
- D.
$100,000
- 2.Which of the following insurance arrangements is invalid because of a lack of insurable interest?
- A.
An employer effects a public liability policy to cover the negligent acts of his employee
- B.
A bowling club effecting an all risk policy on bowling balls belonging to its members
- C.
An employer effecting a group personal accident policy on all employees who are already entitled to workmen compensation benefits
- D.
A finance company effecting a comprehensive motor policy on a car because the hirer under a hire purchase agreement has failed to effect the policy
- 3.Claim forms are frequently issued by the insurers and they
- A.
Are prepared and issued by insurance intermediaries
- B.
Contain information used to make underwriting decisions
- C.
Are exactly the same with all classes of business
- D.
Provide information that the insurers will need to process a claim
- 4.The legal principle to insurance contracts dealing with the insurer's right of recovery against a negligent or guilty party is called the principle of
- A.
Assignment
- B.
Indemnity
- C.
Subrogation
- D.
Contribution
- 5.Which of the following is NOT a criteria for a risk to be insurable?
- A.
Loss must be definite in terms of time and amount
- B.
There must be a large number of people with similar potential for loss available for insurance
- C.
Risk must be pure risk
- D.
Loss must be catastrophic
- 6.Under liability insurance, the loss profit due to fire is known as
- A.
Fidelity guarantee insurance
- B.
Uberrima fiedes insurance
- C.
Consequential loss insurance
- D.
Hold harmless insurance
- 7.Which of the following is an example of "conditions precedent to policy"
- A.
Utmost good faith
- B.
Charge of occupation
- C.
Inform insurer within a time frame when loss occur
- D.
Ensure burglary alarm is in good order
- 8.An insurance policy
- A.
Is the written evidence of the contract
- B.
Is the basis of a contract
- C.
Is like a cover note that have the same legal status of a actual insurance policy
- D.
Forms the basis o a contract
- 9.The sellers in an insurance market are
- A.
Insurance agents
- B.
Lloyds intermediaries
- C.
Reinsurers ceding retrocession contracts
- D.
Insurance brokers
- 10.Speculative risks are risks that involve which of the following?
- A.
At loss
- B.
At best no gain situation
- C.
Either a profit or loss
- D.
Neither a profit or loss
- 11.An example of active retention of risk is
- A.
Laziness or ignorance
- B.
Insurance policy with a deductible
- C.
No smoking rule in area which flammable materials are stored
- D.
Install fire sprinkler system
- 12.Which of the following best describes Loss control best?
- A.
A method to transfer risk
- B.
A method to prevent or reduce loss if they occur
- C.
A non insurance method of retaining a risk
- D.
A particular risk that affects a limited group of people
- 13.Which of the following statements is true?
- A.
At lloyds of london, underwriting members are not grouped into syndicates
- B.
An insurance principle is bound by acts within the actual authority of the agent and not by any authority which the agent ostensibly possess
- C.
An agent has certain rights against the principle. They are remuneration, lien, indemnity
- D.
The basis if risk transfer is that the losses of a few are met by the contribution of many
- 14.Which of the following is not an advantage of arbitration?
- A.
Arbitration proceedings are conducted in private
- B.
Proceedings are informal and may be less expensive than litigation
- C.
The credibility of arbitration may be undermined if proceedings are conducted in a unbiased manner
- D.
Verdict is final unless a point of view is raised
- 15.The concept of subrogation and contribution:
- A.
Mean exactly the same thing but expressed in a diff manner
- B.
Are concepts that are not connected to indemnity in any way
- C.
May be considered sub principles and corollaries to principle of indemnity
- D.
Will apply in every class of insurance including Life and PA insurance
- 16.Notifications of claims and loss is
- A.
Not subjected to time limits
- B.
The insured's responsibility
- C.
Insurer's responsibility
- D.
Required to enable loss management measurements
- 17.To avoid disputes after signing the insurance contract, proposal forms usually includes the warning statement which reads:
- A.
The insurer or agent has a duty to provide proper advice on the subject matter of insurance
- B.
The proposer/insured has a duty to state perils to be insured
- C.
The proposer/insured is to disclose in the proposal form fully and faithfully all the facts which he/she knows or ought to know
- D.
The insurer or agent is entitted to reject the proposal if he finds that the information provided is inadequate
- 18.The main purpose of endorsements
- A.
Endorse the payment of premium
- B.
Describes and states the ground rules for the policy
- C.
States the parties to the contract
- D.
Record any changes made to existing policy
- 19.Which is a common form of proportional reinsurance?
- A.
Facultative excess of loss
- B.
Quota share
- C.
Excess of loss
- D.
Catastrophe excess of loss
- 20.Which of the following does not consist of the authority of agent?
- A.
Express authority
- B.
Waiver of authority
- C.
Usual or customary authority
- D.
Implied authority
- 21.Which of the following is not a major objective regarding reinsurance?
- A.
To eliminate uncertainty of losses and provide peace of mind to the direct insurer
- B.
To help stabilize the direct insurer's losses by smoothing the fluctuations from year to year
- C.
To help increase the direct insurer's capacity so that he can cover more catastrophe risks
- D.
By way of reinsurance the effects of catastrophes can be cushioned
- 22.The renewal certificate does not contain:
- A.
Policy number
- B.
Correction of error in description
- C.
Period of insurance and renewal date
- D.
Signatures of authorized signatories
- 23.The term padding does not include
- A.
Providing more service than what is required
- B.
Cheating and a criminal offence
- C.
Grounds for suspecting or cancelling an agent's registration
- D.
When an agent quote a premium rate set by the insurer and keeps the difference
- 24.Insurable interest is
- A.
Only important with life and property insurance
- B.
Is not always necessary with every kind of insurance
- C.
Is required to be present at one time or another with all insurances
- D.
Is only applicable if the financial loss can be measured with exact precision
- 25.The functions of a risk manager are:I: to apply probability and statistical theory to problems relating to insurance II: to identify risk exposures and implement risk control programs to eliminate or minimize such risksIII: to keep accurate records, including loss records and payrolls figuresIV: to update members on technical matters and current practices relating to risk and insurance management
- A.
I, II, III
- B.
II & III
- C.
II, III, IV
- D.
All
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