CII London Market 1 (LM1) – Insurance Essentials Practice Test

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• What are "statutory insurance" requirements?
• What aspect of risk are insurance companies primarily concerned with measuring?
• A commercial customer applying for office insurance has been burgled a number of times recently. In accordance with the duty of fair presentation, when must this be disclosed to the insurer?
• What does the Financial Conduct Authority aim to ensure through its regulations?
• What does home state regulation within the EU allow for insurers?
• What does the insurance principle of 'equitable premiums' mean?
• Which of the following is NOT a role of regulations concerning insurance brokers?
• What is a deductible in an insurance policy?
• The concept of physical hazard is best described as:
• In the London Market, what is the final confirmation that creates the contract between the insured and insurer known as?
• What is meant by "excess" in an insurance policy?
• What is the primary objective of the PRA?
• What is the primary purpose of OFAC?
• What is the role of an "insurance broker"?
• The part of the claims‐handling process where the insurer assesses and calculates the funds that need to be set aside to pay each individual claim is known as?
• What is a key feature of travel insurance policies?
• What does the accumulation of cash value in permanent life insurance signify?
• Why is the London Market popular for placing insurance risks?
• For what primary purpose do commercial policyholders take out property insurance?
• What does "guaranteed replacement cost" in property insurance refer to?
• If an insurance claim is declined due to a claims condition breach, what is most likely to happen to the policy?
• What does "peril" in insurance terms refer to?
• What does the term "total loss" mean in property insurance?
• How does actual cash value differ from replacement cost?
• What does "business interruption insurance" typically cover?
• What is integration in the context of money laundering?
• How might making more classes of insurance compulsory impact supply and demand?
• Which regulator[s] would authorise a Lloyd's broker?
• What happens when a policyholder fails to pay their premium?
• What is a bureau leader in the London Market?
• What is the role of the Financial Conduct Authority (FCA) in the UK insurance market?
• When would the average be applied to an insurance claim?
• In insurance, what does the term "peril" refer to?
• What role does a managing general agent (MGA) fulfill?
• What is typically required from an insured party regarding disclosures?
• If an administrator fails to report money laundering concerns, what is the maximum potential prison sentence?
• What does the principle of subrogation enable the insurer to do?
• What does "assumed risk" mean in insurance terminology?
• A major UK insurance company under scrutiny for low solvency margins would be monitored by?
• What is an "insurer"?
• Which organization assists US State insurance regulators in establishing standards and conducting peer reviews?
• If a marine vessel is damaged and cannot be used, which type of insurance provides financial compensation?
• What responsibility does an underwriter have?
• How does a broker typically place complex risks within the London Market?
• What is a key role of managing agents in the London Market?
• Under the Insurance Act 2015, what must a company disclose when applying for insurance?
• What would a standard aviation policy for an airline most likely cover?
• What type of coverage does "personal accident insurance" provide?
• What does "interest of the insured" refer to?
• What is the role of a loss adjuster?
• In the context of insurance, what does "moral hazard" refer to?
• What does BIBA primarily ensure for its members?
• An insurance broker's primary role involves providing advice to clients on what?
• What is the typical cancellation period for most insurance policies?
• Which liability might be covered under a standard aviation policy for an airline?
• Which group significantly benefits from contingency insurance?
• Within the London Market, when should the insured expect to receive evidence of insurance cover?
• If an insured wants to increase the sum insured beyond their insurer's limit, how can the insurer underwrite it?
• Who regulates the London Company Market?
• If an insurer requires a survey of a risk prior to accepting it, this would be an example of risk:
• In total, how many members does the Council of Lloyd's typically have?
• How are brokers involved in the payment part of the claims process?
• Under the Money Laundering Regulations 2017, what additional risk assessment must be done alongside the risk of money laundering?
• What does the term "consideration" refer to in contract law?
• What does "fire department service charge" in insurance refer to?
• What does risk assessment involve in the insurance industry?
• What type of coverage does travel insurance provide?
• What is meant by the term "premium" in insurance?
• Which organization focuses on the interests of brokers in the London insurance market?
• Within the London Market, what is a broker called that has contact with the insurer?
• What type of risks does general insurance cover?
• Which type of information would an overseas regulator typically not be interested in regarding a risk?
• In which type of insurance does the insurer have no right of recovery?
• What is the purpose of reinsurance in the insurance industry?
• What is NOT considered a primary function of insurance?
• In the insurance context, what does financial stability refer to?
• What does the process of underwriting involve?
• Which statement best defines risk management?
• What is typically required of a policyholder if they receive a speeding fine during the policy term?
• Who regulates the use of personal data within the UK?
• For the principle of contribution to apply, which factor is typically NOT required?
• What type of risk is indicated by Gerry's restaurant losing revenue due to a power failure caused by a mechanical digger?
• What does "subrogation" mean in the context of insurance?
• In marine insurance, when must insurable interest exist?
• What does the term "sanctions" refer to in the context of financial regulations?
• What does the agent's duty of personal performance entail?
• What is necessary for the validity of an insurance contract?
• Syndicates in the insurance market are commonly referred to as what?
• Which organization oversees the standards for the insurance sector in the UK?
• Delegated authority schemes are also typically referred to as:
• What is the approximate minimum level of professional indemnity insurance required for intermediaries under FCA rules?
• What does 'Reinsurance to Close' involve?
• How is an "insurance policy" defined?
• Which of the following best describes a policyholder's responsibility after a loss occurs?
• What does the term "insurable interest" refer to?
• What does "comprehensive insurance" cover?
• Under the concept of 'pooling of risks', the premium charged by an insurer should:
• Which body is primarily concerned with the regulation of the insurance market?
• The assessment of the probability of a risk and its consequences is referred to as what?
• What type of damage does "fire insurance" protect against?
• What is a key concern when underwriting motor insurance for an applicant with three unexpired speeding offences?
• If a second underwriter asks for more premium than the first, what should the broker do?
• What does OFAC stand for?
• The organisation that provides representation, information and technical services to managing agents in the Lloyd's Market is called the:
• Protection and indemnity clubs primarily provide insurance for which group?
• What does environmental liability insurance specifically cover?
• Which entity typically provides regulatory oversight for financial services in the UK?
• What is the primary responsibility of a claims examiner?
• Which role within an authorised firm is responsible for establishing anti-money laundering systems?
• What does the indemnity principle ensure in insurance?
• What is an example of non-life insurance?
• What does "full coverage" generally mean in auto insurance?
• What is the primary function of the Lloyd's Market Association (LMA)?
• What aspect does the Bribery Act 2010 aim to combat in financial transactions?
• For whom does BIBA represent interests?
• What is covered under business interruption insurance?
• Why is it important for an insurance policyholder to understand exclusions?
• What is typically the main focus of a broker's work in the London Market?
• What generally follows higher capacity in an insurance cycle?
• Which of the following is a characteristic of professional indemnity insurance?
• What are the two main types of insurance?
• In the event of a claim, what service are brokers LEAST likely to provide?
• Which method is least likely used by brokers to communicate with clients about complex risks?
• Which of the following is NOT an offence covered by the Bribery Act 2010?
• What is the primary function of insurance?
• Who is the broker usually acting on behalf of in the London Market?
• What does key person insurance protect against?
• Who has the responsibility of managing the affairs of Lloyd's?
• Which of the following is an example of pecuniary insurance?
• What is a common characteristic of a mutual indemnity association?
• Which section of the market does the LMA represent?
• What does the claims process involve?
• What characterizes permanent life insurance?
• What is the primary purpose of liability insurance?
• How is "risk" defined in the context of insurance?
• What role does an actuary play in an insurance company?
• In insurance, what does 'subrogation' allow an insurer to do?
• In what way does the IUA support its member companies?
• What is a key role of the National Association of Insurance Commissioners?
• What is the primary purpose of directors and officers insurance (DandO insurance)?
• What is typically a key feature of the London Market regarding claims service?
• What is meant by catastrophic loss?
• Why does a broker for a utilities company prefer the London Market for a power station risk?
• What is the main purpose of insurance fraud detection?
• What is usually considered the most effective way for a London Market insurer to avoid underwriter non-compliance with EU legislation?
• What is meant by "aggregate limit" in an insurance policy?
• What does the term 'invisible exports' refer to in the context of the London Market?
• What type of sentence could an individual face for failing to report money laundering suspicions?
• What can be a consequence of a company underestimating its risk assessment?
• Who typically purchases contractors all risks insurance for a construction site?
• What is one of the roles of insurance regulators?
• What does "moral hazard" mean in insurance terms?
• What is meant by a coverage gap in insurance?
• What does industrial disease insurance primarily protect?
• Heavy rain causes a drain to overflow into the basement storeroom of a nearby grocery shop. The perishable goods in the storeroom, which were NOT raised off the floor, have been written off. What is the proximate cause of the loss?
• What is required for effective supervision under the Prudential Regulation Authority's threshold conditions?
• What type of insurance is compulsory for a firm with five employees managing a portfolio of commercial offices?
• What is the main goal of contract certainty in insurance?
• What is the International Underwriting Association of London's (IUA) primary purpose?
• What is the principle called when a second insurer pays part of a claim covered by two insurers?
• What term is used in marine insurance to describe physical damage to the insured property?
• In the event of a fire at a factory, from whom does the insurer usually require notification to process the claim?
• Which statement accurately describes a non-admitted insurer?
• Who is responsible for regulating brokers in the London Market?
• What is an example of compulsory insurance under UK law?
• What does the term 'binding authority' relate to in insurance?
• How does the concept of moral hazard impact insurance practices?
• What benefit do companies gain by using insurance?
• What is a non-admitted insurer?
• Who is a policyholder?
• Which organization records risk data for insurers and transfers premiums from brokers to insurers?
• What is one of the key objectives of money laundering regulations?
• What is the main purpose of the Financial Conduct Authority's firm systematic framework?
• Is the following definition of supply and demand accurate? "Supply is the provision of something and demand is the need for something but only at a certain price."
• What aspect does hull insurance specifically assess in maritime contexts?
• In terms of financial monitoring, which aspect is essential for insurance companies according to the Prudential Regulation Authority?
• Why is it important for an insurance company to have financial stability?
• In the London Market, which class of business provides indemnity for damage to a vessel's hull?
• Which of these categories does not describe Members of Council?
• How much will the Financial Services Compensation Scheme pay for a non-compulsory insurance claim if the insurer becomes insolvent?
• The London Market writes a considerable amount of insurance overseas. This is a[n]:
• What typically occurs after an insurance policy is underwritten?
• In terms of insurance, how is catastrophic loss generally understood?
• When is an insurer likely to apply a franchise?
• Which class of insurance covers a toy manufacturer for financial losses due to a safety issue with a toy?
• Which of the following options is not a power held exclusively by the Council of Lloyd's?
• To whom does the FCA have to report on an annual basis?
• When a broker places an insurance policy on a subscription basis with Lloyd's underwriters, to whom do they pay the premium?
• What is the purpose of the FCA?
• What is a significant factor influencing demand in the insurance market?
• What is the function of cross-liability insurance?
• What is meant by the term 'premium income limit'?
• What is the meaning of "claims-made coverage"?
• What do the Prudential Regulation Authority's threshold conditions require authorised firms to have?
• What does MGAA represent in the insurance market?
• Which type of insurance would cover financial losses resulting from damage to a business's premises?
• What is the name of the Lloyd's system that stores information about sanctions in foreign countries?
• What is a potential outcome of effective insurance fraud detection?
• What type of insurance addresses loss of crops due to natural disasters?
• What does LIIBA stand for?
• In a commercial contract, what are shares regarded as?
• What does "product liability insurance" protect businesses against?
• Who provides the financial backing necessary for Lloyd's operations?
• Who typically draws up a Market Reform Contract in the London Market?
• What are exclusions in an insurance policy?
• What is BIPAR?
• Which organisation would regulate a small firm of high street insurance brokers?
• What is the purpose of the "Insurance Premium Tax" (IPT)?
• What is the purpose of an "adjustment clause" in an insurance policy?
• In the context of pecuniary insurance, what does 'pecuniary' refer to?
• Which type of insurer typically specializes in risks like shipowners' liability?
• A Lloyd's broker is paid brokerage of £3,000 for placing a risk with an insurer having already agreed a fee for the work direct with the client of £4,000. What action is the broker most likely to take?
• In the context of Money Laundering, what does 'placement' refer to?
• Who are Lloyd's brokers regulated by?
• Who do Lloyd's Names typically consult as their professional advisers when deciding on investments?
• What is the name of the database used to trace previous insurers for employers' liability insurance claims?
• When insurers allow intermediaries to act on their behalf by taking on risks within defined limits and criteria, what is this known as?
• What is meant by the term "coverage limit" in insurance?
• What is meant by 'layering' in Money Laundering?
• What is the subjective judgment of individuals or organizations regarding the characteristics and severity of a risk called?
• What process most accurately describes risk assessment in insurance?
• What is one of the main objectives of the International Association of Insurance Supervisors?