Final Examination (102 Questions)

1) Your insured, a sole proprietor, purchased a building valued at $1 million. The insurance policy has a coinsurance clause based on the replacement cost value of 90%. Contrary to your advice, your insured insures the building for only $500,000. He suffers a windstorm loss totalling $150,000.

How much will the insurer pay?

a) $75,000
b) $83,333
c) $150,000
d) $93,755

2) An insured property is covered by two separate commercial policies placed with two different insurers. Insurer A’s policy has a limit of $100,000 and Insurer B’s policy has a limit of $200,000. The insured suffers an insurable loss of $230,000. Assuming no deductibles apply, how much will each insurer pay?

a) Insurer A will pay $100,000. Insurer B will pay $130,000
b) Insurer A will pay $100,000. Insurer B will pay $200,000
c) Insurer A will pay $76,659. Insurer B will pay $153,341
d) Neither insurer will pay. Two policies on the same property are prohibited

3) On a Commercial Building, Equipment, and Stock Form, that insures the building owner, which of the following would not be included under the “building” definition?

a) Growing plants and trees inside the building used for decorative purposes
b) Building maintenance supplies
c) Fixed structures pertaining to the building
d) Temporary fixtures and fittings

4) Under a Commercial Building, Equipment, and Stock insurance policy, the definition of “stock” includes

a) merchandise of every description usual to the insured’s business, including packing and wrapping materials
b) advertising material usual to the insured’s business
c) all stock including similar property belonging to others for which the insured is obligated to insure
d) all of the above

5) The Commercial Building, Equipment, and Stock insurance policy identifies three types of equipment for which coverage is provided. Which of the following is NOT one of these three types?

a) Tenants’ improvements and betterments if the insured does not own the building
b) Packing materials used to ship stock
c) Property belonging to others for which the insured is legally liable
d) The contents usual to the business the insured is engaged in, other than stock

6) The basic principle of business interruption insurance is

a) to arrange alternate employment for employees while the building is being repaired following an insured loss
b) to restore the premises to the condition they were in before the loss
c) to cover the cost of relocating the business
d) to restore the income that would have been earned had the business not been interrupted

7) On a commercial crime insurance policy, employee dishonesty insurance

a) is provided on a discovery basis
b) is also known as fidelity insurance
c) protects insured against dishonest acts committed by employees, alone or in collusion with others
d) all of the above

8) Which of the following losses normally excluded under a boiler and machinery policy can be added by endorsement?

a) Fire
b) Nuclear reaction or radioactive contamination
c) Increased costs due to the enforcement of a bylaw regulating building construction
d) War related losses

9) A surety bond

a) is a contract between two parties
b) protects the surety
c) provides security to a party entering into a contractual agreement with another
d) protects the insurer

10) A marine insurance policy provides coverage for

a) the hull and cargo
b) the hull only
c) cargo only
d) property damage to third parties only, not the vessel itself

11) Statutory conditions which are found in all fire policies

a) impose obligations on both the insured and the insurer
b) specify the coverages provided
c) state the rights of a third party
d) are not expressly required by law

12) Actual cash value (ACV) is understood as the cost of replacing property, less any depreciation to it.

Most insurers expand their definition to recognize that a fair estimate of depreciation at the time of loss depends on which of the following factors?

a) The property’s physical condition
b) The property’s resale value
c) The property’s obsolescence
d) All of the above

13) A “mortgagee” is defined as a person or organization that lends money to someone to buy property. The mortgagee under a mortgage clause on a property insurance policy has certain rights and obligations. Which of the following is a right of the mortgagee?

a) The right to share in the loss payment, as long as the insured owes something on the mortgage
b) The right to share in the loss payment, unless the mortgagor neglects the property
c) The right to share in the loss payment, unless occupation of the premises is for purposes more hazardous than those permitted by the policy d) All of the above
d) All of above

14) In anticipation of building an addition to his home, which you insure under a homeowner package policy for $320,000, your client purchases and stores on his property $4,000 worth of lumber. A serious windstorm strikes the area and your insured’s lumber pile is destroyed. What coverage would be available under your policy?

a) None. The lumber is not yet part of the building
b) The lumber would be fully covered under Coverage A—Dwelling Building
c) The loss would be paid under the 10% extension of Coverage C—Personal Property for property outside the building
d) None. The policy excludes damage to property in the open caused by windstorm

15) Motorized vehicles are excluded under Coverage C—Personal Property of a homeowner policy. Coverage is provided as an exception to the exclusion for which of the following?

a) Mobility scooter
b) Lawn mower
c) Child’s motorized toy car up to a maximum speed of 10 kilometres per hour
d) All of the above

16) Stamp and coin collections are best insured by a/an

a) Personal articles floater
b) Fine arts floater
c) Homeowner package policy (Comprehensive Form)
d) Homeowner package policy (Basic Form)

17) Under the Definitions section of a homeowners form, “data problem” is defined as

a) ability to receive data
b) ability to transmit data
c) erasure, destruction, or misinterpretation of data
d) all of the above

18) Under a Homeowners Basic Form, the named peril “water damage” excludes loss or damage caused by freezing in a heated portion of the dwelling or detached private structures during the normal heating season if the insured is away for more than

a) 24 hours
b) one week
c) three consecutive days
d) four consecutive days

19) Which of the following losses would be covered under the refrigerator or freezer food extension of coverage?

a) Food spoilage in the refrigerator because the insured’s child pulls the power cord out of the electrical outlet and it goes unobserved for a period of time
b) Expenses incurred to store freezer food in a cold storage unit while the freezer is being repaired
c) Food spoilage when a circuit breaker trips, disrupting the supply of power
d) Damage to the freezer due to food spoilage up to the full limit of insurance for Coverage C

20) Your clients have been renting a unit in a condominium high-rise building and have carried a tenants package policy with your office. They have just purchased a condominium unit similar to the one they have been renting and will soon move in. What advice do you provide to meet their needs?

a) Transfer their existing policy (as is) to their new address. The buildings are similar, and they do not plan to buy any additional contents right away
b) Cancel the entire policy. They no longer have any need for insurance as the condominium corporation is required by law to insure all exposures for the owners of every unit
c) Get full details of the security arrangements and alarm systems in the building. You will then be able to recommend how much fire and theft insurance they should carry
d) Cancel their tenants policy and apply for a special package policy designed for condominium unit owners

21) Which of the following is correct?

a) The condominium unit owner package purchased by a unit owner must provide sufficient insurance limits to cover the common elements of the building in addition to his/her contents and any improvements
b) A condominium corporation never owns the land on which the building stands
c) A condominium unit owner owns the space inside his/her unit, the contents, and any improvements bought or installed by him/her
d) The condominium unit owners package policy does not provide personal property insurance

22) Your client, Bill West, has purchased a farm. You advise Bill that he requires a farm insurance policy which will cover his dwelling and contents as well as the rest of his farm. You recommend an endorsement be added to cover his farm machinery and equipment. The typical coverage this endorsement will provide is

a) coverage for scheduled equipment only
b) all-risk coverage
c) subject to 100% coinsurance
d) all of the above

23) Burglars enter the insured’s unlocked seasonal residence and steal some of the contents. Under the seasonal residence insurance policy, the loss is

a) covered, subject to the policy deductible
b) covered, only if the owners were away for less than 24 hours
c) covered, up to $500 only for building damage
d) not covered

24) You inherit a valuable painting which you intend to exhibit periodically at various galleries. This would best be insured under a

a) Personal articles endorsement
b) Homeowner’s Broad Form policy
c) Fine arts endorsement
d) Tenants package policy

25) With respect to mobile homes, when reasonable expenses are incurred to remove the building to protect it from an insured peril, the optional emergency removal expense extension allows the insured to use up to

a) 5% of the amount of insurance under Coverage A
b) 10% of the amount of insurance under Coverage A
c) 15% of the amount of insurance under Coverage A
d) 25% of the amount of insurance under Coverage A

26) Betty Smith has invited several friends over to join her in celebrating her birthday. She has purchased some alcohol from the local liquor store. After a guest had a drink, glass shards were found in a bottle of vodka. The guest required surgery to repair internal damages. The liquor store was found legally liable.

This is an example of a/an _____________ liability exposure.

a) operations
b) products
c) contractual
d) premises

27) A claims-made policy

a) triggers coverage when an accident occurs during the term the policy is in force
b) covers only claims made during the term of the contract
c) limits coverage to accidents that occur within a prescribed period
d) does not respond solely on the basis of liability

28) Failure to do what an ordinary and reasonably prudent person would do under the same or similar circumstances is the definition of

a) proximate cause
b) intervening cause
c) assumption of risk
d) negligence

29) The principle of indemnity requires that

a) insurance rates must be neither too high nor too low
b) the insured should be paid for the actual value of the loss sustained and not more
c) people who have accidents must pay for the losses that result
d) the insured must be paid the policy benefits that his or her premium has purchased

30) Section F on a homeowner policy provides coverage for

a) Personal liability
b) Voluntary compensation for residence employees
c) Voluntary medical payments
d) Voluntary payment for property damage

31) Coverage E—Personal Liability on a homeowner policy defines “property damage” as

a) physical loss or damage to intangible property, including the loss of use of such property
b) physical loss or damage to tangible property, including the loss of use of such property
c) physical loss or damage to tangible property, excluding the loss of use of such property
d) damage to tangible or intangible property occurring on the premises of the insured

32) You are the broker for Speedy Trucking Ltd. They own 25 power units. The automobile insurance policy you would recommend to your client to protect their fleet of vehicles is the

a) Standard Policy Form 1—Owners Form
b) Standard Policy Form 4—Garage Automobile Policy
c) Standard Policy Form 6—Non-owned Automobile Policy
d) Standard Policy Form 9—Transportation Network Policy

33) An SPF4—Garage Automobile Policy provides coverage for physical damage to owned automobiles. The insured can choose the coverage from four available options. Which of the following is NOT one of these options?

a) All perils
b) Collision or upset
c) Comprehensive
d) Specified perils

34) The SPF6—Non-owned Automobile Policy provides which of the following coverages?

a) Third party liability coverage
b) Physical damage coverage for owned vehicles
c) Accident benefits coverage
d) Physical damage coverage for customers’ vehicles

35) Automobile commercial fleet policies often include a Standard Endorsement Form (SEF) 30a— Excluding Attached Machinery endorsement pertaining to equipment such as a crane or a picker. The purpose of this endorsement is to

a) exclude liability arising out of the operation of such equipment under Sections A and B of the automobile policy
b) exclude physical damage to attached equipment
c) exclude both liability arising out of the operation of such equipment and physical damage to the equipment
d) exclude coverage under a Commercial General Liability (CGL) policy

36) ABC Trucking is a client of your brokerage. From time to time, they have non-owned vehicles in their care, custody, and control. You recommend to ABC Trucking Ltd. that they add an SEF 27—Legal Liability for Damage to Non-owned Automobiles to their policy. Which of the following statements is TRUE about this endorsement?

a) Since ABC Trucking is a corporation, indemnity is provided to individuals named on the endorsement
b) The endorsement covers multiple vehicles and/or trailers
c) The endorsement provides a “good will” type of coverage and will respond whether the insured is responsible for any damage or not
d) The endorsement protects against third party liability but not physical damage

37) Your insured has an SPF1—Owners Policy and asks if his policy will cover him while driving in New Mexico, Texas, Arizona, and Mexico. You advise that it will cover him

a) in all four areas
b) in Arizona and Texas only
c) in Texas, Arizona, and New Mexico, but not in Mexico
d) only in Canada

38) On an automobile application, the Particulars of the Described Automobile (SAF1) section includes all of the following details except

a) body type
b) lienholder
c) vehicle serial number
d) colour of the vehicle

39) The grid rating program in Alberta

a) was developed to set maximum premiums that insurance companies can charge for basic coverages for any driving record
b) applies traditional underwriting criteria such as age, gender, and marital status
c) does not consider the territory where the vehicle is used
d) does not base the grid step on past losses

40) Your insured calls to advise that he is leasing an automobile from an automobile dealer for three years and requires insurance. You should issue a/an

a) SPF6—Non-owned Automobile Policy, suitably endorsed
b) SPF1—Standard Owner’s Automobile Policy, suitably endorsed
c) SPF2—Driver’s Policy, suitably endorsed
d) SPF4—Garage Auto Policy, suitably endorsed

41) Residual markets, from an underwriting standpoint, refer to

a) special programs to ensure insurance availability for all uninsured drivers
b) special markets that are immediately available to brokers, agents, and the public
c) special programs to ensure insurance availability for less desirable or more hazardous risks
d) special programs to encourage insurance for the more desirable or less hazardous

42) Under the third party liability section of the automobile policy, the insured agrees to

a) pay up to the minimum limits of the jurisdiction
b) reimburse the insurer for all amounts the insurer has to pay because of the absolute liability law, but which the insurer would not otherwise be liable to pay
c) pay court costs taxed against him or her
d) pay to cover any defence costs, even if the action is groundless

43) The purpose of the Total Disability Coverage (Section B, Subsection 2, Part 2) of the SPF1 is

a) to provide payment for any medical expenses which the insured may incur
b) to provide the insured with temporary funds for the period of injury until such time as all of the lost earnings are recovered from the responsible party
c) to provide a substitute for some of the earnings which an insured may lose as a result of injury in an automobile accident if the injury prevents the insured from working
d) to provide punitive damages if the insured suffers from total disability or dismemberment

44) SEF44—Family Protection Endorsement

a) protects the insured and eligible passengers in his or her automobile for liability of a third party whose own insurance is insufficient to cover their claims for bodily injury
b) is mandatory coverage in Alberta
c) provides the same coverage as uninsured motorist coverage while driving in Quebec, Manitoba, Saskatchewan, and British Columbia
d) provides protection to the insured for damage to his or her automobile, provided he or she does not have collision insurance, and is able to identify either the owner or the driver of the uninsured third party automobile

45) Which of the following statements is TRUE with respect to travel insurance?

a) It replaces insurance provided by a government plan
b) It does not normally provide coverage where an illness existed prior to the trip commencing
c) It pays before any other coverage when the insured is travelling outside of Canada
d) It covers unexpected events as well as expected events, such as pregnancy

46) What is the best definition of “pure risk” as used for insurance purposes?

a) Must always be dealt with through reduction or elimination
b) The chance of loss
c) A condition which may cause a loss to occur
d) The possibility of property being over-insured

47) It is your responsibility as a broker to assist individual insurance consumers to determine the best insurance program for them. A risk analysis is an effective tool to

a) retain, organize, and file your notes
b) clarify information provided by your client
c) determine property items at risk as well as the likelihood of events happening
d) describe the differences between named perils and all-risk wordings

48) In insurance terms, a peril is frequently described as a cause of loss. Which of the following is NOT a peril?

a) Lightning
b) A wood-burning stove used for heating
c) Windstorm
d) Burglary

49) You have requested a flow chart from your client to assist you in identifying exposures to loss. A flow chart maps the sequence of business activities using graphic representation. One of the main benefits of a flow chart is its ability to

a) describe in detail the subjects of insurance
b) reveal bottlenecks in production which may be difficult to repair or replace in a timely manner
c) highlight any legal liabilities
d) identify appropriate insurance policies to address the exposure to loss

50) For a risk manager, controlling a risk means

a) measuring the frequency and severity of the exposure accurately
b) developing a plan to address loss prevention and reduction strategies including loss assumption or risk transfer methods
c) identifying the exposures
d) purchasing insurance

51) One of the most important rules for deciding what to do about an exposure to loss is the “large loss principle.” Which of the following statements is TRUE with respect to this principle?

a) Devastating exposures to loss should be retained
b) The best loss exposure treatment is always insurance
c) If possible, devastating exposures to loss should be transferred through non-insurance or insurance transfers
d) The technique to best handle devastating exposures is either loss control or avoidance

52) The insurance market is dynamic and constantly changing. Your knowledge of current market conditions will be invaluable

a) in matching your client’s needs to the most appropriate insurance product being offered at the time
b) in understanding that an underwriter will be willing to cut prices in a hard market
c) in understanding that an underwriter will implement stricter terms and conditions in a soft market
d) all of the above

53) Why is it necessary to monitor and modify a risk management plan?

a) If it is determined that a technique is not effective, changes may be required
b) New exposures to loss may develop
c) Benchmarks used to measure outcomes may be unrealistic and require modification
d) All of the above

54) There may be times when the premium you quote to a client from the rate manual and the final premium differ. It is important that you discuss the reason for this discrepancy with your underwriter so you can

a) have the discrepancy corrected
b) explain the reasons for the difference to your client
c) look for other solutions such as an increase in deductibles to lower the premium
d) all of the above

55) A premium

a) is not a primary motivator for clients in obtaining insurance coverage
b) in the rate manual is the final premium
c) is the amount of money an insurer charges to provide insurance coverage
d) if lower, is the sole factor in customer retention

56) Agencies/brokerages must have efficient systems to handle reported claims. While it is not generally the function of producers to be involved in the handling of claims, they must do which of the following?

a) Promptly notify the insurer if a loss is reported and appears not to be covered by the policy
b) Recommend and appoint an adjuster
c) Monitor the progress of the claim and assist the client, adjuster, and insurer, whenever requested
d) All of the above

57) Brokers or agents do not normally adjust claims, but you are an advocate for the insured. To provide good claims service to your client, it is important to

a) promptly notify the insurer of the loss and explain the claims process to your client
b) monitor the progress of the claim
c) contact the client periodically to verify that the claim is progressing to his or her satisfaction
d) all of the above

58) The binding limits outlined in the agency agreement

a) represent the minimum amount an insurance company will entertain
b) grant the same degree of binding authority to an insurer’s brokers
c) act as a control on brokers’ binding powers
d) none of the above

59) Before an insurance agent may bind an insurer to a policy at the request of a client, he or she must always have

a) a signed application
b) a signed application and the premium must be paid in advance
c) authority from an insurer to bind the risk
d) the rest of the insured’s business

60) When reviewing policy wordings, identify any conditions or warranties that require action or duties on the part of the insured in order to maintain coverage. Once identified,

a) contact the insurer and have them removed
b) contact the insurer and have them modified
c) bring them to the attention of the insured and explain the effect they would have on potential losses
d) all of the above

61) Which of the following is NOT an example of private or personal information?

a) A client’s contact information
b) A client’s credit rating
c) A list of criteria for acceptable risk identification
d) Medical history for an identifiable client

62) Customer profiles are useful tools for identifying clients and their insurance needs. Because information being collected is confidential, discretion and respect for the privacy of others is essential. A federal statute, the Personal Information Protection and Electronic Documents Act requires

a) information gathered for a specific purpose must only be used for that purpose
b) information requested must be relevant
c) information collected must be held in strictest confidence
d) all of the above

63) Privacy laws are in effect to provide consumers with confidence that their personal information will be kept confidential. A client’s financial history reveals a bankruptcy filing which took place seven years prior. You must not share this information with

a) the underwriter
b) others within your office
c) the marketing broker in your office helping you place the coverage
d) the customer service representative in your office assisting you in arranging adequate insurance coverage

64) The Personal Information Protection Act (PIPA) states that an organization may use personal information only for

a) arbitration or mediation purposes
b) purposes that are reasonable
c) 30 days unless consent has been granted
d) purposes in relation to existing or proposed organizational programs

65) A broker or agent has a fiduciary duty to the insurers they represent. A fiduciary duty

a) is a duty to act in trust and in the best interests of another
b) arises in the relationship between an agent and his or her principal
c) applies to monetary aspects of the relationship between the agent and his or her principal
d) all of the above

66) Brokers or agents usually have two bank accounts for their business, an operating account and a trust account. A trust account is one that is used to deposit

a) premiums collected to pay insurers for policies issued
b) commission earned
c) contingent profits earned
d) earned premiums only

67) Net premiums are

a) premiums after the producer’s commission has been deducted
b) premiums remaining after paying actual losses
c) premiums held for the trust account
d) premiums remaining after paying salaries, rents, and other operating costs

68) If an agent incorrectly tells an insured that a loss to his or her automobile is covered under his or her automobile insurance policy, the insurer

a) would never be required to pay such a loss because the loss was not covered under the insured’s policy
b) may be held liable for the loss by a court of law because under agency law, the agent’s acts are considered acts of the insurer
c) would never be required to pay such a loss if the agent was not authorized by the agency agreement to adjust losses for the insurer
d) would never be required to pay such a loss because a waiver must be in writing before it is valid

69) An insurance agent or broker is responsible for providing the principal with all information that

a) they have on file about an applicant
b) might be of interest to the insurer
c) the market conditions impose on them
d) materially affects the insurer’s interest

70) The major cause of errors and omissions (E&O) claims is a failure to

a) comply with licensing regulations
b) file appropriate forms with Canada Revenue Agency
c) provide correct cover, in time
d) find an alternative market for a client, on request

71) Which of the following statements describes an action that would be beneficial in preventing an E&O claim?

a) Act only within the scope of your authority and competence
b) Answer all questions posed by your client, even if it falls outside your area of expertise
c) If asked, explain the effects of exclusions and restrictions
d) Utilize good communication skills to ensure you fully understand your client’s requests

72) The financial guarantee under the Insurance Act of Alberta requires all insurance agents to have an errors & omissions policy. This policy

a) must be issued by a licensed insurer
b) must pay any claim proceeds directly to the insured
c) must contain a 14-day cancellation clause
d) must be for a minimum limit of $200,000

73) The errors & omissions insurance policy required by the Insurance Act for all holders of a Certificate of Authority must provide a per claim minimum limit of

a) $100,000
b) $200,000
c) $500,000
d) $1,000,000

74) PIPEDA sets out 10 privacy protection principles that must be followed by organizations. Which of the following is NOT one of these principles?

a) Personal information shall be accurate, complete, and up-to-date as is necessary for the purposes for which it is to be used
b) Personal information may only be gathered to write authorized types of business and must not exceed specified limits
c) Personal information shall be protected by security safeguards appropriate to the sensitivity of the information
d) The collection of personal information shall be limited to that which is necessary for the purposes identified by the organization

75) You have been asked to provide a commercial property quote for Blue River Construction Ltd. Some of the information you gather from them will be confidential, particularly financial data. In addition to reassuring your client that the information will only be used for the purposes they authorize and will be kept strictly confidential, you should also obtain

a) instructions on how to safeguard this documentation
b) written permission to share the information with various insurance companies you will ask to quote
c) written permission to shred the submission once the quote has been provided
d) detailed instructions on how they wish the information to be used

76) A “conflict of interest” position means a situation where an intermediary

a) is charging an excessive rate of interest on a payment plan
b) is looking after the best interests of the client and other stakeholders
c) has an incentive to act other than in the best interests of the client
d) commits a civil wrong, other than a breach of contract

77) Professional brokers’ associations have codes of conduct which specify brokers’ duties to clients, insurers, and fellow brokers. Which of the following is NOT a duty owed to fellow brokers?

a) To not harm their reputation
b) To adhere to the binding authority granted by the insurer
c) To cooperate in every reasonable way for the betterment of the industry
d) To encourage public respect for an endeavour to improve the practice of their vocation

78) When recommending appropriate types of insurance to your client, you Appendix

a) have an ethical duty to advise of all coverages available through the insurers you represent (but not other carriers)
b) have an ethical duty to advise of all insurance available, even if it is beyond what your insurers can provide
c) have NO obligation to discuss risk control options with your client
d) need not explain the details of various options, but should encourage the client to read the policy wordings

79) You are a broker with a CIP designation in the commercial account department with Mateo Insurance Brokers Ltd. ABC Insurance Company has season tickets to NHL games.

You are an avid fan of the Montreal Canadiens, and your underwriter has alluded to the fact that she might give you tickets to an upcoming game with the Canadiens if you place a large fleet account with ABC Insurance Company.

Even though it is not the best market for the account, you strongly recommend ABC as the market of choice to the client.

Which of the following ethical principles found in professional codes of ethics is being violated?

a) The requirement to facilitate the purchase of insurance
b) The requirement to provide the coverage best suited to the client’s needs, putting their interests first
c) The requirement to hold information in strict confidence
d) The requirement to stay within the terms of the broker agreement

80) Insurance documentation is a source of evidence of what took place with a certain policy. Should a dispute arise, consistent, accurate record-keeping can provide information about

a) privacy laws
b) policy retention standards
c) what instructions were given or what promises were made
d) commission structures

81) Which of the following is true about the form of organization that an insurer may take?

a) A joint stock company is owned by its policyholders
b) A farm mutual insurance company is owned exclusively by farmers who buy shares in the company
c) Lloyds of London is NOT an insurance company; it is a place where underwriters undertake to insure risks
d) Mutual insurance companies are NOT required to be licensed under the Insurance Act

82) Insurance allows people to live their lives and carry on their businesses without the fear that some single catastrophe or natural disaster could physically and financially ruin them. Which of the following best defines “insurance”?

a) It is the minimization of detrimental effects of risk
b) It is the method of sharing the losses of the few individuals in a group who suffer them among the many members of the group who do not
c) It influences the outcome of a loss
d) It is based on risk or uncertainty

83) Many large insurers market their policies through the independent brokerage system. An independent broker is

a) one who has authority from a company to manage all of that company’s business within his or her territory
b) one who has authority from a company to appoint other agents and to settle claims
c) one who represents one company only
d) a business person who may place business with any number of insurers

84) The insurance industry manages large pools of money from premiums which are generally paid in advance. This capital has a positive influence on the economy. An example of this is

a) insurers invest in federal, provincial, and municipal bonds, thus recycling premiums into community development
b) the peace of mind that results when substituting a known premium payment for an uncertain loss payment
c) businesses must set aside reserves of money in case of a future loss or accident
d) insurance protects the insured’s interest in property, but excludes the lender’s investment

85) Reinsurance is an agreement between insurers and reinsurers. Which of the following is true of reinsurance? Reinsurance

a) directly affects the consumer
b) is insurance for insurance companies
c) is the primary link in the risk-spreading chain
d) cannot consist of more than one layer

86) The Facility Association

a) is an industry plan designed to guarantee availability of automobile insurance for automobile risks that cannot obtain coverage in the open market
b) is an industry plan designed to guarantee availability of automobile insurance for all personal automobile risks, but not commercial automobile risks
c) is run by the provincial government
d) is run by the Insurance Brokers Association of Canada

87) Regulation of persons who sell insurance to the general public falls under the control of

a) the federal government
b) the provincial governments
c) the Insurance Brokers Association of Canada
d) insurance companies whom they have agreements with

88) The Insurance Act in the province of Alberta states that no insurer, insurance agent, or adjuster may engage in a tied selling practice prohibited by the Regulations. Tied selling is defined as

a) an illegal practice in which a company agrees to sell a customer some good or service only if the customer also buys some other good or service
b) the action or practice of selling an additional product or service to an existing customer
c) a sales technique whereby a seller induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale
d) selling a bond, debenture, note, or other evidence of indebtedness where secured or unsecured

89) If an individual does not successfully pass the Level 1 General Insurance Agent’s Certificate of Authority examination, he or she

a) is eligible for one re-write only, but must wait for 90 days from date of previous writing
b) is eligible for two re-writes, but must wait for six months from date of previous writing
c) is eligible for two re-writes, at any time, but must wait at least six months for a third attempt
d) is eligible for one re-write only, which must be attempted within one year from the date of the previous writing

90) The insurance industry manages vast sums of money accumulated from premiums paid for the purchase of insurance policies. The money managed

a) can be invested in the stock market until it is needed to cover losses
b) cannot be invested but must be put aside in reserve funds
c) can be invested in both high and low risk stocks
d) can be invested in government specified secure and liquid investments

91) An underwriter is an insurance professional

a) employed by an insurer to accept or reject risk on their behalf
b) employed by an insurer to calculate rates for various classes of insurance
c) an independent business person who underwrites and sells insurance
d) all of the above

92) Which of the following functions are part of a staff adjuster’s duties?

a) They interview insureds, third parties, and witnesses
b) They listen and observe people’s reactions
c) They visit accident and/or loss scenes
d) All of the above

93) Salvage

a) is the portion of any property remaining after a loss that has value
b) belongs to the insured once the claim is settled
c) increases the cost of a claim
d) may be purchased by the insurer for a reasonable cost

94) Joanna is a salaried employee of ABC Insurance Company. Her responsibilities include processing a large volume of claims that do not require face-to-face contact. What type of adjuster is Joanna?

a) An independent adjuster
b) A telephone adjuster
c) A field adjuster
d) A staff adjuster

95) In Alberta, all agents and brokers are licensed by the Alberta Insurance Council. To maintain their license, every agent and broker must

a) progress to the next level within three years
b) meet minimum mandatory continuing education credits annually
c) write and pass a renewal licensing exam annually
d) all of the above

96) Obtaining an appropriate level of education and expertise is the responsibility of all brokers and agents. Why is this important?

a) To advance one’s career
b) To earn the trust and confidence of colleagues
c) To assist in understanding and performing one’s duties effectively and efficiently, ensuring that client and insurer needs are met
d) Better education leads to an increase in income

97) Complaints are a form of communication and may provide useful feedback. When handling complaints,

a) accept responsibility and admit fault; the customer is always right
b) always refer the client directly to the insurer
c) listen without making assumptions about the client or his/her concerns
d) try to dismiss it as quickly as possible or it may create a barrier with the client

98) When consumers or others submit a complaint to the Alberta Insurance Council, investigators from AIC’s Compliance Department will

a) refer the complainant to the appropriate insurance company for handling
b) gather relevant documentation to determine whether a violation of the Insurance Act has occurred
c) contact the broker or agent and insist that their license be suspended unless they immediately stop such behaviour
d) assure the complainant that the broker, agent, or adjuster will be disciplined

99) Provincial Brokers’ Associations

a) establish ethical and professional standards for their members
b) represent their members’ views to insurers and governments
c) provide licensing and professional designation courses to their members
d) all of the above

100) Which of the following is NOT an activity in which the Insurance Bureau of Canada (IBC) is involved?

a) Developing advisory model policy wordings for use by the industry
b) Handling claims with a high standard of ethics and claims arbitration
c) Providing insurance crime-related investigative services
d) Advocating industry positions with consumers, government, members, and other stakeholders

101) Which of the following statements is TRUE with respect to direct compensation property damage (DCPD) coverage?

a) Suits are not allowed for any type of property damage loss
b) Suits are not allowed for any type of injury sustained in an auto mobile collision
c) An insured cannot pursue an at-fault party's insurer for damages to their vehicle, its contents, and any resulting loss of use
d) An insured will be indemnified for damages to their vehicle by their own insurer, regardless of fault

102) Under direct compensation property damage (DCPD) coverage, an insured will be indemnified by their own insurer, according to the degree they were not at fault for the automobile damage. One of the benefits of DCPD is that

a) Fault determination is no longer required
b) subrogation is quicker
c) accidents will be repaired expediently
d) All of the above

Final Examination (102 Questions)

Final Examination (102 Questions)

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