CII R05 Chapter 2 Questions with Verified
Correct Answers
Which factors can encourage an individual to purchase a financial protection policy?
A combination of increased income and house market activity and falling inflation
Some life policies are open to commoditisation in the current financial protection
marketplace. Such policies are most likely to be simpler with what?
Cheaper premiums
What is commoditisation in the context of protection products?
Where protection products are bought via the internet without the help of a financial adviser.
This is usually down to price.
People in the UK are living longer. This has led to....
Mortality rates decreasing
What impact has the UK welfare state had on insurance needs?
This has made people less aware of their insurance needs
Which type of protection would be best suited to long term cover?
Income protection insurance
Support for Mortgage Interest (SMI) features
maximum loan amount that will have interest covered: £200,000 and maximum typical
waiting period: 39 weeks
What is the qualification criteria for Personal Independence Payments? (PIP)
Must be under state pension age and needing assistance for at least three months
,How long will it take to enter the assessment phase for employment support allowance
for both employees and those who are self-employed?
Employed: 28 weeks
Self-employed: 3 days
Demand for life cover is driven by: (4)
Affordability
Movements in the housing market
Income per head
Dependents
What is the protection gap?
The shortfall in cover required to maintain the current living standard of any dependents
Whats is the formula for the protection gap?
Resources needed - cover already in place through individual and personal policies
When insuring against risk, it is most effective when addressing risks that are?
Low frequency but high impact
Life insurance is...
Sold not bought
Life insurance being sold not bought refers to?
Life insurance being complex and easily misunderstood and should rely on a financial adviser
identifying a need and selling the correct cover
What are the impacts for customers not taking financial advice on protection products?
,1. Taking out the wrong kind of cover
2. Taking out the wrong amount of cover
3. Taking out cover for an insufficient term
4. Incorrect or no use of a trust form
5. Having cover they dont fully understand
6. Taking out a cover that is unaffordable
What is the protection gap?
The shortfall in cover required to maintain the current living standard of any dependents
The preferred life approach to underwriting:
Effectively reverses the underwriting process
Commoditisation of term assurance has resulted in:
Providers trying to be near the top of price comparison websites
In a survey of millennials, what is the most common reason given by people that would
prevent them from buying life assurance in the future?
They feel they do not need it
What is the aggregate demand for life assurance primarily driven by?
Affordability
The two main events that have a high impact on individuals and their families and
which should be the focus for insurance based solutions are:
Death and disability
Should the cost of living increase, what would be the expected percentage of people who
would consider cancelling their health insurance?
, 10%
One of the major changes in protection product design has arisen through vital health
issues that affect mortality such as:
Whether the individual is a smoker or non-smoker
It has become much easier to buy financial protection products without advice. This has
led to:
More simplified and standardised processes
The rapidly improving trends in mortality mean the biggest concern facing most people
is:
Living too long
Which type of financial protection will provide Juan with a lump sum or income benefit
if he suffers an accident or falls ill?
Accident, sickness and unemployment insurance
Danny is considering an offer of employment that includes a package of benefits. He
should be aware that:
Private medical insurance is taxable on the employee as a benefit in kind
What is the usual maximum period for mortgage protection cover?
2 years
What are the four main categories of risk and how are these dealt with?
1. Low frequency and high impact (insure)
2. Low frequency and low impact (manage)
Correct Answers
Which factors can encourage an individual to purchase a financial protection policy?
A combination of increased income and house market activity and falling inflation
Some life policies are open to commoditisation in the current financial protection
marketplace. Such policies are most likely to be simpler with what?
Cheaper premiums
What is commoditisation in the context of protection products?
Where protection products are bought via the internet without the help of a financial adviser.
This is usually down to price.
People in the UK are living longer. This has led to....
Mortality rates decreasing
What impact has the UK welfare state had on insurance needs?
This has made people less aware of their insurance needs
Which type of protection would be best suited to long term cover?
Income protection insurance
Support for Mortgage Interest (SMI) features
maximum loan amount that will have interest covered: £200,000 and maximum typical
waiting period: 39 weeks
What is the qualification criteria for Personal Independence Payments? (PIP)
Must be under state pension age and needing assistance for at least three months
,How long will it take to enter the assessment phase for employment support allowance
for both employees and those who are self-employed?
Employed: 28 weeks
Self-employed: 3 days
Demand for life cover is driven by: (4)
Affordability
Movements in the housing market
Income per head
Dependents
What is the protection gap?
The shortfall in cover required to maintain the current living standard of any dependents
Whats is the formula for the protection gap?
Resources needed - cover already in place through individual and personal policies
When insuring against risk, it is most effective when addressing risks that are?
Low frequency but high impact
Life insurance is...
Sold not bought
Life insurance being sold not bought refers to?
Life insurance being complex and easily misunderstood and should rely on a financial adviser
identifying a need and selling the correct cover
What are the impacts for customers not taking financial advice on protection products?
,1. Taking out the wrong kind of cover
2. Taking out the wrong amount of cover
3. Taking out cover for an insufficient term
4. Incorrect or no use of a trust form
5. Having cover they dont fully understand
6. Taking out a cover that is unaffordable
What is the protection gap?
The shortfall in cover required to maintain the current living standard of any dependents
The preferred life approach to underwriting:
Effectively reverses the underwriting process
Commoditisation of term assurance has resulted in:
Providers trying to be near the top of price comparison websites
In a survey of millennials, what is the most common reason given by people that would
prevent them from buying life assurance in the future?
They feel they do not need it
What is the aggregate demand for life assurance primarily driven by?
Affordability
The two main events that have a high impact on individuals and their families and
which should be the focus for insurance based solutions are:
Death and disability
Should the cost of living increase, what would be the expected percentage of people who
would consider cancelling their health insurance?
, 10%
One of the major changes in protection product design has arisen through vital health
issues that affect mortality such as:
Whether the individual is a smoker or non-smoker
It has become much easier to buy financial protection products without advice. This has
led to:
More simplified and standardised processes
The rapidly improving trends in mortality mean the biggest concern facing most people
is:
Living too long
Which type of financial protection will provide Juan with a lump sum or income benefit
if he suffers an accident or falls ill?
Accident, sickness and unemployment insurance
Danny is considering an offer of employment that includes a package of benefits. He
should be aware that:
Private medical insurance is taxable on the employee as a benefit in kind
What is the usual maximum period for mortgage protection cover?
2 years
What are the four main categories of risk and how are these dealt with?
1. Low frequency and high impact (insure)
2. Low frequency and low impact (manage)
