CAIB 1 TEST BANK QUESTIONS WITH
VERIFIED ANSWERS FULL REVIEW
●● What is the primary function of insurance?
Answer: To spread risk from few to many.
●● What does the principle of indemnity state?
Answer: The amount of claim payment equals the amount of loss based
on the value of the object immediately prior to loss.
●● What is the definition of 'insured'?
Answer: Actual insured(s) and employees of the insured.
●● What does 'AoI' stand for?
Answer: Amount of Insurance.
●● What does 'on premises' refer to?
Answer: On the premises stated on the declaration page of the policy.
●● What is meant by 'controlled' in insurance terms?
Answer: Owned, rented, or controlled by the insured.
,●● What types of vehicles are included in the insurance definition of
'vehicles'?
Answer: Includes watercraft and other motorized vehicles, not only cars.
●● What are the three general categories of insurance?
Answer: Automobile Insurance, Property Insurance, and Liability
Insurance.
●● What is the difference between private and government insurance?
Answer: Government insurance is compulsory (e.g., EI, provincial
health plan), while private insurance is profit-oriented.
●● What is a direct writer in insurance?
Answer: An insurer that sells its own products directly to consumers
using employees.
●● What is an independent broker?
Answer: A broker that represents more than one insurer and earns
commission.
●● What is Lloyd's of London known for?
Answer: Insuring items that are uninsurable in normal markets.
,●● What is the role of the Insurance Bureau of Canada (IBC)?
Answer: Collects insurance statistics, provides actuarial analysis, drafts
policy forms, and manages claims settlement agreements.
●● What does the Insurer's Advisory Organization (IAO) do?
Answer: Provides risk inspection and rating services, and loss control
inspections.
●● What is the purpose of the Insurance Crime Prevention Bureau
(ICPB)?
Answer: Helps police detect, investigate, and prosecute insurance
crimes.
●● What is the federal body that licenses insurers operating in multiple
provinces?
Answer: Office of the Superintendent of Financial Institutions.
●● What is the role of provincial regulators in insurance?
Answer: Regulate terms of insurance policies and license insurers,
brokers, and adjusters.
●● What does solvency mean in the context of insurance?
Answer: The ability to meet financial obligations.
, ●● What is the Property & Casualty Insurance Compensation
Corporation?
Answer: Covers policyholders even when an insurer goes bankrupt.
●● What is the responsibility of brokers in the insurance industry?
Answer: To hold commissions in trust and return unearned commissions.
●● What must appear on the Declarations Page of an insurance policy?
Answer: Parties to the contract, loss payable or payee, policy period,
coverage and amount of insurance, subject matter of insurance, rates,
and premiums.
●● What happens to unearned premiums in insurance?
Answer: They must be held in trust and are returned to the insured upon
policy expiry.
●● What is the significance of the 'slip' in Lloyd's underwriting process?
Answer: It provides the underwriting information on which underwriters
commit to a percentage of the risk.
●● What is a syndicate in the context of Lloyd's of London?
Answer: A group of underwriters that assume risks collectively.
VERIFIED ANSWERS FULL REVIEW
●● What is the primary function of insurance?
Answer: To spread risk from few to many.
●● What does the principle of indemnity state?
Answer: The amount of claim payment equals the amount of loss based
on the value of the object immediately prior to loss.
●● What is the definition of 'insured'?
Answer: Actual insured(s) and employees of the insured.
●● What does 'AoI' stand for?
Answer: Amount of Insurance.
●● What does 'on premises' refer to?
Answer: On the premises stated on the declaration page of the policy.
●● What is meant by 'controlled' in insurance terms?
Answer: Owned, rented, or controlled by the insured.
,●● What types of vehicles are included in the insurance definition of
'vehicles'?
Answer: Includes watercraft and other motorized vehicles, not only cars.
●● What are the three general categories of insurance?
Answer: Automobile Insurance, Property Insurance, and Liability
Insurance.
●● What is the difference between private and government insurance?
Answer: Government insurance is compulsory (e.g., EI, provincial
health plan), while private insurance is profit-oriented.
●● What is a direct writer in insurance?
Answer: An insurer that sells its own products directly to consumers
using employees.
●● What is an independent broker?
Answer: A broker that represents more than one insurer and earns
commission.
●● What is Lloyd's of London known for?
Answer: Insuring items that are uninsurable in normal markets.
,●● What is the role of the Insurance Bureau of Canada (IBC)?
Answer: Collects insurance statistics, provides actuarial analysis, drafts
policy forms, and manages claims settlement agreements.
●● What does the Insurer's Advisory Organization (IAO) do?
Answer: Provides risk inspection and rating services, and loss control
inspections.
●● What is the purpose of the Insurance Crime Prevention Bureau
(ICPB)?
Answer: Helps police detect, investigate, and prosecute insurance
crimes.
●● What is the federal body that licenses insurers operating in multiple
provinces?
Answer: Office of the Superintendent of Financial Institutions.
●● What is the role of provincial regulators in insurance?
Answer: Regulate terms of insurance policies and license insurers,
brokers, and adjusters.
●● What does solvency mean in the context of insurance?
Answer: The ability to meet financial obligations.
, ●● What is the Property & Casualty Insurance Compensation
Corporation?
Answer: Covers policyholders even when an insurer goes bankrupt.
●● What is the responsibility of brokers in the insurance industry?
Answer: To hold commissions in trust and return unearned commissions.
●● What must appear on the Declarations Page of an insurance policy?
Answer: Parties to the contract, loss payable or payee, policy period,
coverage and amount of insurance, subject matter of insurance, rates,
and premiums.
●● What happens to unearned premiums in insurance?
Answer: They must be held in trust and are returned to the insured upon
policy expiry.
●● What is the significance of the 'slip' in Lloyd's underwriting process?
Answer: It provides the underwriting information on which underwriters
commit to a percentage of the risk.
●● What is a syndicate in the context of Lloyd's of London?
Answer: A group of underwriters that assume risks collectively.
