LM1 – CII Exam 2025 Questions and
Answers 100% Pass
By sharing information about their risk, the insured satisfies which obligation? -
✔✔Good faith
The proximate cause of a loss will always be the - ✔✔Dominant cause
Which insurance principle gives an insurer the right to call upon other insurers to share
in the settling of a claim? - ✔✔Contribution
A building valued at £250,000 is jointly owned by Karen and Terry, who each
individually arrange insurance on it. Karen insures the building for £100,000, whilst
Terry insures it for £150,000. If a valid claim of £55,000 occurs how much is each insurer
liable to pay? - ✔✔Karen's insurer is liable for £22,000 and Terry's for £33,000.
An insurer arranges for a policyholder's car to be repaired following damage by a
negligent third party motorist. Under which insurance principle can the insurer recover
the paid claim? - ✔✔Subrogation
Which insurance principle ensures that in the event of a loss the insured is placed in the
same financial position as he was immediately prior to the loss? - ✔✔Indemnity
The protection of jobs is classed as which type of function of insurance? - ✔✔A
secondary function of insurance only
Which type of risk arises from a cause outside the control of any one individual and
affects a large number of people? - ✔✔Fundamental risk
For an individual, which class of risk is always uninsurable? - ✔✔Speculative risk
COPYRIGHT © 2025 BY EMILLY CHARLOTTE, ALL RIGHTS RESERVED 1
, The subjective judgment that individuals or organisations make about the
characteristics and severity of a risk is known as - ✔✔Risk perception
In relation to insurance, a peril is - ✔✔An event that may give rise to a loss
The calculation of what involves the use of the law of large numbers? - ✔✔Equitable
premiums
What is the most likely impact, if any, on a commercial insurer if it fails to implement
an effective claims-handling process? - ✔✔The reputation of the insurer will be affected
A proposer for an insurance policy who has previously made fraudulent insurance
claims would be classed by an underwriter as a - ✔✔Poor moral hazard
Where the premiums of the many pay the losses of the few, this is known as -
✔✔Pooling of risks
What is the basic purpose of insurance? - ✔✔To transfer risks
What class of insurance protects the policyholder from the nationalisation of their
overseas assets by a foreign government? - ✔✔Political risks
Cargo carried by an airline will usually be covered under what class of business? -
✔✔Marine
What class of insurance would respond to claims made against a lawyer in respect of
advice given to fee paying clients? - ✔✔Professional indemnity
What class of insurance can provide cover for loss of attraction or denial of access to the
insured's premises? - ✔✔Business interruption
When underwriting capacity is withdrawn from the insurance market, what is the next
likely outcome in the context of the insurance cycle? - ✔✔The cost of insurance
increases
An insurer who has accepted a risk too large to retain can choose to insure part of the
risk to - ✔✔A reinsurer
What does the term facultative reinsurance mean? - ✔✔A single risk is reinsured
What effect does purchasing reinsurance have on an insurer's trading results? - ✔✔It
smooths peaks and troughs
COPYRIGHT © 2025 BY EMILLY CHARLOTTE, ALL RIGHTS RESERVED 2
Answers 100% Pass
By sharing information about their risk, the insured satisfies which obligation? -
✔✔Good faith
The proximate cause of a loss will always be the - ✔✔Dominant cause
Which insurance principle gives an insurer the right to call upon other insurers to share
in the settling of a claim? - ✔✔Contribution
A building valued at £250,000 is jointly owned by Karen and Terry, who each
individually arrange insurance on it. Karen insures the building for £100,000, whilst
Terry insures it for £150,000. If a valid claim of £55,000 occurs how much is each insurer
liable to pay? - ✔✔Karen's insurer is liable for £22,000 and Terry's for £33,000.
An insurer arranges for a policyholder's car to be repaired following damage by a
negligent third party motorist. Under which insurance principle can the insurer recover
the paid claim? - ✔✔Subrogation
Which insurance principle ensures that in the event of a loss the insured is placed in the
same financial position as he was immediately prior to the loss? - ✔✔Indemnity
The protection of jobs is classed as which type of function of insurance? - ✔✔A
secondary function of insurance only
Which type of risk arises from a cause outside the control of any one individual and
affects a large number of people? - ✔✔Fundamental risk
For an individual, which class of risk is always uninsurable? - ✔✔Speculative risk
COPYRIGHT © 2025 BY EMILLY CHARLOTTE, ALL RIGHTS RESERVED 1
, The subjective judgment that individuals or organisations make about the
characteristics and severity of a risk is known as - ✔✔Risk perception
In relation to insurance, a peril is - ✔✔An event that may give rise to a loss
The calculation of what involves the use of the law of large numbers? - ✔✔Equitable
premiums
What is the most likely impact, if any, on a commercial insurer if it fails to implement
an effective claims-handling process? - ✔✔The reputation of the insurer will be affected
A proposer for an insurance policy who has previously made fraudulent insurance
claims would be classed by an underwriter as a - ✔✔Poor moral hazard
Where the premiums of the many pay the losses of the few, this is known as -
✔✔Pooling of risks
What is the basic purpose of insurance? - ✔✔To transfer risks
What class of insurance protects the policyholder from the nationalisation of their
overseas assets by a foreign government? - ✔✔Political risks
Cargo carried by an airline will usually be covered under what class of business? -
✔✔Marine
What class of insurance would respond to claims made against a lawyer in respect of
advice given to fee paying clients? - ✔✔Professional indemnity
What class of insurance can provide cover for loss of attraction or denial of access to the
insured's premises? - ✔✔Business interruption
When underwriting capacity is withdrawn from the insurance market, what is the next
likely outcome in the context of the insurance cycle? - ✔✔The cost of insurance
increases
An insurer who has accepted a risk too large to retain can choose to insure part of the
risk to - ✔✔A reinsurer
What does the term facultative reinsurance mean? - ✔✔A single risk is reinsured
What effect does purchasing reinsurance have on an insurer's trading results? - ✔✔It
smooths peaks and troughs
COPYRIGHT © 2025 BY EMILLY CHARLOTTE, ALL RIGHTS RESERVED 2
