CAIB 2 ACTUAL FINAL EXAM QUESTIONS AND ANSWERS
GUARANTEE A+
✔✔Identify four activities that are common to all underwriter" - ✔✔- risk selection
- risk classification
- rating and rate making
- policy holders service
✔✔Identify two possible effects if an application is improperly classified b an underwriter
- ✔✔1) premium charged is in excess of that required
2) premium charged is insufficient
✔✔Identify two factors which normally affect the premiums charged by insurers - ✔✔-
inflation
-changes in interest rates being paid on investments
✔✔identify six types of physical hazards: - ✔✔type of building construction
occupancy
housekeeping
external exposures
geography
protection
[phgote]
✔✔briefly explain how the hazards of occupancy, or housekeeping can affect two
buildings of identical construction - ✔✔two identical constructed buildings will represent
a different level of hazard when one is used to house the local public library and the
other, a welding and metal fabrication shop
✔✔identify three types of external exposures that can affect an otherwise 'good risk' -
✔✔forestry area
bakery
gas station
(close to restaurants)
✔✔identify three types of moral hazard and explain - ✔✔financial condition - if profits
reduce due to economy for ex. many insurdes consider the benefits of a fire.
associates - friends circle
moral character - personality
✔✔identify two types of morale hazard - ✔✔indifference to loss
,poor management
✔✔identify four 'external sources of information' available to an underwriter - ✔✔the
broker
government records
financial rating services
consumer investigation reports
✔✔identify seven 'internal sources of information' available to an underwriter - ✔✔loss
experience data
inspection reports
field representatives (ex staff)
claims information
production records
underwriting guides, and manuals
other underwriters.
✔✔identify two types of 'underwriting information' contained in inspection reports -
✔✔physical characteristics of risk
character of the applicant or insured
✔✔identify the two types of 'recommendations' found in inspection reports -
✔✔mandatory
suggested
✔✔explain how 'previous claim information' may present a positive or negative view of
the applicant - ✔✔was the claim a legitimate one or do the circumstances surrounding
the claim make it questionable? was the applicant co-operative or hostile when dealing
with the claims adjuster?
✔✔explain the relationship between 'accommodation business' and 'supporting
business' - ✔✔brokers will sometimes request coverage on a risk which is substandard
or marginal but which the underwriter agrees to accept as a favor or accommodation to
the broker. The broker will do this because of the applicants supporting business of
other insurance policies the applicant has with the same insurer.
✔✔identify the four parameters within which an underwriter makes a decision about a
particular risk - ✔✔- to accept the submission o the basis presented
- to reject the risk
- to accept the risk with an increase in the rate
- to accept the risk, maintain the rate, and increase the deductible
✔✔identify the three leading causes of fires in canada - ✔✔-failure or malfunction of
mechanical or electrical equipment
,-arson, suspected arson and other set fires
-misuse of source of ignition
✔✔Identify what information is required by law to appear on all insurance policies -
✔✔names of parties to the contract
policy period\loss payable or payee
summary of insurance coverage
rate and premium charged
subject matter of insurance
✔✔identify the 'policy period' shown on the declarations page - ✔✔the policy takes
effect 1201 am local time at the insureds address
✔✔what could happen if an insurer paid the entire amount of a claim to the client when
a 'loss payable' was indicated on the policy? - ✔✔the insurer would be called upon to
pay the claim twice
✔✔how could your answer differ if the loss payable was not indicated on the policy? -
✔✔when the payee is not stated on the policy and payment of a loss is paid in full to the
insured, there is no obligation upon the insurer to indemnify the payee
✔✔The IFC 10010 is designed to meet the requirements of the insurance acts of the
common law provinces. identify the three perils to be included by law in any contract of
fire insurance - ✔✔fire
lightning
explosion of natural, coral or manufactured gas
✔✔does the peril of lightning under this form cover DIRECT losses to electrical
appliances? - ✔✔no
✔✔identify the losses that insurers are NOT liable for by law - ✔✔loss or damage to
electrical devices, appliances or wiring caused by artificially generated electrical
currents.
loss or damage by the application of heat.
loss or damage caused by war
✔✔trade losses are NOT required to be insured by law. identify three types of
businesses that may suffer a trade loss - ✔✔bakeries\laundaries\machinging and
fabricating shops, garages
✔✔certain property losses are NOT required to be nsured by law. identify the four
groups of property exluded - ✔✔money, securities, stamps
automobiles, watercraft, aircraft
, property at locations which the knowledge of the insured are vacant, unoccupied, or
shut down for more than 30 consecutive days
✔✔any additional costs as a result of a by-law, incurred by the insured is NOT covered
under the policy. identify any three such costs that may be incurred by the insured. -
✔✔use of improved construction materials
installation of automatic fire estinguishing systems
installation of wheelchair, ramps, and improved accessibility features for the
handicapped
✔✔identify two extensions of coverage required by law to be in a fire policy -
✔✔removal
debris removal
✔✔identify three provisions of the removal clause - ✔✔coverage provided for 7 days to
unnamed location of until unexpired term of policy
coverage is provided the insured is ABLE to show that such property was 'necessarily'
removed to prevent loss
remaining amount of policy be paid if loss occurs
✔✔briefly explain the purpose of the debris removal extension - ✔✔to clean the site,
condition paid if any money left in the policy.
shall not exceed 25% of total amount payable
✔✔all fire and extended forms used by insurance companies are identical, true or false?
- ✔✔false
✔✔identify the perils insured by the fire and extended coverages form In the text -
✔✔fire and lightning
explosion
impact by aircraft, space ship or land vehicle
riot, vandalism or malicious acts
smoke
leakage from fire protective equipment
windstorm or hail
✔✔all DIRECT damages caused to by electrical appliances covered under this form?
(fire or extended coverages) - ✔✔yes
✔✔the peril of explosion covers only direct damages caused by explosion of -
✔✔natural
coal
manufactured gas
GUARANTEE A+
✔✔Identify four activities that are common to all underwriter" - ✔✔- risk selection
- risk classification
- rating and rate making
- policy holders service
✔✔Identify two possible effects if an application is improperly classified b an underwriter
- ✔✔1) premium charged is in excess of that required
2) premium charged is insufficient
✔✔Identify two factors which normally affect the premiums charged by insurers - ✔✔-
inflation
-changes in interest rates being paid on investments
✔✔identify six types of physical hazards: - ✔✔type of building construction
occupancy
housekeeping
external exposures
geography
protection
[phgote]
✔✔briefly explain how the hazards of occupancy, or housekeeping can affect two
buildings of identical construction - ✔✔two identical constructed buildings will represent
a different level of hazard when one is used to house the local public library and the
other, a welding and metal fabrication shop
✔✔identify three types of external exposures that can affect an otherwise 'good risk' -
✔✔forestry area
bakery
gas station
(close to restaurants)
✔✔identify three types of moral hazard and explain - ✔✔financial condition - if profits
reduce due to economy for ex. many insurdes consider the benefits of a fire.
associates - friends circle
moral character - personality
✔✔identify two types of morale hazard - ✔✔indifference to loss
,poor management
✔✔identify four 'external sources of information' available to an underwriter - ✔✔the
broker
government records
financial rating services
consumer investigation reports
✔✔identify seven 'internal sources of information' available to an underwriter - ✔✔loss
experience data
inspection reports
field representatives (ex staff)
claims information
production records
underwriting guides, and manuals
other underwriters.
✔✔identify two types of 'underwriting information' contained in inspection reports -
✔✔physical characteristics of risk
character of the applicant or insured
✔✔identify the two types of 'recommendations' found in inspection reports -
✔✔mandatory
suggested
✔✔explain how 'previous claim information' may present a positive or negative view of
the applicant - ✔✔was the claim a legitimate one or do the circumstances surrounding
the claim make it questionable? was the applicant co-operative or hostile when dealing
with the claims adjuster?
✔✔explain the relationship between 'accommodation business' and 'supporting
business' - ✔✔brokers will sometimes request coverage on a risk which is substandard
or marginal but which the underwriter agrees to accept as a favor or accommodation to
the broker. The broker will do this because of the applicants supporting business of
other insurance policies the applicant has with the same insurer.
✔✔identify the four parameters within which an underwriter makes a decision about a
particular risk - ✔✔- to accept the submission o the basis presented
- to reject the risk
- to accept the risk with an increase in the rate
- to accept the risk, maintain the rate, and increase the deductible
✔✔identify the three leading causes of fires in canada - ✔✔-failure or malfunction of
mechanical or electrical equipment
,-arson, suspected arson and other set fires
-misuse of source of ignition
✔✔Identify what information is required by law to appear on all insurance policies -
✔✔names of parties to the contract
policy period\loss payable or payee
summary of insurance coverage
rate and premium charged
subject matter of insurance
✔✔identify the 'policy period' shown on the declarations page - ✔✔the policy takes
effect 1201 am local time at the insureds address
✔✔what could happen if an insurer paid the entire amount of a claim to the client when
a 'loss payable' was indicated on the policy? - ✔✔the insurer would be called upon to
pay the claim twice
✔✔how could your answer differ if the loss payable was not indicated on the policy? -
✔✔when the payee is not stated on the policy and payment of a loss is paid in full to the
insured, there is no obligation upon the insurer to indemnify the payee
✔✔The IFC 10010 is designed to meet the requirements of the insurance acts of the
common law provinces. identify the three perils to be included by law in any contract of
fire insurance - ✔✔fire
lightning
explosion of natural, coral or manufactured gas
✔✔does the peril of lightning under this form cover DIRECT losses to electrical
appliances? - ✔✔no
✔✔identify the losses that insurers are NOT liable for by law - ✔✔loss or damage to
electrical devices, appliances or wiring caused by artificially generated electrical
currents.
loss or damage by the application of heat.
loss or damage caused by war
✔✔trade losses are NOT required to be insured by law. identify three types of
businesses that may suffer a trade loss - ✔✔bakeries\laundaries\machinging and
fabricating shops, garages
✔✔certain property losses are NOT required to be nsured by law. identify the four
groups of property exluded - ✔✔money, securities, stamps
automobiles, watercraft, aircraft
, property at locations which the knowledge of the insured are vacant, unoccupied, or
shut down for more than 30 consecutive days
✔✔any additional costs as a result of a by-law, incurred by the insured is NOT covered
under the policy. identify any three such costs that may be incurred by the insured. -
✔✔use of improved construction materials
installation of automatic fire estinguishing systems
installation of wheelchair, ramps, and improved accessibility features for the
handicapped
✔✔identify two extensions of coverage required by law to be in a fire policy -
✔✔removal
debris removal
✔✔identify three provisions of the removal clause - ✔✔coverage provided for 7 days to
unnamed location of until unexpired term of policy
coverage is provided the insured is ABLE to show that such property was 'necessarily'
removed to prevent loss
remaining amount of policy be paid if loss occurs
✔✔briefly explain the purpose of the debris removal extension - ✔✔to clean the site,
condition paid if any money left in the policy.
shall not exceed 25% of total amount payable
✔✔all fire and extended forms used by insurance companies are identical, true or false?
- ✔✔false
✔✔identify the perils insured by the fire and extended coverages form In the text -
✔✔fire and lightning
explosion
impact by aircraft, space ship or land vehicle
riot, vandalism or malicious acts
smoke
leakage from fire protective equipment
windstorm or hail
✔✔all DIRECT damages caused to by electrical appliances covered under this form?
(fire or extended coverages) - ✔✔yes
✔✔the peril of explosion covers only direct damages caused by explosion of -
✔✔natural
coal
manufactured gas
