Fundamentals of Insurance Chapter 3
(BC Canada) Questions and Answers
2025-2026 Updated.
Explain the role of the property and casualty Insurance compensation corporation when an
insurer becomes insolvent. - Answer When a bankruptcy occurs and claims cannot be paid;
the corporation pays all valid claims. All participating insurance companies have been charged
an assessment to cover the total amount of the claims. The amount of each Insurance
contribution is based on total direct premiums written by it. Maximum of $250,000 for a single
occurrence. A refund of up to 70% of unearned premium subject to a maximum of $700 per
policy.
Insurance is "fiduciary" in nature. Define "fiduciary". - Answer A fiduciary is one who handles
other people's money. People in those positions must ensure that the trust placed in them is
not abused.
Briefly explain the fiduciary obligations of the insurers. - Answer Premiums paid to insurers
are not fully earned until the expiry of the insurance policy. Unearned premiums are considered
to be held in trust to refund to the insureds in the event the policy is cancelled prior to the
expiry date.
Briefly explain the fiduciary obligations of the brokers. - Answer Commissions are not fully
earned until the expiry of the insurance policy. Unearned commissions are considered to be
held in trust to refund to the insureds in the event of the policy being cancelled prior to its
expiry date.
Briefly summarize the provisions of the "Removal" clause contained in policies of fire insurance.
- Answer If property is moved to an unnamed location to prevent further loss coverage for
items moved is still covered. Insured will need to prove that property was necessarily removed
in order to prevent damage.
State the meaning of "subrogation" and indicate how this right is exercised by the insurer. -
Answer Subrogation means to put oneself "into another's shoes". The insurance acts allow
the insurer to place itself in the insured's shoes in respect to their right to recover the amount
of the loss from the responsible party. Any action commenced against the responsible party is
taken in the insured's name.
(BC Canada) Questions and Answers
2025-2026 Updated.
Explain the role of the property and casualty Insurance compensation corporation when an
insurer becomes insolvent. - Answer When a bankruptcy occurs and claims cannot be paid;
the corporation pays all valid claims. All participating insurance companies have been charged
an assessment to cover the total amount of the claims. The amount of each Insurance
contribution is based on total direct premiums written by it. Maximum of $250,000 for a single
occurrence. A refund of up to 70% of unearned premium subject to a maximum of $700 per
policy.
Insurance is "fiduciary" in nature. Define "fiduciary". - Answer A fiduciary is one who handles
other people's money. People in those positions must ensure that the trust placed in them is
not abused.
Briefly explain the fiduciary obligations of the insurers. - Answer Premiums paid to insurers
are not fully earned until the expiry of the insurance policy. Unearned premiums are considered
to be held in trust to refund to the insureds in the event the policy is cancelled prior to the
expiry date.
Briefly explain the fiduciary obligations of the brokers. - Answer Commissions are not fully
earned until the expiry of the insurance policy. Unearned commissions are considered to be
held in trust to refund to the insureds in the event of the policy being cancelled prior to its
expiry date.
Briefly summarize the provisions of the "Removal" clause contained in policies of fire insurance.
- Answer If property is moved to an unnamed location to prevent further loss coverage for
items moved is still covered. Insured will need to prove that property was necessarily removed
in order to prevent damage.
State the meaning of "subrogation" and indicate how this right is exercised by the insurer. -
Answer Subrogation means to put oneself "into another's shoes". The insurance acts allow
the insurer to place itself in the insured's shoes in respect to their right to recover the amount
of the loss from the responsible party. Any action commenced against the responsible party is
taken in the insured's name.
