IF1 Review 1

By paying their premium, someone who has insured their motor car is said to have:

• confirmed the peril with the insurer.

• insured the contingency with the insurer.

• transferred the risk to the insurer.

• re-insured the risk to the insurer.

Answer explanation

Chapter reference 1A2

Someone who buys contents insurance is most likely to:

• have plenty of savings.

• have a limited disposable income

• have few personal possessions.

• be risk-averse

Answer explanation

chapter reference 1A4

If a motor insurance policy requires the car to be kept in a garage at night, this is an example of risk:

• reporting.

• control.

• analysis.

• identification.

Answer explanation

chapter reference 1B3

As a risk, the theft of mobile phones and the unauthorised use of them is regarded as:

• low frequency, high severity.

• ow frequency, low severity.

• high frequency, low severity.

• high frequency, high severity.

Answer explanation

chapter reference 1C2

An old thatched cottage catches fire after being struck by lightning. What is most likely to be regarded as being the hazard in this example?

• The age of the property.

• Being struck by lightning.

• The fire.

• The thatched roof.

Answer explanation

chapter reference 1C3

A pure risk is one where there is:

• a possibility of a gain or break-even, but not a loss.

• a possibility of a loss or break-even, but not a gain.

• only the possibility of break-even.

• the possibility of gain or loss, but not break-even.

Answer explanation

chapter reference 1D2

What type of risk does a typical insurance policy provide insurance cover against?

• Pure risks.

• Risks with no insurable interest.

• Deliberate acts.

• Non-financial risks.

Answer explanation

chapter reference 1D2

What must a risk be in order to be insurable?

• Inevitable.

• Avoidable.

• Fortuitous

• Deliberate.

Answer explanation

Chapter reference 1E1

The ability of underwriters to be able to quote an appropriate premium is based on the concept of:

• speculation.

• fairness.

• equity.

• homogeneous exposures.

Answer explanation

chapter reference 1E4

What is the primary function of insurance?

• To reduce dependency on the State.

• To act as a risk transfer mechanism.

• o provide high levels of jobs and employment

• To invest funds to support the economy.

Answer explanation

chapter reference 1F