LM1 Practice Exam · Lloyd's Market Exam 1

What is the principle of indemnity?

• The insured must always profit from a claim

• The insurer pays more than the actual loss

• The insured is restored to their financial position before the loss

• The insurer pays a fixed amount regardless of the loss

Which of the following is a moral hazard?

• A building located in a flood zone

• A driver with a history of reckless driving

• A car parked on a busy street

• A house with a wooden roof

What is the purpose of reinsurance?

• To increase the insurer's profits

• To reduce the insured's premium

• To spread risk among multiple insurers

• To avoid paying claims

Which of the following is a peril?

• Fire

• Poor maintenance

• High crime rate

• Negligence

What is the role of Lloyd's central fund?

• To pay brokers' commissions

• To guarantee payment of claims

• To regulate underwriters

• To insure small businesses

What does the principle of good faith require?

• The insurer must pay all claims

• The insured must disclose all material facts

• The broker must act as an underwriter

• The policy must be renewed annually

Which body regulates insurance firms in the UK?

• FCA

• HMRC

• ABI

• PRA

What is the role of a broker in the London Market?

• To underwrite risks

• To represent the insurer

• To place business on behalf of clients

• To regulate claims

What is a follow underwriter?

• The first underwriter to assess a risk

• An underwriter who leads negotiations

• An underwriter who supports the lead underwriter

• A broker who follows up on claims

What is the insurance cycle?

• The process of claim settlement

• The fluctuation of premiums and underwriting results over time

• The renewal of policies

• The lifecycle of a broker