Preparation for Insurance Claims Handling Process (WCE)
BIBF Mock exam II
Chapter 1
1. Into which of these situations ‘notification of a claim’ does fall?
a. Conditions precedent to contract
b. Conditions precedent to liability
c. Conditions subsequent to liability
d. Conditions prior to contract
2. In liability insurance claims, the amount of loss is to be decided either by the court or ……. .
a. To be decided by the insurer
b. To be decided by the regulator
c. To be negotiated and agreed between the policyholder and the third party
d. To be negotiated and agreed between the insurer and the third party
3. Which of the following is a point of ‘initial review’ of a claim?
a. Has the duty of disclosure been complied with?
b. The application of excess or deductible
c. Recovery from TP fault-doer
d. The disposal of the salvage
4. Which of the following express conditions limits the indemnity amount?
a. Average
b. Loss notification
c. Subrogation
d. Arbitration
5. Which of the following conditions only affects a particular loss or claim?
a. Conditions subsequent to contract
b. Conditions precedent to contract
c. Conditions precedent to liability
d. Conditions precedent to the policy
6. For a term or condition of an insurance policy to be fair, it needs to be transparent.
Transparent means:
a. Prominent
b. Clear
c. It serves the policyholder more than the insurer
d. Notable
7. Which of the following documents enables the insurer to know their right of recovery of a
claim amount?
a. Quotations of damaged items
b. Climate report issued by authority for storm incident
c. Proposal form
d. Claim form
8. In which of the following claims “coroner’s inquest report” is needed?
a. Sickness insurance claims
b. Personal accidents claims
c. Medical insurance claims
d. Creditors insurance claims
9. Which of the following experts has the duty of approving the repairing costs?
a. Insurance surveyor
b. Solicitor
c. Motor engineer
d. Loss adjuster
10. Which of the following provides a good description of the doctrine of proximate cause?
a. The first cause
b. The dominant cause
c. The last cause
d. The middle cause
11. In a road traffic accident, a truck runs into a tree, causing the tree to be deemed unsafe.
One week later, a gale blows it over onto a warehouse. What is the proximate cause of the
damage to the warehouse?
a. The location of the tree
b. The delay in removing or treating the tree
c. The road traffic accident
d. The gale
12. Why the FNL enables the insurer to reduce the exaggeration of claims?
a. Prompt attendance to the site of the loss by the loss surveyor or loss adjuster
b. Recovery of the loss from TP will be easier
c. Prompt settlement of the claim
d. The details of the lost items to be submitted to the insurer by the insured quickly
Chapter 2
13. A business interruption policy is designed primarily to cover …………… .
A. Loss of sales
B. Loss of profit
C. Loss of turnover
D. Loss in the value of the shares of the insured firm
14. Under motor comprehensive insurance policy, what is the position of malicious act?
a. Excluded
b. Covered only if the policyholder extends his policy and pays additional premium
c. Covered
d. Covered only if requested by the policyholder without paying additional premium
15. How to describe a situation when a commercial vehicle is used by the driver for private and
pleasure purposes?
a. Indemnity to user
b. Indemnity to driver
c. Indemnity to passenger
d. Indemnity to policyholder
16. Which of the following is excluded under travel insurance?
a. Medical expenses
b. Injury to others by the negligent act of the policyholder
c. Travel interruption
d. Pregnancy and child-birth
17. In which of the following insurance policies ‘first loss’ basis is commonly used?
a. Fire and special perils policy
b. Professional indemnity policy
c. Theft insurance
d. Extended warranty insurance
18. Which of the following insurance policies is based on an ‘all risks’ cover?
a. Theft insurance
b. Household insurance
c. Public liability insurance
d. Money insurance
19. Which of the following policies operates when the policyholder becomes unemployed or
redundant?
a. Creditor insurance
b. Extended warranty
c. Gadget insurance
d. Personal accidents and sickness insurance
20. Which of the following is covered under employer’s liability insurance policy?
a. Injury to consumer
b. Injury to a visitor
c. Ancillary activities
d. Injury to an employee by a partner
21. Which of the following is a typical limitation of creditor insurance policy?
a. Cover does not apply to senior management employees
b. Cover does not apply to part-time workers
c. Cover does not apply to those working six hours a day
d. Cover does not apply to the first month of the policy period
22. Which of the following perils form the components of standard fire insurance policy?
a. Fire and lightning
b. Fire, lightning and chemical explosion
c. Fire, subterranean fire and lightning
d. Fire, lightning and domestic explosion
23. How does household contents insurance provide the cover against theft?
a. Generally, it is covered whether the thief uses forcible and violent entry/exist or not
b. It is covered only when the thief uses forcible and violent entry/exist
c. It is covered only if the value of items stolen is £10,000 or more
d. Theft is covered but excluding theft of money
24. ‘This clause stipulates that a material damage insurance policy must be in place, covering the
physical damage caused by the incident, before the business interruption policy will respond.’
What is being described here?
a. An implied condition
b. A material damage warranty
c. Prevention of access clause
d. Consequential loss exclusion
25. What is ‘pure financial loss’ in the context of product liability insurance?
a. Financial loss that arises purely from the insured’s product
b. Financial loss that accompanies bodily injury or property damage to third party
c. Financial loss that does not accompany bodily injury or property damage to third party
d. Financial loss that arises whether or not bodily injury or damage to third party property has
occurred.
Chapter 3
26. Which of the following is a role of claims department?
a. Claims settlement
b. Loss survey
c. Ability to distinguish between valid and fraudulent claims
d. Loss recovery from third party following the payment of a claim
27. How does replacement of goods is a way to fight fraud?
a. It discourages fraudulent claims where cash is needed
b. It discourages fraudulent claims where underinsurance is experienced
c. It discourages fraudulent claims where betterment is needed to be deducted
d. It discourages the use of supply chains
28. In which way ‘claims philosophy’ of claims department is written?
a. Using two to three paragraphs
b. In broader terms
c. Goes into details of promptness and deadlines
d. Providing examples and testimonies of the quality service provided by claims department
29. Who are the parties of disputes raised to Financial Ombudsman Services?
a. Insurer and another insurer
b. Insurer and third parties
c. Insurer and policyholders
d. Insurer and reinsurers
30. Claims reserve for a specific class of insurance or a branch of insurance company, is called?
a. Global reserving
b. Aggregate reserving
c. Departmental reserving
d. Individual reserving
31. Before handling any dispute/complaint, they will ensure that all possible steps are taken by
the insurer to try to resolve the dispute. This statement describes which dispute resolution?
a. Arbitration
b. Expert determination
c. Financial Ombudsman Services
d. Early neutral evaluation
32. Which of the following ADRs is used for construction disputes?
a. Arbitration
b. Conciliation
c. Expert determination
d. Adjudication
33. Who are vulnerable customers?
a. Difficult or awkward customers
b. Those customers who especially susceptible to detriment
c. Those customers who have the habit of changing insurers every year
d. Those customers who always expect additional services from insurers
34. In which of the following situations, the injured third party is not to get full indemnity?
a. Negligence of the insured
b. Contributory negligence
c. Carelessness of the insured
d. Third party property damage
35. Which of the following is NOT a reason for considering customer service as a dominant issue?
a. Competent staff within claims department
b. Customer awareness
c. Expectation of service
d. Competition
36. Who does not regularly review claims reserves?
a. Actuary
b. Loss adjuster
c. Underwriters
d. Claims manager
37. Which of the following is requested by the regulator?
a. To separate claims of personal lines from commercial lines
b. To appoint a loss adjuster for large claims
c. To settle claims promptly once settlement terms are agreed
d. To handover the salvage to insured once he requests
38. Which of the following is NOT a sign of fraudulent claims?
a. Excessive pressure for cash settlement
b. The perfect presentation of the claim
c. Lack of cooperation by the insured
d. Reminding motor claims handler of his entitlement of car replacement
Chapter 4
39. In handling motor claims for third party injury, what is to be established by the claims handler
before consideration is given to the extent of the injury?
a. The number of dependents of the injured person
b. The income of the injured person
c. The degree of negligence of the driver
d. The property damage
40. What evidence will a claims handler require when assessing a claim under a personal accident
policy for the death of the insured person?
a. Death certificate
b. A will
c. Financial debts of the insured person
d. Financial status of the beneficiaries
41. When considering the settlement of contents under household insurance policy, how to
classify refrigerators, freezers and TVs?
a. Durable goods
b. Non-durable goods
c. Consumer goods
d. Perishable goods
42. Why handling claims of benefit policies differs from handling claims of indemnity policies?
a. Their losses are usually less than indemnity
b. The amount payable for their claims is stated in the policy
c. It is proven that their claims are more susceptible to fraud
d. Settling of their claims is on ‘claims made basis’
43. The bedroom window of a house is damaged by falling of a tree and a claim is submitted
under a building section of householder insurance policy for new glazing. The new window is
a double-glazed unit and therefore, of a higher specification than the original single-glazed
window. What is this situation known as?
a. Indemnity
b. Under-insurance
c. Consumer goods
d. Betterment
44. Fraud incidents are less expected in which of the following insurance policies?
a. Life assurance
b. Extended warranty insurance
c. Theft insurance
d. Household insurance
45. Claims/losses are to be reported to the insured during the policy period. This statement
describes which of the following?
a. Loss occurring basis
b. Claims made basis
c. Claim notification basis
d. Negligence occurring basis
46. ‘How soon the insured can start working?’. In which claim form this question is written?
a. Business interruption insurance
b. Medical insurance
c. Extended warranty insurance
d. Employer’s liability insurance
47. Which of the following is an example of ‘special damages’ in personal injury claims?
a. Pain
b. Loss of amenities
c. Treatment costs
d. Suffering
48. General damages are normally used in settling claims of which insurance policies?
a. Personal accidents
b. Liability
c. Gadget
d. Business interruption
49. Which of the following is considered as risk retention?
a. Self-insurance
b. Transferring the risk to insurance industry
c. Ignoring the existence of risks
d. Letting other parties bear the risk
50. For rehabilitation of the injured person, under which of the following options ‘helping the
claimant to live normal’ life falls?
a. Medical
b. Professional
c. Qualitative
d. Vocational
51. Which of the following is an example of the uninsured loss recovery service?
a. Recovery of the uninsured loss from third party wrongdoer
b. Recovery of uninsured loss from treaty reinsurer
c. Recovery of uninsured loss from co-insurer
d. Recovery of uninsured loss from facultative reinsurer
Chapter 5
52. In relation to the policyholder, what is the main aim of an insurer implementing IT into the
claims handling process?
a. To aid communication
b. To improve service
c. To reduce the loss survey visits
d. To help choose a proper loss adjuster
53. Functional structure of an insurance company is more suited for which size of insurance firms?
a. Smaller firms
b. Larger firms
c. Firms with regional branches
d. Firms with multi-national
54. Employees can specialize in their type of work. Which type of company structure this
statement relates?
a. Centralization
b. Decentralization
c. Divisional
d. Blend of functional and divisional
55. As well as being able to make significant cost reductions, why else might an insurer choose to
outsource its claims handling function?
a. To improve its business as multi-site operation
b. To transfer some of its burden imposed by the regulator
c. To access wide skills base
d. It is liked by the customers
56. Which of the following is NOT a function of a loss adjuster?
a. Loss recovery
b. Loss investigation
c. Loss negotiation
d. Loss mitigation
57. Who pays the loss assessor’s fees?
a. Insurer
b. Insured
c. Both insurer and insured
d. Insurance broker
Chapter 6
58. Where a claims handler is able to assemble sufficient evidence to show that a claim is
fraudulent, what is the position of the claim under the insured’s policy?
a. The claim will be referred to Financial Ombudsman Services
b. The claim will be reported to the regulator
c. The claim will be invalidated
d. The claim will be referred to complaints department
59. Which of the following leads a claim to be partially met?
a. A breach of a condition
b. Ex-garia payment
c. A breach of a warranty
d. Fraud
60. Motor Insurance Bureau (MIB) provides compensation for victims in relation to what of the
following situation?
a. Stolen vehicles which are not insured comprehensively
b. Natural disasters
c. Unroadworthy vehicles
d. Uninsured and untraced drivers
61. Trend is very important in which of the following?
a. Flag reserving
b. Disposing of the salvage
c. Application of average clause
d. Cash settlement
62. To which of the following principle/concept ‘Bilateral market claims agreement’ relates?
a. Subrogation
b. Proximate cause
c. Reinstatement memorandum
d. Ex-gratia payment
63. Which of the following grants the insured a discount?
a. Compulsory excess
b. Voluntary excess
c. Deductible
d. Franchise
64. It is a fire insurance policy with a franchise amount of £100. What is the liability of the insurer
if the insured suffers a loss of £150?
a. £50
b. £100
c. £150
d. Nothing
65. Which of the following insurance policies helps the insured to recover the lost deductible?
a. Professional indemnity
b. Household insurance
c. Extended warranty
d. Legal expenses
66. Under the contribution market claims agreement, no contribution is to be applied between
motor insurance and which other insurance policy?
a. Medical insurance
b. Travel insurance
c. Theft insurance
d. Personal accident insurance
67. Which of the following is a remarkable consequence of surge events?
a. Less workload
b. Less reinsurers as they are overused
c. Increase in claims reported
d. More use of solicitors
Chapter 7
68. Which of these is the role of the claims manager?
a. Maintaining the solvency margin on behalf of the company
b. Day to day implementation of a company’s claims strategy
c. Agrees costs with the outsourced firms like motor repairing workshop
d. Enters claims reserves for large losses
69. Which of the following is an example of hard leakage?
a. Estimation of actual value of property
b. Degree of depreciation
c. Vague conditions or exclusions
d. Sub-limit
70. Which of the following is not a reason for overpayments in claims settlement?
a. Poor understanding of the policy provisions by the insureds
b. Poor skills of claims employees
c. Bad training of claims employees
d. Using ineffective system in claims handling
71. What does the balance sheet of an insurance company reveal?
a. Assets and liabilities of the insurer at the end of the year
b. All financial transactions during the financial year
c. Premium received and claims/expenses paid during the year
d. The premium received by the insurer at the end of the year
72. What is the term to apply where a claim is reported by a policyholder but the claims handler
later found out that the amount recorded is understated?
a. Incurred but equalization required
b. Partially incurred
c. Incurred but not enough reported
d. Incurred but not reported
73. Which of the following reserves is used to smooth fluctuations in loss ratios for certain classes
of business?
a. Unexpired risk reserve
b. Unearned premium reserve
c. Re-opened claims reserve
d. Equalization reserve
74. Financial ability to pay financial obligations like insurance claims. What does this statement
describe?
a. Solvency margin
b. Management accounts
c. Budget
d. Balance sheet
75. Which of these reserves is needed only if the’ unearned premium reserve’ may not be
sufficient to cover expected losses?
a. IBNR
b. IBNER
c. Catastrophe reserve
d. Unexpired risk reserve
Answers
Questions Answers Objectives
1 B 1
2 D 1
3 A 1
4 A 1
5 C 1
6 B 1
7 D 1
8 B 1
9 C 1
10 B 1
11 D 1
12 A 1
13 B 2
14 C 2
15 A 2
16 D 2
17 C 2
18 D 2
19 A 2
20 C 2
21 D 2
22 D 2
23 A 2
24 B 2
25 C 2
26 C 3
27 A 3
28 B 3
29 C 3
30 A 3
31 C 3
32 D 3
33 B 3
34 B 3
35 A 3
36 B 3
37 C 3
38 D 3
39 C 4
40 A 4
41 A 4
42 B 4
43 D 4
44 B 4
45 B 4
46 A 4
47 C 4
48 B 4
49 A 4
50 C 4
51 A 4
52 B 5
53 A 5
54 A 5
55 C 5
56 A 5
57 B 5
58 C 6
59 B 6
60 D 6
61 A 6
62 A 6
63 B 6
64 C 6
65 D 6
66 C 6
67 C 6
68 B 7
69 D 7
70 A 7
71 A 7
72 C 7
73 D 7
74 A 7
75 D 7
