Fundamentals of Insurance Chapter 3 QUESTIONS WITH COMPLETE SOLUTIONS
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Course
Fundamentals of Insurance
Institution
Georgia State University
What is the role of the federal Government when insurers receive federal licensing? Correct Answer: Licensing provided only to companies that can meet strict financial standards. Established by the office of the Superintendent of Financial Institutions (OSFI). Insurers are monitored on an ongoing ...
fundamentals of insurance chapter 3 questions with complete solutions
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Georgia State University
Fundamentals of Insurance
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Fundamentals of Insurance Chapter 3 QUESTIONS WITH
COMPLETE SOLUTIONS
What is the role of the federal Government when insurers receive federal licensing? Correct
Answer: Licensing provided only to companies that can meet strict financial standards.
Established by the office of the Superintendent of Financial Institutions (OSFI). Insurers are
monitored on an ongoing basis.
What is the role of the provincial Government? Correct Answer: The superintendent of
Insurance in each province are responsible for administrating the Insurance Act. Responsibilities
include supervising terms and conditions of contracts, licensing of insurers and monitoring
financial stability of insurers.
What is the role of the Property and Casualty Insurance Compensation Corporation (PACICC)?
Correct Answer: When bankruptcy occurs, PACICC pays all valid claims. Insurer's are then
charged an assessment to cover the total amount of claims.
What are the amounts available to consumers from the PACCIC? Correct Answer: A max of
$250,000 for all claims arising from a single occurrence and a refund of up to 70% of unearned
premiums, a max of $700 per policy.
What is the definition of Fiduciary? Correct Answer: One who handles other people's money.
Who is Fiduciary? Correct Answer: Insurers and brokers.
What is the fiduciary responsibility of insurers? Correct Answer: Premiums paid to insurers are
not fully earned until policy expires. Unearned premiums are considered to be held in trust in
event of cancellation prior to policy expiration.
What is the fiduciary responsibility of insurance brokers? Correct Answer: Commissions not
fully earned until policy expires. Unearned commissions are considered to be held in trust in
event of cancellation prior to policy expiration.
What are the 6 contents of all insurance policies? Correct Answer: 1. Parities to Contract
2. Policy Period
3. Loss Payable or Payee
4. Type(s) of Insurance Coverage(s) and Amounts Insurer may be liable
5. Rate and Premium
6. Subject Matter
Explain Parties to Contract. Correct Answer: Name of insurer and insured are required to be
shown. Insured first to contract, Insurer second. No third party.
Explain Policy Period. Correct Answer: Both commencement date and expiry are required to be
stated on policy.
, Explain Loss Payable or Payee. Correct Answer: Law requires policy to identify all parties to
whom insurance monies are payable in event of loss.
Explain Type(s) of Insurance Coverage(s) and Amounts Insurer may be Liable Correct Answer:
Policy must identify specific coverage(s) and amounts to each item.
Explain Rate and Premium Correct Answer: Law requires cost of insurance be indicated on
policy. Insurer must identify amount of premium, method or rate used to determine amount.
Explain Subject Matter Correct Answer: A description of subject matter must be provided.
What are the conditions of applying to Removal Clause? Correct Answer: Before insurer pays
for a loss, must be shown that property was at (unnamed on policy)location, because it was in
danger of a peril.
Explain the Removal Clause Correct Answer: Policies restrict coverage on insured property to
the location identified on the policy. If property is not there at time of loss, there is no coverage.
The exception is in certain circumstances, in the event of peril of fire, coverage can extend to
property when moved to a location not stated on the policy.
What is the rule regarding the insurer's use of Limitation of Liability clauses? Correct Answer:
Most property policies contain clauses which limit the amount of payment for a loss to an
amount which is less than purchased by insured. Policy must have "This policy contains a
clause(s) that may limit the amount payable." stamped or printed on face page of policy.
What does Subrogation mean? Correct Answer: Subrogation means to put oneself in another's
shoes.
How is the right, Subrogation, exercised by the insurer? Correct Answer: The Insurance Act
allows insurers to place itself in the insureds shoes in respect of their right to recover amount of
loss from the responsible party. Any action commenced against responsible party is taken in
insureds name.
Who is entitled to amend the terms or conditions of insurance contracts? Correct Answer:
Whoever the insurer wants it to be, but normally an officer of the insurance company.
What effect does a claim have when the insurance policy has been delivered but not paid for?
Correct Answer: The policy is still as binding on the insurer as if the premium has been paid for.
What are the basic coverage's legislated for policies insuring peril of fire? Correct Answer: 1.
Fire
2. Lightning
3. Explosion of Natural Gas, Coal or Manufactured Gas
Name the 2 types of fire. Correct Answer: 1. Friendly fire
2. Hostile
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