Exam (elaborations)
ISR3701 EXAM PACK 2023
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WELL ELABORATED EXAM QUESTIONS & ANSWERS
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ISR3701EXAM PACK
2023
WELL ELABORATED EXAM QUESTIONS &
ANSWERS
, ISR3701/101
Question 1
A strike in the mining industry in South Africa is a typical example of a … risk.
1 dynamic
2 particular
3 fundamental
4 speculative
Question 2
In an insurance policy, the cancellation clause will be reflected under the …
1 general conditions.
2 operative clause.
3 general exemptions.
4 recital clause.
Question 3
An organisational chart may assist the risk manager in identifying …
1 possible bottlenecks in the production process.
2 process type risks.
3 supplier risks.
4 key staff members.
Question 4
Lloyds …
a. has underwritten the voice of Bruce Springsteen.
b. is not an insurance company.
c. operates worldwide.
d. invented the term underwriting.
Choose the correct combination:
1 a,c,d
2 a,b,c,d
3 a,b,c
4 a,c
Question 5 in terms of insurance is enforced through
the principles of:
a. Subrogation.
b. Average.
c. Contribution.
d. Insurable interest.
1
,Choose the correct combination:
1 a,b,c,d
2 a,c
3 a,b,c
4 b,d
Question 6
Self-insurance may result in …
a. lower investment income.
b. lower premiums.
c. less focused risk control programmes.
d. a smaller statistical base for premium calculations.
Choose the correct combination:
1 a,b,c,d
2 a,b,c
3 b,c,d
4 b,d
Question 7
Indicate the correct statement:
1 The principle of indemnity applies to all insurance
contracts. 2 Insurable interest enforces the principle of
indemnity. 3 Insurance contracts are contracts of uberrima fides.
4 Insurable interest is not a requirement for taking out a life insurance policy on another person’s life.
Question 8
An underwriter is requested to underwrite a tyre manufacturing plant. The sums insured are:
Fire R50 000 000
Loss of profits R30 000 000
The underwriter has a net line of R2 000 000 and can take an additional 50% if the risk involves Fire and
Loss of profit. The underwriter has a nine-line surplus treaty.
Under the above scenario …
1 the gross retention is R27 000 000.
2 the total net line is R2 000 000.
3 no facultative reinsurance is required.
4 facultative reinsurance of R50 000 000 will have to be placed.
2
, ISR3701/101
Question 9
An insurer enters into a quota share arrangement with the ceding insurer retaining 60% of any loss. How
much will the reinsurer pay if the loss amounts to R40 000 under a R80 000 policy?
1 R24 000
2 R40 000
3 R32 000
4 R16 000
R80 000 X 60%= R48 000
R40 000 X 40%= R16 000
Question 10
Brokers …
1 are allowed to collect premiums from the insured.
2 have a legal obligation to handle claims on behalf of their clients.
3 cannot be held legally liable for advice given to clients.
4 may not operate in the reinsurance market.
Question 11
Indicate the correct statement (s).
a The breaching of a warranty in an insurance contract by the insured may result in the
repudiation of a claim by the insurer.
b The first amount payable is reflected in the schedule of a policy document. c
Insurance contracts are based on the premise of caveat emptor.
d The reasonable man test is generally applied to test the validity of insurance contacts
Choose the correct combination:
1 a,b,c,d
2 a,b,c
3 a,d
4 a,b,d
Question 12
Mr. A insured his car, valued at R400 000, with Company X for R150 000 and Company Y for
R250 000. Mr. A is involved in an accident and damage to his car amounts to R25 000. His claim,
however, is repudiated due to some technical reasons. Company Y, however, decided to make an ex
gratia payment of R15 625 to Mr. A.
Based on the aforementioned scenario, indicate the correct statement.
1 Ex gratia payments are indemnity payments.
3
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