Specimen examination questions

Answers will be posted on Moodle following completion of all ‘E’ seminars.

1. The following statements refer to the Marine and General Mutual Life Assurance Society. Which one statement is correct?
A – It is a proprietary insurance company.
B – The firm was founded with capital provided by shipping companies, who were its initial shareholders.
C – Its main business is insuring ships’ cargoes.
D - Its policyholders share in its profits.

2. Westall (2001) described some of the trends in British insurance in the 20th century. Which one of the following was not one of the trends?
A – Motor insurance provided growth and diversification for the UK insurance industry.
B – After 1945, UK life insurers were among the leaders in the ‘cult of the equity’ in their investment strategy.
C – After 1960, tariffs helped maintain the competitiveness of UK general insurers.
D – In the 1990s British insurers came increasingly under foreign control.
E – Selling personal insurance by telephone created opportunities for new insurers to enter the market.

3. Which one of the following statements is not correct?
A - Insurance helps reduce companies’ need for liquidity to meet unexpected events.
B – Insurance supports tort law
C - Firms would not take any risks if they did not have access to property insurance.
D - Insurers take steps to control moral hazard, and this gives incentives to policyholders to reduce the likelihood and/or size of a claim.

4. Which one of the following statements is not correct?
A - Risks are uninsurable if moral hazard is present.
B - In some cases insurance is a precondition for other businesses to operate.
C - Reinsurance can shift the boundaries of uninsurability.
D - Insurance policies can cover terrorism risks.
E - Insurance can encourage risk-taking

5. Which one of the following statements, in relation to the UK life insurance market, is correct?
A – UK life insurers are not permitted to invest in overseas shares.
B – Residential property is a major investment of UK life insurers.
C - Most life insurers back their annuity liabilities largely with shares.
D - Unit-linked policies expose policyholders to investment risk more directly than do with-profits policies.
E – Interest payments from fixed-interest investments are certain to be paid.

6. The following statements refer to annuity rates (i.e. the annual annuity available from a given premium) in the pre-2013 UK annuity market before the implementation of the Gender Directive. Which one is not correct?
A - An increase in the expectation of life leads to a reduction in annuity rates.
B – The annuity rate for a 70-year-old will be higher than that for a 65-year-old.
C - Annuity rates are usually lower for males than for females.
D - A reduction in interest rates is usually associated with a reduction in annuity rates.
E - An impaired life annuity will offer a higher annuity rate than an ordinary annuity.

7. Which one of the following statements is not correct?
A – The overall real growth rate of insurance industries in emerging markets is often higher than in industrialised countries.
B - Countries with high levels of inflation generally have lower levels of life insurance density and penetration than countries with low inflation.
C – Poor countries have a higher insurance density than rich countries.
D – A poorly developed legal system can hinder the development of a general insurance industry.
E - Competitive insurance markets generally encourage insurance purchases.

8. Which one of the following statements about a family’s purchase of contents insurance is correct?
A - The contents of their house are insured because such insurance is compulsory by law.
B - Contents are insured because the family may not be able to replace them if destroyed.
C - Contents insurance is usually provided on an indemnity basis.
D - Contents insurance provides cover against accidental death of