BCP - Basic Insurance Concepts and Principles Singapore Fundamental Principles of Insurance Questions and Answers

Question 1

Under Singapore's Insurance Act (Cap. 142), which of the following parties is presumed to have an insurable interest in the life of the person being insured?

Accepted Answer

The insured person's spouse.

Answer

A business partner in a joint venture.

Answer

A creditor in the life of their debtor.

Answer

The insured person's child who is 25 years old and financially independent.

Question 2

An applicant for a fire insurance policy in Singapore failed to disclose that the premises were used for storing highly flammable chemicals, a fact that would have influenced the insurer's decision to accept the risk. This non-disclosure is a breach of which fundamental insurance principle?

Accepted Answer

Utmost Good Faith (Uberrima Fides)

Answer

Indemnity

Answer

Proximate Cause

Answer

Subrogation

Question 3

Mr. Tan's provision shop was damaged by a fire which was the insured peril. However, subsequent water damage was caused by firefighters extinguishing the fire. According to the principle of Proximate Cause as applied in Singapore, what is the insurer's likely liability?

Accepted Answer

The insurer is liable for both the fire and water damage as the fire was the dominant and effective cause of the entire loss.

Answer

The insurer is only liable for the fire damage, as water damage is a separate, uninsured peril.

Answer

The insurer's liability is limited to 50% of the water damage as it was an indirect consequence.

Answer

The insurer is not liable for any damage because there were two concurrent causes.

Question 4

A vehicle insured for S$80,000 is declared a total loss in an accident. The pre-accident market value was S$75,000 and the salvage value is S$5,000. Based on the principle of Indemnity, what is the maximum amount the insured is entitled to receive from the insurer?

Accepted Answer

S$75,000, to be restored to their pre-loss financial position.

Answer

S$80,000, which is the sum insured.

Answer

S$70,000, which is the market value less the salvage value.

Answer

S$85,000, which includes the sum insured and the salvage value.

Question 5

After an insurer pays for the damages to its policyholder's car caused by a negligent third party, the insurer attempts to recover the costs from that third party. This action is an exercise of which insurance principle?

Accepted Answer

Subrogation

Answer

Contribution

Answer

Insurable Interest

Answer

Indemnity

Question 6

A warehouse in Singapore is insured against fire with Company A for S$500,000 and with Company B for S$1,000,000 for the same risk. A fire causes a loss of S$300,000. Under the principle of Contribution, how much is Company B liable to pay?

Accepted Answer

S$200,000

Answer

S$150,000

Answer

S$300,000, with the right to recover from Company A.

Answer

S$100,000