BCP Insurance Contracts & Underwriting 3

Question 1

What does 'policy schedule' contain in a typical general insurance policy?

Accepted Answer

Specific details of the individual policy: insured's name, property description, sum insured, premium, and period

Answer

The policy schedule contains the specific details of the individual policy — insured's name and address, property/risk description, sum insured, premium amount, policy period, and any specific endorsements.

Question 2

What is meant by 'agreed market value' in a motor insurance context?

Accepted Answer

The vehicle's value agreed between insurer and insured, used to settle total loss claims

Answer

Agreed market value in motor insurance is the value of the vehicle agreed between the insurer and insured at inception. In a total loss, this agreed value is paid without further negotiation about the vehicle's actual value.

Question 3

What does 'basis of settlement' in a property policy determine?

Accepted Answer

The method by which claim payments are calculated — e.g., indemnity, reinstatement, or agreed value

Answer

The basis of settlement specifies how claim payments are calculated. Common bases include indemnity (depreciated value), reinstatement (new for old), or agreed value (pre-agreed sum for total loss).

Question 4

What is 'long-tail liability' in insurance underwriting?

Accepted Answer

Insurance where claims may emerge or be settled many years after the original policy period, creating extended uncertainty

Answer

Long-tail liability refers to liability insurance classes (e.g., professional indemnity, product liability) where claims can emerge and be settled many years after the policy period, making reserving and pricing challenging.

Question 5

What is a 'declaration policy' used for in property insurance?

Accepted Answer

A policy where the sum insured is adjusted based on periodic declarations of stock or property values

Answer

A declaration policy allows the insured to declare fluctuating values (typically stock) periodically. The premium is calculated based on actual declared values, preventing both over and underinsurance.

BCP Insurance Practice Test

BCP Insurance Practice Test

BCP Insurance Contracts & Underwriting 3