BCP Insurance Contracts & Underwriting

Question 1

What are the four essential elements of a valid insurance contract in Singapore?

Accepted Answer

Offer, acceptance, consideration, and legal capacity (with insurable interest)

Answer

A valid insurance contract requires: offer (proposal), acceptance (by insurer), consideration (premium), and legal capacity of the parties, plus insurable interest to distinguish it from wagering.

Question 2

What is 'risk selection' in the underwriting process?

Accepted Answer

The process of evaluating and deciding which risks to accept, decline, or modify

Answer

Risk selection is the underwriting process of evaluating proposed risks, deciding which to accept (and on what terms), which to decline, and which require modifications (such as exclusions or higher premiums).

Question 3

What is a 'proposal form' in the insurance context?

Accepted Answer

The insured's formal application for insurance, providing material facts for underwriting assessment

Answer

A proposal form is the formal application completed by the prospective insured, disclosing all material facts about the risk so the insurer can make an informed underwriting decision.

Question 4

What is the underwriting significance of a 'moral hazard' assessment?

Accepted Answer

It assesses the character, integrity, and attitude of the insured toward risk and potential claims

Answer

Moral hazard assessment evaluates the insured's character, honesty, and attitude — an insured who is dishonest or careless represents a higher risk of inflated or fraudulent claims, affecting the underwriting decision.

Question 5

What is an 'endorsement' on an insurance policy?

Accepted Answer

A document that modifies the terms, conditions, or coverage of an existing policy

Answer

An endorsement is a written document attached to an insurance policy that modifies its original terms — adding, removing, or amending coverage, exclusions, or conditions during the policy period.

BCP Insurance Practice Test

BCP Insurance Practice Test

BCP Insurance Contracts & Underwriting