2CEXAM Mock Question

IIQE Paper 2

12-Sep-19
16:29:01
1 Property insurances cover either specified perils or: Topic 1

A All risks Chapter (b)

B Single hazard mode Section (ii)

C Particular perils QID 8

D Particular life insurance Ans A Hot

Exp Property insurances cover either all risks or specified perils. The answer is C.
2 The fundamental risks considered exclusions in most general policies include war and: Topic 1

A Earthquake risks Chapter (c)

B Hurricane risks Section

C Nuclear risks QID 11

D Flood risks Ans C Hot

Exp The fundamental risks considered exclusions in most general policies include war and nuclear risks. The
answer is C.
3 An "all risks" policy is unlikely to cover loss or damage arising from which of the following causes? Topic 1

A Was stolen by an armed burglar Chapter (b)

B The internal damage of a watch due to falling into the sea Section (ii)

C The internal damage of a watch caused by sustained high humidity QID 9

D All of the above Ans C Hot

Exp "All Risks" means that loss or damage arising from any conceivable risk is covered by the policy unless
an exclusion
applies. The claimant merely has to show that an accidental loss has occurred, without the need to
pinpoint its exact cause. The internal damage of a watch caused by high humidity is not an accidental
loss. The answer is C.
4 Insurance that provides protection only against damage caused by fire, lightning and household gas Topic 1
explosions is more likely to be:
A All risks Chapter (b)

B Third party insurance Section (i)

C Excepted perils QID 6

D Specified perils Ans D Hot

Exp Specified perils (or "named perils") refer to that to be recoverable a loss or damage must have been
proximately caused by a peril (i.e. cause of loss) specifically mentioned (specified) in the policy, e.g.
lightning under a fire policy. The answer is D.

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 5 Property insurances cover either "all risks" or: Topic 1

A Particular life insurance Chapter (b)

B Particular perils Section

C Specified perils QID 5

D Specified life insurance Ans C Hot

Exp Property insurances cover either all risks or specified perils. The answer is C.
6 In general insurance, health insurance is usually classified as: Topic 1

A Insurance of liability Chapter (a)

B Insurance of the person Section

C Insurances of property QID 3

D Insurance of pecuniary interests Ans B Hot

Exp "Insurance of the person" is one whose subject matter is a human being's life, limbs or health, or medical
expenses. The answer is B.
7 General insurance covers: Topic 1

A Insurance of property Chapter (a)

B Insurance of liability Section

C Insurance of the person QID 2

D All of the above Ans D Hot

Exp General insurance covers insurance of the person, insurance of property, insurance of pecuniary
interests, and insurance of liability. The answer is D.
8 War risks and nuclear risks are standard exclusions. Which of the following statements is correct? Topic 1

A Fundamental risks are generally not insurable Chapter (c)

B Fundamental risks are insurable after the payment of an additional premium Section

C Fundamental risks are protected in "all risks" safeguard QID 10

D All of the above Ans A Hot

Exp War risks and nuclear risks are standard exclusions and are generally not insurable. The answer is A.
9 Which of the following is unlikely to involve the "avoidance of certain terms and right of recovery" clause Topic 1
in a motor insurance policy?
A Fail to report an injured pedestrian within a reasonable period of time Chapter 1

B Fail to report an insured damaged vehicle within a reasonable period of time Section (g)

C Admit liability to injured pedestrians in the incident QID 49

D All of the above Ans B Hot

Exp Most commonly this will arise where the insured fails to report an accident to the insurer, or admits
liability to a third party without obtaining the insurer's prior written consent. The answer is B.

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 10 Compulsory third party liability means: Topic 1

A Liability for property damage to third parties Chapter 1

B Liability for death or injury to third parties Section (b)

C Liability for property damage, death and injury to third parties QID 27

D 100% liability for property damage, death and injury to third parties Ans B Hot

Exp The Ordinance, when referring to "third party" risks, means potential liability for death or injury only.
Liability for property damage to third parties is not required by law. The answer is B.
11 "Act" insurance in Hong Kong motor insurance industry is: Topic 1

A An important part of the insurer's motor insurance portfolio Chapter 1

B More expensive and therefore less common than third party insurance Section (b)(iii)

C Cheaper and therefore more common than the motor insurance combination QID 29

D Of no importance in the insurer's motor insurance business because the coverage is so narrow; it cannot Ans D Hot
expect somebody will buy it
Exp "Act" insurance in Hong Kong motor insurance industry is of no importance in the insurer's motor
insurance business, because the coverage is so narrow, cannot expect somebody will buy it. The answer
is D.
12 Most motor insurance policies have a practice, that is, if the insured has not made a claim in the past year, Topic 1
in the coming year renewal he/she can get a discount on the premium. The most correct name for this
practice is:
A No claim bonus Chapter 1

B No claim discount Section (c)

C No claim deduction QID 30

D No claim renewal waiver Ans B Hot

Exp A significant and almost unique feature of motor insurance is the practice of granting a progressive
discount, called the " no claim discount" (NCD) or "claim free discount", on the renewal annual premium if
the preceding policy year has been claim-free. The answer is B.
13 In the practice of motor insurance in Hong Kong, the no claim discount adopted by the insurer provides Topic 1
the highest discount rate to:
A All classes of vehicles Chapter 1

B Private vehicles Section (c)

C Motor cycles QID 31

D Commercial vehicles Ans B Hot

Exp A typical scale of NCD for private cars is such that one claim-free year earns a 20% NCD, the second year
30% and so on, rising to a maximum of 60% after five consecutive claim-free years. With other classes of
vehicles, the scale of discount is very likely to start from 10%, rising to a maximum of 30% after three
consecutive claim-free years. The answer is B.

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 14 In motor insurance, when can we get a no claim discount? Topic 1

A The past has been claim-free Chapter 1

B The next year will be claim-free Section (c)

C The previous year has been claim-free QID 32

D All of the above Ans C Hot

Exp A progressive discount on the renewal annual premium is offered if the preceding policy year has been
claim-free. The answer is C.
15 The NCD will be applied to private car insurance. When the private car gets the highest no claim discount, Topic 1
it will not cancel all the discounts due to a single claim. This operation is called:
A No claim discount deduction mechanism Chapter 1

B Average mechanism Section (c)

C Step-back system QID 33

D Nonforfeiture provisions Ans C Hot

Exp With private cars, the NCD system operates on what is called a "step-back system". This means that a
single claim will not necessarily destroy an entitlement to next year's discount. For instance, with a four
years' entitlement (i.e. 50% NCD) for a policy year, a single claim during the
year will reduce the discount on renewal to 20%. The answer is C.
16 In private car insurance, the "step-back system" means: Topic 1

A If the claim is related to a third party, the discount will not be reduced Chapter 1

B All discounts will be cancelled on each claim Section (c)

C The discount will be reduced by 30% for each claim QID 34

D The discount will be reduced by 10% for each claim Ans C Hot

Exp With private cars, the NCD system operates on what is called a "step-back system". This means that a
single claim will not necessarily destroy an entitlement to next year's discount. For instance, with a four
years' entitlement (i.e. 50% NCD) for a policy year, a single claim during the
year will reduce the discount on renewal to 20%. The answer is C.

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 17 Some insurance policies offer premium discounts to customers who do not file claims in the past. Which Topic 1
of the following is a correct description of the system?
(i) This is called "no claim discount"
(ii) For private cars, the discount rate is very high
(iii) There will be a premium discount if the previous year has been claim-free
(iv) There will be a refund of premium if the previous year has been claim-free
A Only (i) Chapter 1

B Only (ii) & (iii) Section (c)

C (i), (ii) & (iii) QID 35

D (i), (ii), (iii) & (iv) Ans C Hot

Exp A significant and almost unique feature of motor insurance is the practice of granting a progressive
discount, called the "no claim discount" (NCD) or "claim free discount", on the renewal annual premium if
the preceding policy year has been claim-free.

A typical scale of NCD for private cars is such that one claim-free year earns a 20% NCD, the second year
30% and so on, rising to a maximum of 60% after five consecutive claim-free years. With other classes of
vehicles, the scale of discount is very likely to start from 10%, rising to a maximum of 30% after three
consecutive claim-free years.

The answer is C.
18 The so-called "step-back system" is most suitable for which of the following vehicles? Topic 1

A Motor cycles Chapter 1

B Commercial vehicles Section (c)

C Private cars QID 36

D All of the above Ans C Hot

Exp With private cars, the NCD system operates on what is called a "step-back system". This means that a
single claim will not necessarily destroy an entitlement to next year's discount.

With other types of vehicles, a single claim will mean that there will not be any NCD in the forthcoming
year and a fresh claim-free year will be needed to earn the minimum discount again.

The answer is C.
19 Under the motor insurance NCD mechanism, when the NCD has accumulated to a high level, the Topic 1
occurrence of a claim will not eliminate the NCD of the next year. This system is called:
A Average mechanism Chapter 1

B Step-back system Section (c)

C Nonforfeiture provisions QID 37

D No claim discount rebate program Ans B Hot

Exp With private cars, the NCD system operates on what is called a "step-back system". This means that a
single claim will not necessarily destroy an entitlement to next year's discount. The answer is B.

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 20 Which of the following is unlikely to appear in the exclusions of most motor insurance policies? Topic 1

A War and nuclear risks Chapter 1

B Contractual liability Section (d)

C For social, pleasure and leisure purposes QID 39

D Unauthorized use of the vehicle Ans C Hot

Exp Common exclusions/exceptions include the insured vehicle being used otherwise than in accordance with
the specified limitations as to the use of the vehicle, war and nuclear risks, and contractual liability. The
answer is C.
21 How to determine the premiums? Topic 1

A The use of the vehicle (commercial vehicles) Chapter 1

B The cubic capacity of the engine (private cars) Section (e)

C The insured's estimate of the value of his vehicle QID 43

D All of the above Ans D Hot

Exp All the options are the common rating features. The answer is D.
22 Which of the following statements about "act" insurance is true? Topic 1

A Insurers do not advertise "act" insurance Chapter 1

B "Act" insurance is an insurance that meets only the minimum statutory requirements Section (b)

C In theory, not in practice, it is the cheapest motor insurance available QID 26

D All of the above Ans D Hot

Exp All statements are true. The answer is D.

23 The "avoidance of certain terms and right of recovery" clause applies to: Topic 1

A Only when special terms, such as extra premiums, are in force Chapter 1

B When the mandatory terms override the policy terms Section (g)

C Only the insured's car was damaged in the accident QID 48

D Damage caused only by a third party Ans B Hot

Exp There are situations where compulsory insurance requirements will not allow the insurer to deny policy
liability for death or injury claims from third parties, even though there is a breach of policy terms on the
part of the insured. The answer is B.
24 In a road accident, a passenger is injured in an insured vehicle. Which of the following motor insurance Topic 1
may cover the medical expenses?
A "Act" insurance Chapter 1

B Third party, fire and theft cover Section (a)& (b)

C Comprehensive cover QID 20

D All of the above Ans D Hot

Exp All three major types of motor insurance cover any insured driver (or any passenger) for his liability at law
to third parties for their death, injury or property damage. The answer is D.

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 25 What is the "additional" deductible in motor insurance? Topic 1

A Compulsory insurance, need by law requirement Chapter 1

B Applies to all policies in the specified business area Section (f)&2.3.3

C Applicable for the purpose of the undertaking subject to special conditions of insurance QID 47

D The insured voluntarily choose it to get a premium discount Ans C Hot

Exp "Additional" deductibles in motor insurance are those applicable for the purpose of the undertaking
subject to special conditions of insurance. The answer is C.
26 Which of the following descriptions of the deductible is correct? Topic 1

A It is interchangeable with "excesses" Chapter 1

B The amount of deductible is usually less than that of excess Section (f)

C They are implicit in contracts QID 46

D All of the above Ans A Hot

Exp An excess (or "deductible") means that up to the stated amount of each loss is not insured. The answer is
A.
27 There is a motor insurance policy excess that is required by the insured, usually in return for a discount Topic 1
on the policy. This excess is called:
A A standard excess Chapter 1

B A voluntary excess Section (f)

C An underwriting excess QID 45

D A non-compulsory excess Ans B Hot

Exp A voluntary excess is requested by the insured, in return for a premium discount. The answer is B.
28 Which of the following statements about the standard excesses is incorrect? Topic 1

A They are additionally attached to any voluntary excesses Chapter 1

B Such excesses do not allow for the provision of premium deductions Section (f)

C Applicable to all policies within the class QID 44

D Such excesses allow a standard premium deduction Ans D Hot

Exp One of the features of standard excesses is that they do not qualify for any discount on the premium. The
answer is D.

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 29 Which of the following do you expect to be excluded from the exclusions for non-extended motor vehicle Topic 1
policies issued in Hong Kong?
A Liability for property damage Chapter 1

B Accidents occurring outside the insurer's specified area of cover Section (d)

C The first $1,000 damage of an insured car QID 40

D All of the above Ans A Hot

Exp The insurer may provide property insurance on the insured's car.

Common exclusions/exceptions include accidents occurring outside the specified geographical area of
cover.

An excess (or "deductible") means that up to the stated amount of each loss is not insured.

The answer is A.
30 How does motor insurance determine premiums? Topic 1

A The use of the vehicle Chapter 1

B The cubic capacity of the engine Section (e)

C The insured's estimate of the value of his vehicle QID 41

D All of the above Ans D Hot

Exp All the options are the common rating features. The answer is D.
31 Which of the following is not considered by the insurer in determining the premium of a comprehensive Topic 1
private car policy?
A The insured's estimated value of the vehicle Chapter 1

B The insurance coverage Section (e)

C The sex of the insured QID 42

D The engine capacity of the insured vehicle Ans C Hot

Exp The common rating features do not include the sex of the insured. The answer is C.
32 In the "step-back system", all discounts will not be cancelled due to a single claim, which is applicable to: Topic 1

A Private car insurance Chapter 1

B Commercial vehicle insurance Section (c)(ii)

C Motor cycle insurance QID 38

D Insurance on car rental sales Ans A Hot

Exp With private cars, the NCD system operates on what is called a "step-back system". This means that a
single claim will not necessarily destroy an entitlement to next year's discount. The answer is A.

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 33 In insurance industry, vehicles are classified into different categories. Which of the following is not the Topic 1
usual classification?
A Taxi Chapter 1

B Private vehicle Section

C Motor cycle QID 14

D Commercial vehicle Ans A Hot

Exp There are three major classes of motor insurance: private vehicle (private car), motor cycle and
commercial vehicle. The answer is A.
34 Which of the following is not a major class of motor insurance? Topic 1

A Commercial vehicle Chapter 1

B Private vehicle Section

C Taxi QID 1

D Motor cycle Ans C Hot

Exp Three major classes of motor insurance are private vehicle (private car), motor cycle and commercial
vehicle. The answer is C.
35 Which of the following is likely not to involve the "avoidance of certain terms and right of recovery" Topic 1
clause?
A Fail to report pedestrian injuries within the appropriate time Chapter 1

B Fail to report the theft of the insured vehicle within the appropriate time Section (g)&3.1.3
note
C Admit liability to the injured pedestrian at the scene QID 51

D Encourage injured pedestrians to claim for breach of the terms of the policy Ans B Hot

Exp Most commonly this will arise where the insured fails to report an accident to the insurer, or admits
liability to a third party without obtaining the insurer's prior written consent.

In such cases, if the insured is liable to a third party, the insurer shall indemnify the third party
notwithstanding the breach of the terms of the policy.

The answer is B.
36 The narrowest coverage of motor insurance is: Topic 1

A "Act" insurance Chapter 1

B Third party only cover Section (a)& (b)

C Comprehensive cover QID 22

D Third party, fire and theft cover Ans A Hot

Exp The narrowest coverage of motor insurance is "act" insurance. The answer is A.

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 37 The "third party liability insurance" as used by motor insurers in Hong Kong covers: Topic 1

A The property damage of third parties Chapter 1

B The death and injury of third parties Section

C The death and injury of third parties and the damage of the insureds' vehicles QID 13

D The injury, death or property damage of third parties Ans D Hot

Exp The "third party only cover" covers any insured driver (or any passenger) for his liability at law to third
parties for their death, injury or property damage. The answer is D.
38 In respect of compulsory motor death and injury liability, the minimum amount of cover required is: Topic 1

A One million Chapter 1

B One hundred million Section (b)

C No upper limit QID 25

D No limit Ans B Hot

Exp The minimum amount of cover required in respect of third party death and injury liability is HK$100 million
any one event. The answer is B.
39 Which of the following forms of motor insurance only covers the liability required by law? Topic 1

A "Act" Chapter 1

B Third party liability Section (b)

C Comprehensive liability QID 15

D Third party, fire, theft Ans A Hot

Exp "Act" insurance only covers the liability required by law. The answer is A.
40 General insurance covers: Topic 1

A Insurance of property Chapter 1

B Long-term life insurance Section (a)

C Investment-linked insurance QID 16

D All of the above Ans A Hot

Exp General insurance covers insurance of the person, insurance of property, insurance of pecuniary
interests, and insurance of liability. The answer is A.
41 Which of the following statements regarding "act" insurance is incorrect? Topic 1

A The narrowest motor insurance available Chapter 1

B Only cover death or injury of third parties Section (a)

C It is common because it is cheap QID 18

D All of the above are true Ans C Hot

Exp The "act only cover" is now rarely found in the market. The answer is C.

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