Examination Guide

E05

Examination element of M05 Insurance law

Based on the 2023/2024 syllabus

examined from 1 May 2023 until 30 April 2024
 Examination Guide

E05 – Examination element of M05 Insurance law

Based on the 2023/2024 syllabus examined from 1 May 2023 until 30 April 2024

Contents
Introduction to Examination Guide 3
M05 Syllabus 7
Specimen Examination 12
Specimen Examination Answers and Learning Outcomes Covered 22

This PDF document is accessible through screen reader attachments to your web browser and has been
designed to be read via the speechify extension available on Chrome. Speechify is an extension that is
available from [Link] If for accessibility reasons you require this document in an
alternative format, please contact us at [Link]@[Link] to discuss your needs.

The CII Qualifications accessibility and special circumstances policy and guidance document can be
viewed on the CII Rules and Policies page [Link]/learning/qualifications/assessment-
information/before-the-exam/rules-and-policies/

Published in February 2023 by:

The Chartered Insurance Institute
Telephone: 020 8989 8464
Email: [Link]@[Link]

Copyright ©2023 The Chartered Insurance Institute. All rights reserved.

E05 Examination Guide 2023/2024 2

 Examination Guide

E05 – Examination element of M05 Insurance law

Based on the 2023/2024 syllabus examined from 1 May 2023 until 30 April 2024

Introduction
This examination guide has been produced by the Qualifications and Assessment Department at the
Chartered Insurance Institute (CII) to assist students in their preparation for the E05 examination. It
contains a specimen examination with answer key.

Ideally, students should have completed the majority of their E05 studies before attempting the
specimen examination. Students should allow themselves one hour to complete the examination.
They should then review their performance to identify areas of weakness on which to concentrate the
remainder of their study time. The examination must be successfully passed within 18 months of
enrolment on M05.

Although the specimen examination in this guide is typical of an E05 examination, it should be noted
that it is not possible to test every single aspect of the syllabus in any one particular examination. To
prepare properly for the examination, candidates should make full use of the tuition options available
and read as widely as possible to ensure that the whole syllabus has been covered. They should also
endeavour to keep as up-to-date as possible with developments in the industry by reading the
periodicals listed in the M05 reading list, which is located on the syllabus in this examination guide and
on the CII website at [Link].

Background Information
CII examination questions undergo a rigorous writing and editing process before reaching an
examination. The questions are written to strict guidelines by practitioners with relevant technical
knowledge and experience. Questions are very carefully worded to ensure that all the information
required to answer the question is provided in a clear and concise manner. They are then edited by an
independent panel of experienced practitioners who have been specifically trained to ensure that
questions are technically correct, clear and unambiguous. As a final check, each examination is
scrutinised by the Senior Examiner and a CII assessment expert.

Occasionally a question will require amendment after the examination guide is first published. In such
an event, the revised question will be published on the CII website:

1) Visit [Link]/learning/qualifications/diploma-in-insurance-qualification/unit-insurance-law-
m05/

2) Select ‘exam guide update’ on the right-hand side of the page

Candidates should also refer here for the latest information on changes to law and practice and when
they will be examined.

E05 Examination Guide 2023/2024 3

 Examination Guide

Syllabus
The M05 syllabus is published on the CII website at [Link]. Candidates should note that the
examination is based on the syllabus, rather than on any particular tuition material. Of course, the CII
tuition material will provide the vast majority of the information required to perform well in the
examination, but the CII recommends that students consult other reference materials to supplement
their studies.

Supporting information for the syllabus which contains a detailed overview of the areas covered can be
found on the unit page. Select Supporting information for the 2023 syllabus on the right-hand side of
the page.

Skill Specification
The examination syllabus categorises M05 learning outcomes into attainment levels. Each learning
outcome specifies the level of skill required of candidates and thus the level at which candidates may
be tested.

The syllabus requires that candidates have the ability to understand the subject matter. Each learning
outcome begins with one of these cognitive skills:

Understanding - Candidates must be able to link pieces of information together in cause and effect
relationships. Typically questions may ask ‘Why’. Questions set on an understand learning outcome
can test either knowledge or understanding or both.

E05 Examination Guide 2023/2024 4

 Examination Guide

Examination Information
The method of assessment for the E05 examination is 50 multiple choice questions (MCQs): 40 standard
format and 10 multiple response format. One hour is allowed for this examination.

The M05 syllabus provided in this examination guide will be examined from 1 May 2023 until
30 April 2024.

Candidates will be examined on the basis of English law and practice unless otherwise stated.

The general rule is that legislative and industry changes will not be examined earlier than 3 months
after they come into effect.

E05 examinations test the Financial Conduct Authority and Prudential Regulation Authority rules and
regulations.

When preparing for the examination, candidates should ensure that they are aware of what typically
constitutes each type of product listed in the syllabus and ascertain whether the products with which
they come into contact during the normal course of their work deviate from the norm, since questions
in the examination test generic product knowledge.

A standard format multiple choice question consists of a problem followed by four options, labelled A,
B, C and D, from which the candidate is asked to choose the correct response. Each question will
contain only one correct or best response to the problem posed. One mark is awarded for each correct
response identified by the candidate. No mark is awarded if the candidate either chooses an incorrect
response, chooses more than one response or fails to choose any response. No marks are deducted for
candidates choosing an incorrect response.

A multiple response format question consists of a problem, followed by between four to six options.
For each question more than one option is correct. Candidates must select all the correct options to
gain the mark.

If you bring a calculator into the examination room, it must be a silent battery or solar-powered
non-programmable calculator. The use of electronic equipment capable of being programmed to hold
alphabetic or numerical data and/or formulae is prohibited. You may use a financial or scientific
calculator, provided it meets these requirements.

Candidates are permitted to make rough notes. Candidates are not permitted, in any circumstances, to
remove any papers relating to the examination from the examination room.

E05 Examination Guide 2023/2024 5

 Examination Guide

Examination Technique: Multiple Choice Questions

The best approach to multiple choice examinations is to work methodically through the questions.

The questions are worded very carefully to ensure that all the information required is presented in a
concise and clear manner. It cannot be emphasised too strongly that understanding the precise
meaning of the question is vital. If candidates miss a crucial point when reading the question it could
result in choosing the wrong option. Candidates should read carefully through the question and all the
options before attempting to answer.

Candidates should pay particular attention to any words in the question which are emphasised in bold
type, for example, maximum, minimum, main, most, normally and usually. Negative wording is
further emphasised by the use of capital letters, for example NOT, CANNOT.

Candidates should not spend too much time on any one question. If they cannot make up their mind,
they should leave the question and come back to it later.

When all of the questions have been answered, it is prudent to use any remaining time to go through
each question again, carefully, to double-check that nothing has been missed. Altering just one
incorrect response to a correct response could make the difference between passing and failing.

Before the Examination

Before sitting the examination, please visit the preparation page on the CII website to familiarise
yourself with the different requirements for sittings via remote invigilation and at an exam centre
[Link]/learning/qualifications/assessment-information/before-the-exam/

After the Examination

Rigorous checks are made to ensure the correctness of the results issued. A pre-defined quota of
passes to be awarded does not exist. If all candidates achieve a score of at least the pass mark, then all
candidates will be awarded a pass grade. Individual feedback on the candidate’s examination
performance is automatically provided and will indicate the result achieved and, for each syllabus
learning outcome, the percentage of questions in the examination that were answered correctly.

E05 Examination Guide 2023/2024 6

 Insurance law
Purpose
At the end of this unit, candidates should be able to:
• demonstrate a knowledge and understanding of the laws which form the background to the
operation of insurance;
• demonstrate a knowledge and understanding of the system within which these laws operate and
are administered;
• apply knowledge and skills to practical situations.

Assumed knowledge
It is assumed that the candidate has knowledge of the fundamental principles of insurance as covered
in IF1 Insurance, legal and regulatory or equivalent examinations.

Summary of learning outcomes Number of questions

in the examination*

1. Understand the nature and sources of English law and the concept of natural legal 5
persons.

2. Understand the principles of the law of torts and the characteristics of the main torts. 4

3. Understand the law of contract. 4

4. Understand the law of agency and its application to insurance. 4

5. Understand the main principles governing the formation of insurance contracts. 9

6. Understand the classification and interpretation of insurance contract terms, the 8

effects of their breach and other vitiating factors.

7. Understand the main legal principles governing the making of an insurance claim. 6

8. Understand how losses are measured and how the principle of indemnity applies to 4
insurance claims.

9. Understand how the principles of subrogation and contribution apply to insurance 6

claims.

* The test specification has an in-built element of flexibility. It is designed to be used as a guide for study and is not a statement of actual
number of questions that will appear in every exam. However, the number of questions testing each learning outcome will generally be within
the range plus or minus 2 of the number indicated.

Published February 2023

©2023 The Chartered Insurance Institute. All rights reserved. M05
 Important notes
• Method of assessment:
Mixed assessment consisting of two components, both of which must be passed. One component
is a coursework assignment and one is a multiple choice question (MCQ) examination. The details
are:
1. an online coursework assignment using RevisionMate consisting of 10 questions which
sequentially follow the learning outcomes. This must be successfully completed within 6 months
of enrolment; and
2. an MCQ exam consisting of 40 standard format and 10 multiple response questions. 1 hour is
allowed for this exam. This exam must be successfully passed within 18 months of enrolment.
• This syllabus will be examined from 1 May 2023 until 30 April 2024.
• Candidates will be examined on the basis of English law and practice unless otherwise stated.
• This PDF document is accessible through screen reader attachments to your web browser and has
been designed to be read via the speechify extension available on Chrome. Speechify is an
extension that is available from [Link] If for accessibility reasons you require this
document in an alternative format, please contact us on [Link]@[Link] to discuss your
needs.
• Candidates should refer to the CII website for the latest information on changes to law and practice
and when they will be examined:
1. Visit [Link]/qualifications
2. Select the appropriate qualification
3. Select your unit from the list provided
4. Select qualification update on the right hand side of the page

Published February 2023 2 of 5

©2023 The Chartered Insurance Institute. All rights reserved.
1. Understand the nature and sources of 5.3 Explain how the law of insurable interest applies to
English law and the concept of natural the main classes of insurance.
legal persons. 5.4 Explain the duty of fair presentation in non-consumer
1.1 Describe the classifications and characteristics of insurance and the effect of a breach.
English law. 5.5 Explain the duty to take reasonable care not to make
1.2 Describe the sources of English law. a misrepresentation in consumer insurance and the
effects of a breach.
1.3 Describe the professions involved within English law.
5.6 Apply the main principles governing the formation of
1.4 Describe the structures and procedures of the insurance contracts to practical situations.
courts.
1.5 Describe the status and capacity of natural legal 6. Understand the classification and
persons and corporations. interpretation of insurance contract
1.6 Apply the nature and sources of English law and the terms, the effects of their breach and
concept of natural legal persons to practical other vitiating factors.
situations.
6.1 Explain the classification, formation and
interpretation of insurance contract terms.
2. Understand the principles of the law of
torts and the characteristics of the main 6.2 Explain the effect of breach of warranty or condition
and how illegality arises in insurance contracts.
torts.
6.3 Apply the classification and interpretation of
2.1 Describe the nature and classification of torts.
insurance contract terms to practical situations.
2.2 Explain the main torts.
2.3 Explain how the law of torts apply to employers’ 7. Understand the main legal principles
liability, products liability and occupiers’ liability. governing the making of an insurance
2.4 Explain the main defences, remedies and limitations claim.
of actions in tort. 7.1 Describe the parties who can claim on or benefit
2.5 Apply the law of tort to practical situations. from an insurance contract.
7.2 Explain the rules governing notice and proof of loss.
3. Understand the law of contract. 7.3 Explain the insured’s contractual duty to mitigate or
3.1 Explain the nature of contractual liability and prevent an insured loss.
classification of contracts.
7.4 Explain the doctrine of proximate cause.
3.2 Explain the formation of a contract.
7.5 Explain the investigation of fraudulent claims and the
3.3 Explain how contract terms are classified under the remedies available to the insurer.
general law.
7.6 Apply the main legal principles governing the making
3.4 Explain defective contracts. of an insurance claim to practical situations.
3.5 Explain the circumstances in which a contract may
be discharged. 8. Understand how losses are measured
3.6 Explain the remedies for breach of contract. and how the principle of indemnity
3.7 Explain the doctrine of privity of contract. applies to insurance claims.
3.8 Explain the assignment of contractual rights and 8.1 Explain the principle of indemnity.
duties and how it applies to insurance. 8.2 Explain the measure of indemnity in various classes
3.9 Apply the law of contract to practical situations. of insurance.
8.3 Explain the factors which limit, reduce, extend or
4. Understand the law of agency and its modify the principle of indemnity.
application to insurance. 8.4 Explain the methods of providing indemnity.
4.1 Explain the nature of agency and how an agency 8.5 Explain the doctrine of salvage and abandonment.
relationship can be created.
8.6 Explain the effect of claim payments on policy cover.
4.2 Explain the nature of an agent’s rights,
8.7 Apply how losses are measured and the principle of
responsibilities, authority and duties.
indemnity to practical situations.
4.3 Explain the termination of agency and its effects.
4.4 Explain how the principles of agency law apply to 9. Understand how the principles of
insurance and practical situations. subrogation and contribution apply to
insurance claims.
5. Understand the main principles 9.1 Explain the doctrine of subrogation in insurance.
governing the formation of insurance
9.2 Explain the source of subrogation rights and apply
contracts. the law to practical situations.
5.1 Explain how the principles of contract law apply to
9.3 Explain how subrogation rights may be modified or
the formation of insurance contracts.
denied and apply the law to practical situations.
5.2 Explain the concept and key elements of insurable
9.4 Explain the effect of market agreements on rights of
interest.
contribution.

Published February 2023 3 of 5

©2023 The Chartered Insurance Institute. All rights reserved.
9.5 Explain the nature of double insurance and operation Reading list
of contribution.
9.6 Apply the principle of contribution to the main lines of The following list provides details of further
insurance and to practical situations. reading which may assist you with your
studies.
Note: The examination will test the
syllabus alone.
The reading list is provided for guidance
only and is not in itself the subject of the
examination.
The resources listed here will help you
keep up-to-date with developments and
provide a wider coverage of syllabus topics.

CII study texts

Insurance law. London: CII. Study text M05.
Insurance, legal and regulatory. London: CII.
Study text IF1.
Books (and ebooks)
Bird’s modern insurance law. 12th ed. John
Birds. Sweet and Maxwell, 2022.
Colinvaux’s law of insurance. 13th ed.
London: Sweet & Maxwell, 2022.
Drafting insurance contracts: certainty,
clarity, law and practice. Christopher Henley.
London: Leadenhall press, 2010.
Insurance claims. 5th ed. Alison Padfield.
Bloomsbury Professional, 2021.
Insurance theory and practice. Rob Thoyts.
Routledge, 2010.*
MacGillivray on insurance law: relating to all
risks other than marine. 13th ed. London:
Sweet & Maxwell, 2015.
The law of insurance contracts. Malcolm A
Clarke. 6th ed. London: Informa, 2009.
Tort law: text, cases and materials. Jenny
Steele. 3rd ed. Oxford: Oxford University
Press, 2014.
Tort law and liability insurance. Gerhard
Wagner. Wien: Springer, 2005.
Online resources
The Insurance Institute of London (IIL)
podcast lecture series features leading
industry figures and subject experts
speaking on current issues and trends
impacting insurance and financial services.
Available online at [Link]/learning/
insurance-institute-of-london (CII/PFS
members only).
Recent developments in tort I and II. Alan
Peck.

* Also available as an eBook through eLibrary via [Link]/elibrary (CII/PFS members only).

Published February 2023 4 of 5

©2023 The Chartered Insurance Institute. All rights reserved.
 Civil procedure rules. Alan Peck.
The regulatory framework. Simon Collins.
Journals and magazines
The Journal. London: CII. Six issues a year.
Post magazine. London: Incisive Financial
Publishing. Monthly. Contents searchable
online at [Link].
Insurance law monthly. London: Informa.
Monthly.
Reference materials
Colinvaux & Merkin’s insurance contract law.
Robert M Merkin. Brentford: Sweet &
Maxwell. Looseleaf, updated.
Concise encyclopedia of insurance terms.
Laurence S. Silver, et al. New York:
Routledge, 2010.*

Exemplars
Exemplar papers are available for all mixed
assessment units. Exemplars are available
for both the coursework component and the
MCQ exam component.
These are available on the CII website under
the unit number before purchasing the unit.
They are available under the following link
[Link]/qualifications/diploma-in-
insurance-qualification.
These exemplar papers are also available on
the RevisionMate website ([Link]/login)
after you have purchased the unit.

Exam technique/study skills

There are many modestly priced guides
available in bookshops. You should choose
one which suits your requirements.

Published February 2023 5 of 5

©2023 The Chartered Insurance Institute. All rights reserved.
 Examination Guide

1. Which two branches of civil law have most relevance in the context of insurance?
A. Contract and property.
B. Contract and torts.
C. Property and trusts.
D. Torts and trusts.

2. Minor civil cases relating to personal injury claims are usually dealt with by the
A. County Courts.
B. Court of Appeal.
C. Divisional Courts of the High Court.
D. Magistrates Courts.

3. What legal personality best describes a person who is subject to a bankruptcy order?
A. A corporation sole.
B. A juristic person.
C. A member of an unincorporated association.
D. A natural legal person.

4. Which is a characteristic of criminal procedure?

A. A criminal court case is a contest between the prosecution and the defence.
B. Criminal proceedings follow the continental European inquisitorial system.
C. Guilt of a crime must be proven on the ‘balance of probabilities’.
D. The legal process for criminal cases is always trial by judge and jury.

5. In negligence, what standard of care would be required of a newly-qualified electrician?

A. The standard for the electrical profession only.
B. The standard for the electrical profession but with an allowance for level of experience.
C. The standard of a prudent man.
D. The standard of a reasonable man.

6. One of the requirements for a claimant to succeed in an action for trespass to the person is
A. intention.
B. negligence.
C. prescription.
D. recklessness.

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 Examination Guide

7. What is the common law remedy for the tort of nuisance?

A. Exemplary damages.
B. General damages.
C. An injunction.
D. Restitution.

8. A gardener who was entitled to £2,000 under a contract with a private client assigned her rights
under the contract to one of her plant suppliers. To be legally valid as a statutory assignment,
this assignment must be
A. absolute.
B. conditional.
C. a contract under seal.
D. supported by consideration.

9. After what period of time does an action for breach of a simple contract become statute-barred
if the action is NOT in respect of personal injuries?
A. 1 year.
B. 3 years.
C. 6 years.
D. 12 years.

10. A gratuitous promise is contractually valid and binding on the promissor when it is
A. accepted by a minor.
B. a domestic or social arrangement.
C. presented in writing.
D. in the form of a deed.

11. An agent may be able to protect his rights to remuneration and indemnity by
A. accepting commission from both parties to a transaction.
B. accounting for the principal’s money separately.
C. exercising a lien on the principal’s property.
D. signing a negotiable instrument on behalf of the principal.

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 Examination Guide

12. A personal assistant regularly books accommodation at a particular hotel on behalf of her
employer. On one occasion, she also booked a hotel room for her husband and herself without
her employer’s permission. What principle of agency law could make the employer liable to the
hotel for payment of the room charge?
A. Breach of warranty of authority.
B. Implied actual authority.
C. Ostensible authority.
D. Ratification by an undisclosed principal.

13. An agent for a disclosed principal commits the tort of deceit by knowingly making false
statements to a third party. Who, if anyone, is liable if the third party suffers a financial loss as a
result of these statements?
A. No one.
B. The agent only.
C. The principal only.
D. Both the agent and the principal.

14. When is insurable interest required in respect of a life insurance contract?

A. At both the time the contract is made and when a claim arises on death or maturity of the
policy.
B. Only at the time the contract is made.
C. Only when a claim arises on death or maturity of the policy.
D. Throughout the duration of the contract.

15. During the period of insurance of a commercial policy, the policyholder acquires a subsidiary
company for which cover is required under the policy. What specific legal duty of disclosure,
applies, if any, in respect of this additional risk at the date of acquisition?
A. The duty to make a fair representation of the additional risk.
B. The duty to take reasonable care not to misrepresent the additional risk.
C. None, as the acquisition is not a material fact.
D. None, as the duty of disclosure only applies at the renewal date.

16. In consumer insurance law, a proposer for personal accident insurance is under a duty to
A. disclose all material facts relating to the contract.
B. make a fair representation of the risk.
C. take reasonable care not to make a misrepresentation.
D. warrant that all answers on the proposal form are accurate.

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 Examination Guide

17. The subject matter of an insurance policy CANNOT be

A. a future inheritance.
B. a loss of profits.
C. intangible property.
D. the life of another person.

18. Mia wishes to effect a life insurance policy on her husband’s life and on her adult son’s
life. What is the maximum sum insured, if any, legally allowable under each policy?
A. An unlimited amount in respect of both policies.
B. An unlimited amount in respect of Mia’s husband and a nominal amount in respect of her
son.
C. An unlimited amount in respect of Mia’s husband and she is not legally allowed to insure the
life of her son.
D. Mia is not legally allowed to insure the life of either her husband or her son.

19. The risk manager of a large construction company forgot to notify his property insurer that one
of the contracts his company was accepting would involve hazardous work. In the event of a
claim arising from this one contract, the insurer has the statutory legal remedy of
A. applying any different terms relating to hazardous work as if the insurance policy had
contained these terms.
B. applying any different terms relating to hazardous work with effect from the date of the
claim.
C. terminating the insurance policy from inception with no refund of premium.
D. terminating the insurance policy from the date of starting the hazardous work.

20. A policyholder makes a claim for damage to his motor vehicle. After investigation, the insurer
discovers the vehicle was being used by the policyholder in a criminal act. In these
circumstances, the insurance policy is
A. valid and the claim will be paid.
B. valid but the claim will be rejected.
C. void.
D. voidable at the option of the insurer.

21. Special rules apply to employers’ liability insurance in respect of the

A. applicability of basis of contract clauses.
B. avoidance of liability for breach of condition or warranty.
C. effect of a lack of insurable interest.
D. range of remedies following a misrepresentation.

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 Examination Guide

22. An example of a continuing warranty in an insurance contract is one that may require
A. an ongoing duty of disclosure throughout the period of a professional indemnity policy.
B. a quarterly declaration of shipments to enable the calculation of a marine cargo premium
adjustment.
C. a security alarm system being operational whenever a property is unattended.
D. no admission of liability being made in the event of a gradual pollution claim.

23. In what type of contracts, if any, is the use of basis of contract clauses legally permitted?
A. In consumer insurance policies only.
B. In non-consumer insurance policies only.
C. In both consumer and non-consumer insurance policies.
D. In neither consumer nor non-consumer insurance policies.

24. What remedy is available to an insurer where a commercial policyholder has breached a
collateral condition concerning a minor matter?
A. Avoid the policy ab initio.
B. Apply terms retrospectively.
C. Claim for damages.
D. Repudiate any future claim.

25. Under the Consumer Rights Act 2015, a contract term in an insurance policy will be considered
unfair to the policyholder if it
A. causes a significant imbalance in the parties’ rights and obligations to the detriment of the
policyholder.
B. defines a particularly narrow scope of cover in relation to the premium paid by the
policyholder.
C. is a standard term that the policyholder does not have the opportunity to individually
negotiate.
D. is ambiguous and one interpretation of the term is detrimental to the policyholder.

26. A broker, acting for a commercial policyholder, is reviewing a policy wording drawn up by an
insurer. The broker proposes an additional clause for insertion into the policy, which the insurer
agrees to incorporate. Which party to the contract will the clause be construed against in the
event of ambiguity?
A. The broker and the insurer equally.
B. The broker and the policyholder equally.
C. The insurer only.
D. The policyholder only.

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 Examination Guide

27. An insurance contract would automatically become void in the event of

A. bankruptcy of an agent.
B. breach of warranty.
C. illegality.
D. misrepresentation.

28. The basis of the burden of proof that a named insured peril was the proximate cause of the loss
falls upon the
A. policyholder to prove on the balance of probabilities.
B. policyholder to prove beyond reasonable doubt.
C. insurer to prove on the balance of probabilities.
D. insurer to prove beyond reasonable doubt.

29. When two perils are described as interdependent, this means that they combine to cause a loss
A. and either peril would cause some loss without the other.
B. but neither peril can be an uninsured or an excepted peril.
C. but neither peril would cause loss on its own.
D. but only one peril is operating or imminent.

30. What is the effect of a clause in an insurance contract that excludes losses directly or indirectly
caused by flooding?
A. Flooding cover cannot be provided by a separate buy-back policy.
B. Flooding is an uninsured peril in relation to concurrent causes.
C. Flooding must be the proximate cause of the loss in order for the exclusion to operate.
D. Flooding need only be a remote cause of the loss in order for the exclusion to operate.

31. A policy condition requiring the policyholder to give notice of a loss and also any incident or
event which may give rise to a claim, is most relevant in an insurance policy covering
A. personal accident.
B. professional liabilities.
C. property damage.
D. travel risks.

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 Examination Guide

32. What statute permits the third party victim of a motor accident to make a direct claim against
the motor insurer of the negligent driver who caused the accident?
A. The Consumer Protection Act 1987.
B. The Contracts (Rights of Third Parties) Act 1999.
C. The Road Traffic Act 1988.
D. The Third Parties (Rights against Insurers) Act 2010.

33. If a policyholder wishes to take out a life insurance policy insuring their own life expressly for the
benefit of a third party, they can arrange this legally by
A. appointing the third party as sole executor to their will.
B. establishing a trust for the third party.
C. naming the third party on the policy as an additional insured.
D. noting the interest of the third party on the policy as bailee.

34. A fire destroys a business premises and the policyholder receives payment of the full sum
insured from his property insurer. If the new premises are rebuilt on the same site during the
current policy period, insurance for the premises will be arranged under
A. a new policy at new terms.
B. an endorsement to the existing policy for an additional premium.
C. the existing policy subject to a reinstatement premium.
D. the existing policy at no additional premium.

35. Which insurance policy can make a deduction for betterment?

A. An agreed value policy for a vintage car.
B. A new for old household contents insurance policy.
C. A personal accident insurance policy.
D. A property insurance policy for business machinery.

36. Which insurance principle is supported by the following formula to calculate the liability of the
insurer?

Sum insured at the time of loss x amount of loss

Value at risk at the time of loss

A. Contribution using the independent liability method.

B. The Elcock principle for partial losses under an agreed value policy.
C. The pro rata condition of average.
D. Subrogation where the recovery from the third party is less than the loss.

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37. It is usual for an insurer to insert a subrogation waiver clause into a contract to agree with a
policyholder that the insurer will NOT exercise subrogation rights against
A. other insurers.
B. reinsurers.
C. subsidiary companies of the policyholder.
D. any third parties.

38. A policyholder’s motor vehicle has suffered damage caused by a negligent third party. The
damage cost £900 to repair with the insurer making payment of £800 after deduction of the
£100 policy excess. The insurer recovered £500 from the negligent motorist. How will this £500
recovery be distributed?
A. The policyholder is entitled to £100 and the insurer £400.
B. The policyholder is entitled to £200 and the insurer £300.
C. The policyholder is entitled to the full £500.
D. The insurer is entitled to the full £500.

39. The maximum liability method of calculating contribution operates, but with unfair results, if
only one of the relevant policies
A. has additional named insureds.
B. includes a subrogation clause.
C. is a policy of indemnity.
D. is subject to a policy excess.

40. Two property insurance policies cover the same loss but the policy terms and conditions
differ. Following a claim, which method of calculating contribution is most likely to be used?
A. The average method.
B. The independent liability method.
C. The maximum liability method.
D. The reinstatement method.

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For Questions 41-50 more than 1 option is correct. You must select all the correct options to gain
the mark.

41. A persuasive precedent may be set by

A. a decision made in the lower courts.
B. a decision made by the Judicial Committee of the Privy Council.
C. a local custom.
D. obiter dicta of senior judges in a high-level decision.
E. the ratio decidendi of a previous case with similar issues.

42. What roles are typically carried out by solicitors in England and Wales?
A. Drawing up contracts for the sale or purchase of property.
B. Providing a specialist advocacy service in the higher courts.
C. Giving opinions on complex or niche areas of law.
D. Offering professional advice on matters of family law.
E. Representing corporate clients in the lower courts.

43. Which torts are actionable per se?

A. Assault.
B. False imprisonment.
C. Negligent misstatement.
D. Private nuisance.
E. Trespass to land.

44. An employers’ liability insurance policy can be classified as being a type of

A. bilateral contract.
B. collateral contract.
C. contract under seal.
D. simple contract.
E. unilateral contract.

45. When may an agent be legally allowed to delegate contractual duties to a sub-agent without the
express permission of the principal?
A. In accordance with trade custom.
B. Only if the sub-agent is based overseas.
C. Out of necessity.
D. Whenever it is cheaper to do so.

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46. What statutory remedy is available to an insurer where a qualifying misrepresentation, which is
careless, has been made by a consumer policyholder?
A. Amend the contract terms from those originally agreed.
B. Avoid the contract and keep any premium paid.
C. Maintain the contract but avoid any claims relating to the misrepresentation.
D. Proportionately reduce the amount to be paid on a claim if a higher premium would have
been charged.

47. A key element of insurable interest is that in relation to the subject matter of the insurance, the
policyholder must have
A. a current interest.
B. an expectation of acquiring an interest.
C. a financial interest.
D. a legal interest.
E. the sole interest.

48. Which rules apply to deal with issues regarding inconsistencies or contradictions in policy
wordings?
A. An express term overrules or modifies any implied term.
B. An implied term overrules or modifies any express term.
C. Handwritten endorsements take priority over printed words in a policy document.
D. A policy document takes priority over a proposal form.

49. Which items are most commonly insured on an agreed value basis?
A. Antiques.
B. Golf clubs.
C. Household appliances.
D. Ships.
E. Works of art.

50. The operation of the principle of subrogation, and the way in which any recovery from a third
party is shared between the policyholder and the insurers, depends on
A. the amount of the recovery in relation to the loss.
B. the time when subrogation rights arise.
C. whether the insurance covers the loss in full.
D. whether there is a non contribution clause.

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Specimen Examination Answers and Learning Outcomes Covered

Learning Learning Learning

Question Answer Question Answer Question Answer
Outcome Outcome Outcome
Standard Format Multiple Response Format
Learning Outcome 1 Learning Outcome 6 Learning Outcomes 1-9
1 B 1.1 20 C 6.3 41 A,B,D 1.6
2 A 1.2 21 B 6.2 42 A,D,E 1.3
3 D 1.5 22 C 6.1 43 A,B,E 2.1
4 A 1.4 23 D 6.1 44 A,D 3.1
4 questions 24 C 6.2 45 A, C 4.2
25 A 6.1 46 A,D 5.5
Learning Outcome 2 26 D 6.1 47 A,C,D 5.2
5 A 2.2 27 C 6.2 48 A,C,D 6.1
6 A 2.2 8 questions 49 A,D,E 8.3
7 B 2.4 50 A,C 9.1
3 questions Learning Outcome 7 10 questions
28 A 7.2
Learning Outcome 3 29 C 7.4
8 A 3.9 30 D 7.4
9 C 3.6 31 B 7.2
10 D 3.2 32 C 7.1
3 questions 33 B 7.1
6 questions
Learning Outcome 4
11 C 4.2 Learning Outcome 8
12 C 4.4 34 A 8.3
13 D 4.2 35 D 8.2
3 questions 36 C 8.3
3 questions
Learning Outcome 5
14 B 5.3 Learning Outcome 9
15 A 5.4 37 C 9.3
16 C 5.5 38 D 9.6
17 A 5.2 39 D 9.5
18 C 5.6 40 B 9.5
19 A 5.6 4 questions
6 questions

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