BCP Insurance Principles 2 — Questions and Answers
Question 1: Which principle prevents an insured from claiming from multiple insurers for the same loss to make a profit in Singapore?
- Principle of subrogation
- Principle of contribution (Correct answer)
- Principle of proximate cause
- Principle of indemnity
Correct answer: Principle of contribution
The principle of contribution ensures that if the same risk is covered by multiple policies, the insurers share the claim proportionally, preventing the insured from profiting by claiming the full amount from each.
Question 2: What is subrogation in the context of Singapore insurance?
- The insured's right to cancel a policy
- The insurer's right to take over the insured's legal rights against a third party after paying a claim (Correct answer)
- The agent's right to earn commission
- The insured's right to increase coverage
Correct answer: The insurer's right to take over the insured's legal rights against a third party after paying a claim
Subrogation allows the insurer, after settling a claim, to step into the insured's shoes and pursue recovery from the responsible third party.
Question 3: What does 'proximate cause' determine in a Singapore insurance claim?
- The nearest physical location of the loss
- The dominant or effective cause of the loss (Correct answer)
- The time of the loss
- The amount of the premium
Correct answer: The dominant or effective cause of the loss
Proximate cause identifies the dominant, effective, or operative cause of a loss. A claim is payable only if the proximate cause is a peril covered under the policy.
Question 4: Under MAS guidelines, what must a financial adviser in Singapore do before recommending an insurance product?
- Conduct a Financial Needs Analysis (FNA) (Correct answer)
- Offer the cheapest product available
- Recommend only one insurer's products
- Require the client to undergo a medical exam
Correct answer: Conduct a Financial Needs Analysis (FNA)
MAS requires financial advisers to conduct a Financial Needs Analysis (FNA) to understand the client's financial situation, protection needs, and objectives before making a product recommendation.
Question 5: What is the role of the Life Insurance Association (LIA) of Singapore?
- To regulate insurance companies
- To represent and promote the interests of life insurance companies in Singapore (Correct answer)
- To sell insurance policies directly to consumers
- To set premium rates for all insurers
Correct answer: To represent and promote the interests of life insurance companies in Singapore
The LIA is a trade association that represents life insurance companies in Singapore. It promotes industry standards and public education but does not regulate or sell policies.
Question 6: What is a 'material fact' that must be disclosed when applying for insurance in Singapore?
- Any fact that is interesting to the applicant
- Any fact that would influence the insurer's decision to accept or rate the risk (Correct answer)
- Only facts about the applicant's nationality
- Only facts about previous claims
Correct answer: Any fact that would influence the insurer's decision to accept or rate the risk
A material fact is any information that would influence a prudent insurer's decision to accept the risk and on what terms. Non-disclosure can lead to policy voidance.
BCP Insurance Principles 2
Which principle prevents an insured from claiming from multiple insurers for the same loss to make a profit in Singapore?