IIC C11 Dumps

Post-loss objectives focus on how an organization continues functioningafter a loss has occurred. One of the most important objectives ismaintaining stable earnings. Even after a major loss event—such as fire, equipment breakdown, or business interruption—the organization aims to minimize financial volatility and continue operating with predictable revenue. Insurance and effective recovery planning help achieve this stability.

Option A (peace of mind) is apre-losspsychological benefit. Option C (internal obligations) is vague and not defined as a post-loss risk management goal. Option D (external development) relates to business growth, which is unrelated to loss response.

Therefore, the recognized post-loss objective isB: Stable earnings.

Bothstaff adjustersandindependent adjusterswork on behalf of the insurer when handling claims. A staff adjuster is an employee of the insurance company, while an independent adjuster is contracted by an insurer to investigate and adjust claims. Regardless of their employment relationship, both types of adjusters operate under the insurer’s authority, follow the insurer’s procedures, and act in the insurer’s interests when assessing damages, determining coverage, and recommending settlement amounts.

Option A is incorrect because both adjustersdoperform investigations. Option C is incorrect—adjusters are licensed in most provinces, not only Quebec and New Brunswick. Option D is incorrect because both staff and independent adjusters have specific limitations on their settlement authority, which depend on the insurer’s internal guidelines. Therefore, the similarity that applies universally isB.

Subrogationallows an insurer that has indemnified an insured to pursue recovery from the partylegally responsiblefor the loss. It prevents the insured from collecting twice and shifts the financial burden back to the negligent third party. Subrogation is a fundamental principle tied to indemnity.

Option A describes insurer action in fraud cases—not subrogation.

Option B is incorrect; deductibles are always retained by the insured, not reimbursed later.

Option C describes a release or waiver, not subrogation.

Thus, the correct definition isD.

[Insurance as a Contract – Utmost Good Faith / Material Facts]

In their property insurance application, a Quebec client stated there wasnohome business. The underwriter binds the policy without knowing the client runs a daycare in a detached garage. If a loss occurs, will there be consequences?

A. Yes; any claims will be subject to an increased deductible depending on the size of the loss

B. No; as long as the homeowner has at least three years’ experience in the business

C. Yes; if the concealment is proven it could result in the contract being nullified

D. No; in-home businesses with a low to medium hazard grade do not affect eligibility

Answer: C

Insurance contracts rely on the principle ofutmost good faith, requiring applicants to disclose allmaterial facts—facts that would influence an underwriter’s decision to accept, decline, or rate a risk. Operating a home daycare is unquestionably amaterial change in exposure, as it increases traffic, liability hazards, and occupancy risk. Even though the daycare is conducted in a detached garage, it still forms part of the premises insured.

If the clientmisrepresentsorfails to disclosethis information, and the insurer can prove concealment, the insurer mayvoid the policy ab initio (from the beginning)or deny the claim. This applies in Quebec as well, whose Civil Code also requires truthful disclosure of material risks.

Options A and B describe conditions that do not exist in Canadian property insurance.

Option D is incorrect because even low-hazard home businesses must be disclosed.

Thus,Cis correct.

This question is identical to Question 25, so the correct answer and reasoning are the same. Whether an adjuster is a staff employee or an independent contractor, they are hiredto represent the insurerin the claims process. They are both compensated by the insurer—staff adjusters through salary and benefits, independent adjusters through fees or billing arrangements. Both must meet licensing requirements established by provincial regulatory bodies, conduct investigations, and report their findings to the insurer. They are also both subject to authority limits on claim settlement.

Thus, the only option that correctly reflects their similarity isB: both serve and are paid by insurers.

Thepure premiumrepresents theexpected loss costper exposure unit. It is calculated as:

Pure Premium=Probability of Loss×Severity of Loss\text{Pure Premium} = \text{Probability of Loss} \times \text{Severity of Loss}Pure Premium=Probability of Loss×Severity of Loss

Here:

Probability of loss = 1 in 5 homes =0.20

Severity (loss amount) =$50,000

0.20×50,000=10,0000.20 \times 50,000 = 10,0000.20×50,000=10,000

But here is the key detail: one loss of $50,000 spread overfive homesmeans:

50,0005=10,000\frac{50,000}{5} = 10,000550,000​=10,000

But the answer choices do not include $10,000 except option C, yet the correct pure premium per homeownerwith equal distribution per yearequals:

$10,000 per home per year

Thus the correct answer isC: $10,000.

A cover holder is a business entity authorized by an insurer—most often within the Lloyd’s structure—to bind coverage, issue policies, collect premiums, and sometimes handle claims for specific lines of business. This authority is granted through a binding authority agreement, which outlines the scope of operations, underwriting limits, and compliance requirements. Cover holders extend the market reach of insurers while maintaining oversight through strict reporting and audit mechanisms.

A reinsurer assumes risk from insurers but does not issue retail policies or bind coverage for individual clients. A factory mutual is a specialized mutual insurer focusing on highly protected risks, not delegated binding authority. A syndicate mutual is not a recognized category in Canadian P&C operations. Since only a cover holder has formal delegated binding authority from an insurer, the correct answer is B.

The agency or production department within an insurance company is responsible for generating new business, managing distribution channels, working with brokers and agents, and promoting the insurer’s products. These functions align directly with sales and marketing departments found in other industries. Their goals include increasing premium volume, maintaining relationships with intermediaries, and ensuring the insurer’s products reach the marketplace effectively.

Option B is incorrect because finance and production refer to cost control and manufacturing, neither of which parallels insurance distribution. Option C does not align because administration and HR handle internal operations, not customer acquisition. Option D deals with internal systems and support functions, unrelated to the business-production role of generating and selling insurance.

Therefore, the insurer’s agency or production department corresponds to A: Sales and marketing.

Insurers in Canada are heavily regulated in the way they invest their capital because they must remain financially strong to pay future claims. Government regulations—federal for federally regulated insurers and provincial for provincially regulated insurers—set out specific investment restrictions, including prohibiting certain high-risk or illiquid investments. These rules protect policyholders by ensuring insurers maintain solvency and liquidity.

Insurers must invest prudently in order to meet long-term obligations, and therefore regulators specify the classes of investments deemed too risky or unsuitable. This includes limits on speculative investments or holdings that could jeopardize stability.

Option A is incorrect because insurers arenotrequired to invest in non-liquid assets; in fact, liquidity is important.

Option B is incorrect; although some foreign investments may be allowed, the statement is not a broad principle of regulation.

Option C is incorrect because insurers face significant restrictions, not complete freedom.

Thus, D is the correct answer.

When an organization chooses to handle losses throughborrowing, it is using debt financing—usually a bank loan or line of credit—to pay for losses instead of transferring the risk through insurance. While this may offer flexibility, it has several drawbacks. The most significant is that borrowingreduces the company’s available line of credit, limiting funds that could otherwise be used for operations, expansion, or emergencies.

This reduction in liquidity can create financial strain, especially if multiple losses occur or if interest rates rise. Borrowing also increases debt obligations, which can affect cash flow and borrowing capacity.

Option A is incorrect; special accounting is not necessarily required beyond standard debt tracking.

Option C is not inherently a disadvantage—senior management involvement is routine in risk management.

Option D is incorrect; the difficulty of borrowing is determined by creditworthiness, not by the presence of assets.

Thus,Bis the correct disadvantage.

Insurance policies require the insured to report all accidents promptly, even when they appear minor. By settling privately and failing to notify the insurer, Mark violated a fundamental policy condition. This breach is significant because it prejudices the insurer’s rights: the insurer lost the opportunity to investigate, defend, or control settlement negotiations. Under the statutory conditions (especially for automobile insurance), failure to report may result in the forfeiture of the insured’s right to recovery.

Option A is incorrect because limitation periods vary and do not automatically cause a denial; moreover, the issue is the insured's breach, not limitation law. Option C is incorrect because this is a liability claim, not accident benefits. Option D is incorrect because the current policy does not automatically cover past unreported accidents, and coverage can be denied if the insured breached statutory reporting conditions.

Thus, the insurer will most likely deny coverage because Mark forfeited his rights by failing to report the loss, making B correct.

Thesubject of insuranceis the property, person, or legal liability exposure that is being insured. This is the central object of the policy—what the insurer agrees to indemnify or protect. For example, a house in a homeowner’s policy, a vehicle in an automobile policy, or a person’s life in a life insurance contract. Identifying the subject of insurance is essential because underwriting, policy wordings, rates, and coverage conditions all revolve around what is being insured.

Option B refers toperils, which are the causes of loss, not the insured item. Option C refers to the insurer itself and is unrelated to the definition. Option D refers to policy language but not the underlying exposure.

Thus, the correct meaning of the term isA: the thing being insured.

Comprehensive Explanation (150–250 words):

In anexcess of loss (non-proportional) reinsurance contract, the reinsurer pays only when the lossexceeds the primary insurer’s retention, known as thepriorityorattachment point. In this question, the priority is$80,000. This means reinsurance doesnotrespond unless the loss exceeds $80,000.

Here, the actual loss is$60,000, which isbelowthe attachment point. Because the loss never reaches the $80,000 threshold, the reinsurer owesnothing. Theentire lossremains the responsibility of the primary insurer.

The reinsurer’s limit of $100,000 only becomes relevant if the loss exceeds $80,000, which is not the case here.

Therefore, the primary insurer pays100% of the $60,000 loss.

Correct answer:D.

The principle of utmost good faith (uberrima fides) is fundamental to all insurance contracts. It requires a higher standard of honesty than ordinary commercial agreements because the insurer must rely on the applicant to disclose all material facts that could affect the underwriting decision. The insured has superior knowledge of the risk, and failure to disclose material information can jeopardize the insurer's ability to assess the exposure properly.

Option B is incorrect because utmost good faith is not required inalllegal contracts—only in specific types where one party must rely heavily on the full disclosure of the other, such as insurance. Option C is partially related—breachescanlead to policy voidance—but that is a consequence, not the definition. Option D is incorrect because utmost good faith refers to the presence of elevated honesty, not the absence of negligence.

Therefore, the best explanation is A: Requires a high standard of honesty.

Interim covers—also called binders or cover notes—are legal proof of temporary coverage. Because they function as contracts, any additional terms the insurer wishes to impose must be clearly written and communicated to the insured at the time coverage is bound. Courts consistently require that policy terms be in writing to be enforceable, especially when modifying or restricting standard coverage.

Option B is incorrect because verbal instructions can lead to disputes and are not enforceable under contract law or statutory requirements. Option C is incorrect because statutory conditions apply automatically but do not add insurer-specific terms. Option D is unrelated—interim covers exist precisely to provide immediate insurance before the policy is issued.

Therefore, if the insurer wants additional conditions or limitations to apply, they must be set down in writing as part of the interim contract, making A the correct answer.

Statutes—especially older, comprehensive ones—can only be amended or repealed by an act of the legislative authority that created them. In Canada, this means a provincial or federal legislature must formally pass a new act or amendment. Legislatures are the bodies responsible for enacting, revising, or modernizing statutory law to reflect new legal, social, or commercial developments.

Option B is incorrect because Canada does not change statutes through public votes (referenda), except in rare constitutional matters. Option C is incorrect and uses U.S. terminology (“congress”), which does not apply to the Canadian system. Even if compared to Parliament, a bill alone does not change a statute until it is passed into law by the legislature. Option D is incorrect because the Supreme Court interprets law, but does not rewrite statutes.

Thus, only an act of legislature can formally alter statutory law, making A the correct answer.

Insurance contracts are built on the principle of utmost good faith, meaning applicants must disclose all material facts that could influence the insurer’s decision to accept the risk or determine the premium. Failing to mention a material fact—such as the home being unoccupied for long periods—is considered non-disclosure. Unoccupancy increases the risk of vandalism, frozen pipes, fire severity, and delayed emergency response, all of which affect underwriting decisions.

Option A, negligence, refers to failure to act with reasonable care, not failure to disclose.

Option C, breach of warranty, applies only after a policy is in force and a condition guaranteed to be true is violated.

Option D, discharge of contract, refers to cancellation or completion of contractual obligations.

Since the issue arises during the application stage and involves withholding a material fact, the correct classification is non-disclosure.

Under contract law principles referenced inPrinciples and Practice of Insurance, a contract is only valid when both parties givefree, informed, and genuine consent. Fraud occurs when one party intentionally misleads another through deception, false representation, or concealment to induce consent. In this scenario, John intentionally misrepresented the nature of the accommodation—promising his private residence while intending to place Louise in a different, inferior property.

Because Louise agreed based on amaterial misrepresentation, the contract is voidable due tofraud, meaning she can invoke nullity and have the contract deemed without effect. Fraud differs from error in that the misinformation wasdeliberatelycreated by John. It is not lesion (which relates to unfair disadvantage in value) nor violence (which involves physical or psychological coercion). Therefore, the correct answer isB. Fraud.

For a new insurer, cash flow and premium collection are critical. Liability claims often take years to develop, but expenses such as commissions, reinsurance, administration, and claim reserves must be funded immediately. If premiums are not collected promptly due to poor management of accounts receivable, the insurer may not have sufficient liquidity to meet obligations—even if it has written a large volume of business on paper.

Option B is irrelevant because insurers (unlike brokers) do not receive profit-sharing commissions.

Option C is not typically a cause of financial distress since endorsements generateadditionalpremium.

Option D—discounting premiums—could affect income but would not normally create severe financial difficulty unless combined with other poor practices.

The most likely reason for early-stage financial trouble is failure to collect premiums efficiently, making A correct.

A telephone adjuster (often called an inside adjuster) handles claims that can be resolved quickly without requiring in-person investigation. Their main role is to efficiently process a high volume of straightforward claims, such as small auto physical-damage losses, minor property losses, and simple theft claims.

Because these claims do not require field investigations, telephone adjusters focus on gathering information by phone, confirming coverage, arranging payments, and closing files promptly.

Option B is incorrect—telephone adjusters do not take instructions from staff adjusters; they operate independently within their own authority levels.

Option C is incorrect—they do not process paperwork for independent adjusters.

Option D is incorrect—they are not intermediaries; they serve the insurer directly.

The correct function is A: processing a large volume of claims.

Brokers are legally and ethically required to keep premiums in a trust account, separate from operating funds. These trust monies belong to insurers (or insureds, depending on the context) until remitted. Misusing trust funds—such as using them to pay operating expenses—is considered a serious breach of fiduciary duty and a violation of insurance regulatory requirements. Such conduct jeopardizes financial integrity and can lead to immediate termination of the broker contract, regulatory sanctions, or license revocation. Therefore, option D reflects a valid and serious reason for terminating the agreement.

Option A concerns underwriting rules, not broker misconduct. Option B actually reflects good insurer service, not grounds for termination. Option C is incorrect because brokers do not owe commissionstoinsurers—insurers pay commissionstobrokers. The broker’s responsibility is to remit collected premiums, not commissions.

Thus, the only option representing a breach serious enough to terminate an agency contract is D.

A commercial property floater is designed for businesses that regularly transport goods, equipment, or samples away from their main premises. In this case, MacMan Inc.’s traveling sales staff carry product samples across Canada. These samples are considered business property, not personal property. Therefore, they must be insured under a commercial floater, which provides coverage regardless of location—hotel rooms, vehicles, trade shows, or customer visits.

Option C, personal property floater, applies toindividualproperty such as jewelry, fine arts, or sporting goods, not business merchandise. Option A, aviation insurance, is irrelevant unless aircraft are owned or used by the business for transport. Option B, accident insurance, covers personal injuries, not physical property.

Because the exposure involves business-owned goods off-premises, the correct coverage is the commercial property floater. It ensures protection against theft, loss, or damage while the goods are in the custody of traveling employees.

The Institute for Catastrophic Loss Reduction (ICLR) is a research-based organization supported by the Canadian property and casualty insurance industry. Its mission is to reduce the loss of life and property caused by natural hazards by promoting scientifically grounded mitigation strategies. One of its central goals is to encourage the development of resilient buildings and communities by advocating for improved building codes, retrofitting standards, and construction methods that reduce vulnerability to severe weather events such as hurricanes, floods, wildfires, and earthquakes.

Options A and B do not reflect the ICLR's mandate; the organization does not focus on personal weather prediction or creating mandatory evacuation procedures. Option C describes a risk-financing mechanism, not risk reduction. ICLR’s true focus is loss prevention and mitigation, specifically through cost-effective, research-supported construction and community planning measures. Therefore, the correct answer is D.

OSFI regulates federally incorporated insurers to ensure they remain solvent and financially stable so they can pay claims. One of the key regulatory tools is restricting or monitoring insurers’ investment portfolios. By controlling the types of investments insurers may purchase, OSFI aims to reduce exposure to excessive investment risks, ensuring that insurers do not jeopardize policyholder funds through speculative or volatile investments.

Option A is incorrect—OSFI’s mandate is consumer protection, not profit maximization.

Option B is incorrect because indemnification amounts depend on claims, not investment rules.

Option C is incorrect—while returns are important, OSFI’s priority is safety, not maximizing yield.

Thus, the correct purpose is D: minimizing insurers' investment loss exposures to protect policyholders and maintain financial stability.

Asubscription policyis used when a single insurance risk is too large for one insurer to assume alone. Multiple insurers participate in the policy, each taking a percentage of the risk. Because each insurer is directly responsible for its portion, the policy must besigned by each participating insurer, acknowledging its share of liability.

Option A, prescription, refers to legal limitation periods.

Option B, all-inclusive, is not a recognized type of policy requiring multiple insurer signatures.

Option D, subrogation, is a legal right—not a policy type.

Only thesubscription policyrequires signatures from all insurers involved, makingCcorrect.

A claims adjuster’s primary initial responsibility is to receive, record, and gather preliminary information about a loss. This includes confirming the identity of the insured, the date and circumstances of the loss, and whether the situation appears to fall within the policy period and coverage. The adjuster also must ask probing questions to obtain the essential facts to begin an investigation. This early information is critical because it guides further steps such as contacting witnesses, arranging inspections, evaluating liability, and determining the need for expert reports.

Option A is incorrect because an adjuster cannot confirm coverage until a full review of the policy and the facts is completed. Option C is incorrect because the adjuster uses an independent adjuster’s report but is not required to “verify no errors” in a formal sense; they assess and evaluate the report’s content. Option D is unrelated to claims adjusting—premium changes are underwriting functions.

Therefore, the adjuster’s correct responsibility at the early stage is to record preliminary details and obtain further necessary information, making B the accurate answer.

Loss adjusters are required to conduct themselves with professionalism, fairness, and integrity. Their responsibilities include explaining how coverage applies, gathering facts, assessing damage, and ensuring the claim is handled according to policy terms and applicable law. This includes respecting legal requirements and proper interpretation of insurance statutes and conditions.

However, adjusters must not provide legal advice. Legal advice is the domain of licensed lawyers. Adjusters may explain policy terms, clarify obligations, or interpret claims procedures, but they cannot advise a claimant on legal strategy, liability, lawsuit responses, or legal rights beyond policy interpretation. Doing so breaches professional boundaries and regulatory expectations.

Therefore, the only option that isnota responsibility is D: Provide legal advice, making it the correct answer.

Prescription refers to the legally defined period during which an insured is permitted to initiate legal action to enforce a claim under the insurance contract. Once the prescriptive period expires, the insured loses the legal right to pursue the claim, even if the claim itself is otherwise valid. This protects insurers from indefinite liability and encourages timely reporting and settlement of claims.

A waiver is the voluntary relinquishment of a known right. A release is a document signed by the insured surrendering further claims, usually after settlement. A non-waiver agreement preserves the insurer’s right to investigate a claim without admitting liability. None of these terms relate to the legal time limit for bringing an action. Therefore, the correct term describing the time frame for commencing legal proceedings is prescription.

Abroker reportaccompanies an application submitted to an insurer. Its purpose is to give the underwriter helpful background information to properly assess the risk. The broker is expected to providepersonal knowledge of the clientthat may not be evident from the application itself, such as reputation, financial responsibility, prior behaviour, and risk-management practices. This information can significantly influence underwriting decisions.

Option A is incorrect—the insurer, not the broker, determines premium.

Option C may be included if relevant, but it is not the essential purpose of a broker report.

Option D (comparable accounts) is not standard practice; insurers rely on their own rating manuals and actuarial data.

Thus, the most appropriate and expected content in a broker report ispersonal knowledge of the client, makingBthe correct answer.

The Canadian Insurance Claims Managers Association (CICMA) is a professional body composed of senior claims managers across the Canadian insurance industry. Its principal purpose is to promote high ethical standards, professionalism, fairness, and integrity in claims handling. CICMA supports education, networking, and the sharing of best practices to ensure consistency and ethical conduct across insurers.

Option A is incorrect because CICMA does not evaluate or adjudicate claims; individual insurers and provincial accident benefit systems handle those tasks. Option B is incorrect because fraud detection is handled by insurers and sometimes by the Insurance Bureau of Canada (IBC). Option C is unrelated—vehicle damageability research is conducted by organizations such as the Insurance Institute for Highway Safety or similar bodies.

CICMA’s work emphasizes ethics, professional development, and claims leadership, which align directly with option D.

Pre-loss objectives in risk management are goals an organization aims to achievebeforeany loss occurs. These objectives focus on minimizing the frequency and severity of losses, ensuring preparedness, and maintaining organizational functionality.

Operational continuityis a key pre-loss objective because it emphasizes having systems, controls, and procedures in place to ensure that operations run smoothly—even when risk exposures are present. This includes safety programs, maintenance schedules, compliance measures, and contingency planning. Operational continuity ensures the business can withstand or avoid disruptions.

Option A (external obligations) is vague and not formally defined as a risk management objective.

Option B (sustained growth) and D (business development) arebusiness goals, not pre-loss risk management objectives.

Thus, the correct answer isC: Operational continuity.