LM1 ACTUAL EXAM PAPER 2026 QUESTIONS
WITH SOLUTIONS GRADED A+
◉ The proximate cause of a loss will always be the. Answer: Dominant
cause
◉ Which insurance principle gives an insurer the right to call upon other
insurers to share in the settling of a claim? Answer: Contribution
◉ A building valued at £250,000 is jointly owned by Karen and Terry,
who each individually arrange insurance on it. Karen insures the
building for £100,000, whilst Terry insures it for £150,000. If a valid
claim of £55,000 occurs how much is each insurer liable to pay?
Answer: Karen's insurer is liable for £22,000 and Terry's for £33,000.
◉ An insurer arranges for a policyholder's car to be repaired following
damage by a negligent third party motorist. Under which insurance
principle can the insurer recover the paid claim? Answer: Subrogation
◉ Which insurance principle ensures that in the event of a loss the
insured is placed in the same financial position as he was immediately
prior to the loss? Answer: Indemnity
,◉ The protection of jobs is classed as which type of function of
insurance? Answer: A secondary function of insurance only
◉ Which type of risk arises from a cause outside the control of any one
individual and affects a large number of people? Answer: Fundamental
risk
◉ For an individual, which class of risk is always uninsurable? Answer:
Speculative risk
◉ The subjective judgment that individuals or organisations make about
the characteristics and severity of a risk is known as. Answer: Risk
perception
◉ In relation to insurance, a peril is. Answer: An event that may give
rise to a loss
◉ The calculation of what involves the use of the law of large numbers?
Answer: Equitable premiums
◉ What is the most likely impact, if any, on a commercial insurer if it
fails to implement an effective claims-handling process? Answer: The
reputation of the insurer will be affected
, ◉ A proposer for an insurance policy who has previously made
fraudulent insurance claims would be classed by an underwriter as a.
Answer: Poor moral hazard
◉ Where the premiums of the many pay the losses of the few, this is
known as. Answer: Pooling of risks
◉ What is the basic purpose of insurance? Answer: To transfer risks
◉ What class of insurance protects the policyholder from the
nationalisation of their overseas assets by a foreign government?
Answer: Political risks
◉ Cargo carried by an airline will usually be covered under what class
of business? Answer: Marine
◉ What class of insurance would respond to claims made against a
lawyer in respect of advice given to fee paying clients? Answer:
Professional indemnity
◉ What class of insurance can provide cover for loss of attraction or
denial of access to the insured's premises? Answer: Business interruption
WITH SOLUTIONS GRADED A+
◉ The proximate cause of a loss will always be the. Answer: Dominant
cause
◉ Which insurance principle gives an insurer the right to call upon other
insurers to share in the settling of a claim? Answer: Contribution
◉ A building valued at £250,000 is jointly owned by Karen and Terry,
who each individually arrange insurance on it. Karen insures the
building for £100,000, whilst Terry insures it for £150,000. If a valid
claim of £55,000 occurs how much is each insurer liable to pay?
Answer: Karen's insurer is liable for £22,000 and Terry's for £33,000.
◉ An insurer arranges for a policyholder's car to be repaired following
damage by a negligent third party motorist. Under which insurance
principle can the insurer recover the paid claim? Answer: Subrogation
◉ Which insurance principle ensures that in the event of a loss the
insured is placed in the same financial position as he was immediately
prior to the loss? Answer: Indemnity
,◉ The protection of jobs is classed as which type of function of
insurance? Answer: A secondary function of insurance only
◉ Which type of risk arises from a cause outside the control of any one
individual and affects a large number of people? Answer: Fundamental
risk
◉ For an individual, which class of risk is always uninsurable? Answer:
Speculative risk
◉ The subjective judgment that individuals or organisations make about
the characteristics and severity of a risk is known as. Answer: Risk
perception
◉ In relation to insurance, a peril is. Answer: An event that may give
rise to a loss
◉ The calculation of what involves the use of the law of large numbers?
Answer: Equitable premiums
◉ What is the most likely impact, if any, on a commercial insurer if it
fails to implement an effective claims-handling process? Answer: The
reputation of the insurer will be affected
, ◉ A proposer for an insurance policy who has previously made
fraudulent insurance claims would be classed by an underwriter as a.
Answer: Poor moral hazard
◉ Where the premiums of the many pay the losses of the few, this is
known as. Answer: Pooling of risks
◉ What is the basic purpose of insurance? Answer: To transfer risks
◉ What class of insurance protects the policyholder from the
nationalisation of their overseas assets by a foreign government?
Answer: Political risks
◉ Cargo carried by an airline will usually be covered under what class
of business? Answer: Marine
◉ What class of insurance would respond to claims made against a
lawyer in respect of advice given to fee paying clients? Answer:
Professional indemnity
◉ What class of insurance can provide cover for loss of attraction or
denial of access to the insured's premises? Answer: Business interruption
