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Bulgarian Insurance Broker Qualification Exam study materials
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Bulgarian Insurance Broker Qualification Exam practice questions

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Question 1Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Under the Bulgarian Insurance Code, which body is the competent state authority for supervision of insurance and reinsurance activity?

  1. The Financial Supervision Commission Correct answer.
  2. The Bulgarian National Bank
  3. The Ministry of Finance
  4. The Commission for Protection of Competition

Explanation

The Insurance Code assigns prudential and market-conduct supervision of insurers, reinsurers and insurance intermediaries to the Financial Supervision Commission (KFN). The Commission acts as the integrated financial regulator for the insurance, capital and pension sectors.

Question 2Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which law governs the conclusion, content and performance of insurance contracts in Bulgaria?

  1. The Insurance Code Correct answer.
  2. The Obligations and Contracts Act only
  3. The Consumer Protection Act
  4. The Commerce Act

Explanation

The Insurance Code contains a dedicated chapter regulating the insurance contract, including its mandatory elements, rights and duties of the parties, and termination. The general civil law applies only subsidiarily where the Code is silent.

Question 3Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

What is the principal activity of an insurance broker under the Insurance Code?

  1. Concluding insurance contracts on behalf of the insurer
  2. Underwriting risks in the name of the insurer
  3. Settling claims on behalf of policyholders
  4. Advising and intermediating insurance on behalf of the client Correct answer.

Explanation

An insurance broker acts as an independent intermediary representing the prospective policyholder, providing advice and presenting the client's interests in placing insurance. A broker does not act for the insurer, which distinguishes it from an agent.

Question 4Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

An insurance agent differs from an insurance broker in that the agent:

  1. Acts on behalf of one or more insurers under a mandate Correct answer.
  2. Is always a natural person
  3. May place business with any insurer chosen freely by the client
  4. Is supervised by the Ministry of Finance

Explanation

An insurance agent is tied to the insurer by an agency mandate and represents the insurer's interests. A broker, by contrast, acts for the client and must remain independent of insurers.

Question 5Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following is required of a person wishing to be registered as an insurance broker?

  1. Membership in a political party
  2. A minimum of ten years of employment with an insurer
  3. Ownership of real estate in Bulgaria
  4. Professional competence and good repute Correct answer.

Explanation

Registration as an insurance intermediary requires proof of professional competence and good repute, among other conditions set by the Insurance Code. These requirements protect clients and ensure adequate advice.

Question 6Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

The register of insurance intermediaries in Bulgaria is maintained by:

  1. The Financial Supervision Commission Correct answer.
  2. The Association of Bulgarian Insurers
  3. The Registry Agency
  4. The Bulgarian Chamber of Commerce

Explanation

The Financial Supervision Commission keeps the public register of insurance agents and brokers and publishes it on its website. Registration is a precondition for lawful intermediation activity.

Question 7Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following activities is part of insurance intermediation?

  1. Representing a policyholder in court litigation
  2. Auditing the solvency of an insurer
  3. Assisting in the administration and performance of insurance contracts Correct answer.
  4. Issuing insurance policies in the insurer's name

Explanation

Insurance intermediation covers activities such as presenting, proposing and carrying out other preparatory work for concluding contracts, and assisting in their administration and performance. It does not extend to activities reserved to the insurer or to legal representation.

Question 8Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

A broker receives remuneration for placing a policy. Under the Insurance Code, such remuneration is typically:

  1. Set by the Financial Supervision Commission
  2. Prohibited entirely
  3. Always paid by the client only
  4. A commission paid by the insurer, disclosed to the client Correct answer.

Explanation

Broker remuneration commonly takes the form of a commission paid by the insurer out of the premium, and the broker must disclose the basis of remuneration to the client. Transparency about remuneration protects the client's ability to assess conflicts of interest.

Question 9Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

How many insurance intermediaries may a single insurance agent or broker act for in the life insurance sector without additional safeguards?

  1. An unlimited number with no disclosure duty
  2. Only one insurer in all cases
  3. Several, provided the client is informed and conflicts are managed Correct answer.
  4. Exactly two, by statutory cap

Explanation

Intermediaries may work with multiple insurers, but they must inform the client and manage conflicts of interest so that advice remains fair. The key requirement is transparency rather than a fixed numerical cap.

Question 10Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Before concluding an insurance contract, an insurance broker must carry out a demands-and-needs assessment in order to:

  1. Set the premium rate for the insurer
  2. Determine the insurer's solvency margin
  3. Identify the client's requirements and recommend a suitable product Correct answer.
  4. Verify the client's tax status

Explanation

The demands-and-needs test ensures that the product recommended matches the client's circumstances and objectives. It is a core conduct obligation supporting fair treatment of customers.

Question 11Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which document must an insurance intermediary provide to the client before the contract is concluded, disclosing its identity, status and complaints procedure?

  1. A notarised power of attorney
  2. A standardised disclosure document on the intermediary Correct answer.
  3. The insurer's annual solvency report
  4. The policy wording only

Explanation

Intermediaries must give clients standardised information about their identity, status, remuneration and complaint-handling arrangements before contracting. This supports informed decision-making and transparency.

Question 12Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

An insurance broker that also holds a supplementary licence for insurance-based investment products must additionally comply with rules derived from:

  1. The Markets in Financial Instruments Directive framework Correct answer.
  2. The Banking Recovery and Resolution Directive
  3. The Solvency II Directive only
  4. The Payment Services Directive

Explanation

Where insurance intermediaries distribute insurance-based investment products, conduct rules modelled on the financial instruments framework apply, including suitability and conflict-of-interest requirements. These add to the general insurance intermediation rules.

Question 13Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

What is the consequence for an insurance broker that carries on intermediation without the required registration?

  1. The contracts are automatically valid and the broker is exempt from sanctions
  2. It must pay a higher premium to the insurer
  3. It receives a provisional licence by default
  4. It commits an administrative offence subject to sanctions and the activity may be prohibited Correct answer.

Explanation

Unregistered intermediation is an administrative offence under the Insurance Code and may attract fines and measures to cease the activity. Registration is a mandatory precondition for lawful intermediation.

Question 14Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which supervisory measure may the Financial Supervision Commission impose on an insurance broker for breach of the Insurance Code?

  1. Dissolution of the broker's client contracts by court order
  2. A fine and, in serious cases, withdrawal of registration Correct answer.
  3. Deprivation of liberty
  4. Automatic transfer of the broker's portfolio to an insurer

Explanation

The Commission may impose administrative penalties, including fines, and may withdraw registration for serious or repeated breaches. These measures are administrative rather than criminal.

Question 15Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which type of insurance belongs to the life insurance class under the Insurance Code classification?

  1. Fire and natural perils insurance
  2. General liability insurance
  3. Insurance linked to investment funds Correct answer.
  4. Motor third party liability

Explanation

Life insurance classes include traditional life cover and unit-linked products where benefits are linked to investment fund performance. Non-life classes cover property, liability and motor risks.

Question 16Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

An insurer authorised to write non-life business wishes to begin writing life business. What is required?

  1. Approval of the policyholders' assembly
  2. Nothing, since the licence covers all classes
  3. A separate authorisation for the life classes Correct answer.
  4. Only notification to the broker

Explanation

Life and non-life insurance are subject to separate authorisation because of their different risk profiles and capital treatment. An insurer must obtain an extension of its licence to write life classes.

Question 17Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which principle requires an insurer to maintain sufficient technical provisions and eligible own funds to meet its obligations?

  1. The principle of insurable interest
  2. The principle of subrogation
  3. The principle of indemnity
  4. The solvency principle Correct answer.

Explanation

The solvency principle requires insurers to hold adequate technical provisions and capital so that they can meet liabilities to policyholders. It underpins prudential supervision under the Insurance Code.

Question 18Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Motor third party liability insurance in Bulgaria is compulsory because:

  1. It protects third parties injured by the use of a motor vehicle Correct answer.
  2. It replaces the need for a driving licence
  3. It guarantees profits for insurers
  4. It is required only for commercial vehicles

Explanation

Compulsory motor third party liability insurance exists to ensure that victims of road accidents caused by motor vehicles receive compensation. It is required for all motor vehicles used on public roads.

Question 19Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

An insurance broker advises a client on a life insurance product and recommends a specific policy. Which standard must the recommendation meet?

  1. It must be suitable for the client's demands and needs Correct answer.
  2. It must maximise the broker's commission
  3. It must match the cheapest product on the market
  4. It must be approved by the insurer's board

Explanation

A personal recommendation must be suitable and consistent with the client's demands and needs as established during the assessment. Commission maximisation or price alone does not satisfy the suitability standard.

Question 20Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

What is the primary purpose of the Financial Supervision Commission's on-site inspections of insurance intermediaries?

  1. To verify compliance with the Insurance Code and detect breaches Correct answer.
  2. To promote the intermediary's products
  3. To recruit staff for the intermediary
  4. To set the intermediary's commission rates

Explanation

On-site inspections are a supervisory tool to verify compliance with legal and conduct requirements and to detect irregularities. Findings may lead to recommendations or sanctions.

Question 21Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

A client complains to a broker about the conduct of the insurer. Under conduct rules, the broker should:

  1. Destroy the complaint file
  2. Refuse to discuss the matter
  3. Inform the client of the insurer's and the regulator's complaints procedures Correct answer.
  4. Demand that the client waive the complaint

Explanation

Intermediaries must handle complaints fairly and inform clients about available complaint routes, including the insurer's internal procedure and the competent supervisory authority. This ensures access to redress.

Question 22Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following best describes the 'freedom of establishment' and 'freedom to provide services' for insurance intermediaries within the EU?

  1. Cross-border intermediation is prohibited
  2. A broker registered in one Member State may operate in another under notification procedures Correct answer.
  3. A broker must re-register from scratch in every Member State
  4. Only insurers, not brokers, benefit from these freedoms

Explanation

EU passporting allows a registered intermediary to operate in other Member States through establishment or cross-border services, subject to notification between regulators. Full re-registration is not required.

Question 23Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Under the Insurance Code, an insurance broker's records of client transactions and advice must be:

  1. Kept only until the end of the calendar year
  2. Encrypted and never disclosed
  3. Held exclusively by the insurer
  4. Retained and made available to the supervisory authority on request Correct answer.

Explanation

Record-keeping obligations require intermediaries to retain documentation of transactions and advice and to produce it to the supervisory authority when requested. This supports effective supervision and client protection.

Question 24Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which statement about insurance intermediaries and the receipt of client premiums is correct?

  1. Brokers may freely commingle client money with their own funds
  2. Premiums may only be paid in cash
  3. The Code prohibits intermediaries from handling any money
  4. Client money must be safeguarded and kept separate from the intermediary's own funds Correct answer.

Explanation

Where an intermediary handles client money, the law requires appropriate safeguards such as segregation to protect policyholders if the intermediary fails. Commingling with the intermediary's own funds is not permitted.

Question 25Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which requirement applies to advertising and promotional materials used by an insurance broker?

  1. They must guarantee investment returns
  2. They must be fair, clear and not misleading Correct answer.
  3. They may omit material exclusions
  4. They must be approved by the Ministry of Finance

Explanation

Marketing communications must be fair, clear and not misleading so that clients can make informed decisions. Omitting material exclusions or guaranteeing returns would breach this standard.

Question 26Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Under the Insurance Code, which body is responsible for the overall supervision of insurance intermediaries in Bulgaria?

  1. The Bulgarian National Bank
  2. The Financial Supervision Commission Correct answer.
  3. The Ministry of Finance
  4. The Commission for Consumer Protection

Explanation

The Financial Supervision Commission (FSC) is the integrated regulator for insurance, capital markets, and pension funds in Bulgaria. It maintains the register of insurance intermediaries and conducts supervision. The Bulgarian National Bank is responsible for banking supervision, not insurance intermediation.

Question 27Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following is a requirement for registration as an insurance broker in Bulgaria?

  1. Being a member of a professional association
  2. Having at least five years of experience in the insurance sector
  3. Holding a university degree in economics
  4. Maintaining a minimum paid-up share capital Correct answer.

Explanation

The Insurance Code requires insurance brokers to maintain a minimum paid-up share capital as a financial guarantee. Other requirements such as education or experience may apply to managers but not as a capital substitute. Professional association membership is not mandatory for registration.

Question 28Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

What is the primary role of the Financial Supervision Commission's on-site inspections of insurance brokers?

  1. To promote the broker's services to consumers
  2. To verify compliance with legal and regulatory requirements Correct answer.
  3. To provide legal advice to brokers
  4. To negotiate commission rates with insurers

Explanation

On-site inspections are a supervisory tool to assess whether brokers comply with the Insurance Code and FSC regulations. They focus on conduct, record-keeping, and financial soundness. The FSC does not promote, negotiate, or advise in this capacity.

Question 29Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

An insurance broker intends to provide services in another EU Member State on a temporary basis. Which of the following is required under the freedom to provide services?

  1. Notification to the home state supervisory authority Correct answer.
  2. Prior authorisation from the host state supervisory authority
  3. Establishment of a branch in the host Member State
  4. Appointment of a local representative in the host Member State

Explanation

Under the freedom to provide services, a broker must notify its home state supervisory authority, which then informs the host state. No branch or prior authorisation from the host state is required. This is distinct from the freedom of establishment, which involves a permanent presence.

Question 30Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Under the Insurance Code, what is the maximum period for which an insurance broker must retain records of client transactions and advice?

  1. 3 years
  2. 5 years Correct answer.
  3. 7 years
  4. 10 years

Explanation

The Insurance Code requires insurance intermediaries to keep records for at least 5 years. This period ensures that supervisory authorities can access information for compliance checks. Longer retention may be required for other legal purposes but the statutory minimum is 5 years.

Question 31Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

A broker receives a client's premium for onward transmission to the insurer. How must the broker handle these funds under the Insurance Code?

  1. Use them to pay the broker's own expenses until the insurer is paid
  2. Transfer them to the insurer only after deducting the broker's commission
  3. Hold them in a separate client account Correct answer.
  4. Deposit them into the broker's general operating account

Explanation

Client premiums must be segregated from the broker's own funds, typically in a designated client account. This protects clients and insurers in case of the broker's insolvency. Commingling with the broker's operating funds is not permitted.

Question 32Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following statements about an insurance broker's professional indemnity insurance is correct?

  1. It must cover liability for professional negligence Correct answer.
  2. It only covers the broker's employees
  3. It replaces the need for a minimum guarantee fund
  4. It is optional for all brokers

Explanation

Insurance brokers are required to hold professional indemnity insurance to cover claims arising from negligence in their professional activities. This protects clients. It does not replace the guarantee fund and is not optional.

Question 33Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

When an insurance broker provides advice to a client, what standard of care must be met under the Insurance Code?

  1. Acting honestly, fairly, and professionally in the client's best interests Correct answer.
  2. Maximising the broker's commission
  3. Providing advice only when explicitly requested
  4. Recommending only products from a single insurer

Explanation

The Insurance Code imposes a duty on intermediaries to act honestly, fairly, and professionally in accordance with the best interests of the client. This includes providing advice that is suitable based on the client's demands and needs. Conflicts of interest must be managed.

Question 34Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following is a permissible method for an insurance broker to receive remuneration?

  1. All of the above
  2. A fee from the client
  3. Commission from the insurer
  4. Both commission and a fee, if disclosed Correct answer.

Explanation

Insurance brokers may receive remuneration in the form of commission from insurers, fees from clients, or a combination of both, provided the nature of the remuneration is disclosed to the client. Full transparency is required to avoid conflicts of interest. The other options are incomplete because they do not cover the combined and disclosed approach.

Question 35Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

What is the consequence if an insurance broker fails to comply with a lawful instruction of the Financial Supervision Commission?

  1. The broker may appeal to the insurer
  2. The FSC may impose a fine or revoke the broker's registration Correct answer.
  3. The instruction is automatically void
  4. The broker's clients must be notified

Explanation

The FSC has the power to enforce compliance through administrative penalties, including fines and revocation of registration. Non-compliance with supervisory instructions is a serious breach. Appeals are made through the courts, not to insurers.

Question 36Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following best describes the 'freedom of establishment' for insurance intermediaries under EU law?

  1. The right to provide services temporarily without notification
  2. The right to avoid host state supervision
  3. The right to operate without a licence in the home state
  4. The right to set up a permanent presence in another Member State Correct answer.

Explanation

Freedom of establishment allows an intermediary to create a permanent presence, such as a branch or subsidiary, in another Member State. This requires notification and may lead to host state supervision. It is distinct from the temporary provision of services.

Question 37Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

An insurance broker wishes to advertise a new life insurance product. Which requirement applies to the advertisement?

  1. It must be in at least two languages
  2. It must be fair, clear, and not misleading Correct answer.
  3. It must include the broker's registration number
  4. It must be approved by the Financial Supervision Commission before publication

Explanation

Advertising by insurance intermediaries must comply with the principle of being fair, clear, and not misleading. This ensures consumers are not deceived. Prior approval by the FSC is not required, and other details like registration number or language are not mandatory for all advertisements.

Question 38Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Under the Insurance Code, which of the following is a ground for revocation of an insurance broker's registration?

  1. A decrease in the number of employees
  2. Failure to meet annual sales targets
  3. A change in the broker's address without notifying the FSC
  4. Serious or repeated violations of the Insurance Code Correct answer.

Explanation

The FSC may revoke registration for serious or repeated breaches of the Insurance Code. Minor administrative omissions, such as not notifying an address change, typically lead to fines rather than revocation. Sales targets and employee numbers are commercial matters.

Question 39Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

A client complains to an insurance broker about the conduct of the insurer. What should the broker do under the applicable conduct rules?

  1. Resolve the complaint by paying compensation to the client
  2. Dismiss the complaint as outside the broker's responsibility
  3. Forward the complaint to the insurer without informing the client
  4. Inform the client of the insurer's complaint handling procedure and the right to contact the FSC Correct answer.

Explanation

Brokers must handle complaints fairly and inform clients about the insurer's internal complaint procedures and the possibility to escalate to the FSC or the ombudsman. Dismissing or unilaterally compensating is not appropriate. Forwarding without informing the client fails transparency.

Question 40Legal and regulatory framework of insurance and insurance intermediation (Insurance Code, FSC supervision)

Which of the following statements about the register of insurance intermediaries maintained by the FSC is correct?

  1. It is updated annually
  2. It only includes insurance agents, not brokers
  3. It is publicly accessible and includes details of registered intermediaries Correct answer.
  4. It is confidential and only available to insurers

Explanation

The register is public and provides information on all registered insurance intermediaries, including agents and brokers. This transparency allows consumers and insurers to verify status. It is updated regularly, not just annually.

Question 41Insurance contract law: conclusion, content, rights and obligations of the parties, termination

Under Bulgarian insurance contract law, when is a contract of insurance considered concluded?

  1. When the insurance agent collects the first premium from the proposer
  2. When the insurer issues the policy document and the premium is fully paid
  3. When the insurer accepts the written application submitted by the proposer Correct answer.
  4. When the proposer signs the application form regardless of the insurer's response

Explanation

An insurance contract is concluded when the insurer accepts the offer contained in the written application (proposal). Issuance of the policy or payment of premium are subsequent acts and are not constitutive of the contract's formation.

Question 42Insurance contract law: conclusion, content, rights and obligations of the parties, termination

Which document generally constitutes the written offer (proposal) in a Bulgarian insurance transaction?

  1. The insurer's internal underwriting manual
  2. The general terms and conditions of the insurer
  3. The broker's remuneration agreement
  4. The completed and signed insurance application Correct answer.

Explanation

The proposer makes the offer by completing and signing the insurance application, which contains the terms sought. The general terms and conditions form part of the contractual framework but are not the offer itself.

Question 43Insurance contract law: conclusion, content, rights and obligations of the parties, termination

A proposer submits an application for property insurance and the insurer accepts it but issues a policy with a higher deductible than applied for. What is the legal position?

  1. The proposer must accept because the premium was already collected
  2. The insurer's response is a counter-offer that the proposer must accept Correct answer.
  3. The higher deductible is binding because the insurer's acceptance prevails
  4. The contract is automatically void because the terms differ from the offer

Explanation

An acceptance that materially alters the terms of the offer operates as a counter-offer, which requires the proposer's acceptance to form a contract. The proposer is not bound by terms they never agreed to.

Question 44Insurance contract law: conclusion, content, rights and obligations of the parties, termination

What is the legal effect of the general terms and conditions of an insurer?

  1. They replace the individual agreement where the two conflict
  2. They apply only to commercial insureds, not to consumers
  3. They have no legal force and are merely informative
  4. They bind the insured only if expressly accepted and incorporated into the contract Correct answer.

Explanation

Standard terms and conditions become part of the contract when they are incorporated and accepted by the parties. Where they conflict with individually negotiated terms, the individual agreement generally prevails.

Question 45Insurance contract law: conclusion, content, rights and obligations of the parties, termination

Which of the following is a primary obligation of the insured under an insurance contract?

  1. To draft the general terms and conditions
  2. To disclose all circumstances relevant to the risk assessment Correct answer.
  3. To set the premium rate
  4. To inspect the insurer's solvency

Explanation

The insured must disclose circumstances known to them that are relevant to the insurer's assessment of the risk. This duty of disclosure underpins the insurer's ability to price and accept the risk.

Question 46Insurance contract law: conclusion, content, rights and obligations of the parties, termination

The insured fails to notify the insurer of a material increase in risk during the policy period. What is the insurer generally entitled to do?

  1. Automatically increase the sum insured
  2. Terminate the contract or adjust the terms, depending on the circumstances Correct answer.
  3. Nothing, because the risk was fixed at inception
  4. Demand that the insured find a new broker

Explanation

A material aggravation of risk during the term must be notified, and the insurer may respond by terminating the contract or renegotiating its terms. The precise remedy depends on the applicable provisions and the significance of the change.

Question 47Insurance contract law: conclusion, content, rights and obligations of the parties, termination

What is the main obligation of the insurer under an insurance contract?

  1. To provide legal representation in all disputes of the insured
  2. To manage the insured's business affairs
  3. To pay the insurance indemnity or sum insured upon the occurrence of an insured event Correct answer.
  4. To guarantee the insured a profit

Explanation

The insurer's core obligation is to pay the agreed indemnity or sum insured when an insured event occurs, in accordance with the contract terms. Other services may be agreed but are ancillary.

Question 48Insurance contract law: conclusion, content, rights and obligations of the parties, termination

When must the insured pay the first premium in order for cover to commence, absent a different agreement?

  1. Within thirty days after the insured event
  2. Only after the insurer has paid a claim
  3. At the time of conclusion of the contract or as agreed therein Correct answer.
  4. Whenever the broker requests it

Explanation

The premium is generally payable at conclusion of the contract or on the date agreed, and cover typically commences upon payment unless otherwise stipulated. The contract may specify different timing.

Question 49Insurance contract law: conclusion, content, rights and obligations of the parties, termination

What is the consequence of the insured's non-payment of the premium within the agreed period?

  1. The sum insured is automatically doubled
  2. The broker becomes liable for the indemnity
  3. The insurer may suspend cover or terminate the contract in accordance with the agreed terms Correct answer.
  4. The contract converts into a life insurance policy

Explanation

Failure to pay the premium entitles the insurer to the remedies provided in the contract and law, typically suspension of cover or termination after notice. The insurer is not obliged to indemnify events occurring during a period of non-payment where cover is suspended.

Question 50Insurance contract law: conclusion, content, rights and obligations of the parties, termination

Which of the following best describes the insured's duty when an insured event occurs?

  1. To repair all damage before notifying anyone
  2. To negotiate directly with third parties without informing the insurer
  3. To wait until the insurer discovers the event independently
  4. To notify the insurer promptly and provide the required information and documents Correct answer.

Explanation

The insured must notify the insurer of the insured event within the agreed period and cooperate by providing information and documents needed to assess the claim. Prompt notification allows the insurer to investigate and mitigate loss.