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QFA Regulation practice questions

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Question 1Life Assurance

A person who takes out a life assurance policy on their own life is treated in law as having:

  1. No insurable interest unless a beneficiary is named
  2. An unlimited insurable interest in their own life Correct answer.
  3. Insurable interest limited to their annual income
  4. Insurable interest only after the first premium is paid

Explanation

Every person has an unlimited insurable interest in their own life, so no separate legal justification is needed to effect cover on oneself. Insurable interest rules exist mainly to prevent policies being used as wagers on another person's life.

Question 2Life Assurance

A policy taken out by one adult on the life of another adult requires insurable interest to exist:

  1. At the date the claim is made
  2. At the time the policy is effected Correct answer.
  3. When the policy is assigned to a third party
  4. Continuously throughout the policy term

Explanation

For life assurance, insurable interest is tested when the contract is formed. Once the policy is validly effected, a later change in the relationship, such as divorce, does not invalidate it.

Question 3Life Assurance

The obligation on a proposer for life assurance to disclose material information to the insurer is known as:

  1. The doctrine of subrogation
  2. The principle of indemnity
  3. The doctrine of proximate cause
  4. The duty of utmost good faith Correct answer.

Explanation

Life assurance is a contract of utmost good faith, which requires each side to reveal material facts and not to mislead the other. Breach of this duty can entitle the insurer to treat the contract as never having existed.

Question 4Life Assurance

Which of the following is most likely to be a material fact that an applicant must disclose when applying for life cover?

  1. A pending investigation for a heart condition Correct answer.
  2. The applicant's preferred hospital
  3. A change of address three years ago
  4. Membership of a local sports club

Explanation

A fact is material if it would influence a prudent insurer's decision to accept the risk or the terms and premium applied. A pending investigation for a serious condition plainly meets that test.

Question 5Life Assurance

Under Irish law, a company may carry on life assurance business in Ireland only if it:

  1. Is registered as a charity with the Revenue Commissioners
  2. Is a member of a trade association for insurers
  3. Is authorised by the Central Bank of Ireland Correct answer.
  4. Has a minimum of 500 policyholders in the State

Explanation

Carrying on insurance business without authorisation is a criminal offence. The Central Bank authorises and supervises life undertakings, including under the Solvency II capital regime.

Question 6Life Assurance

Under the Consumer Protection Code, the cooling-off period during which a consumer may withdraw from a life assurance policy is:

  1. 30 days Correct answer.
  2. 14 days
  3. 10 working days
  4. 60 days

Explanation

The Code gives a 30-day withdrawal period for life assurance and pensions products, while the period for general insurance is 14 days. The period runs from when the policy is effected or, if later, when the consumer receives the policy document.

Question 7Life Assurance

When a life assurance death claim is submitted, the insurer will normally require, as minimum proof of death:

  1. A copy of the deceased's will
  2. A letter from the deceased's employer
  3. An official death certificate Correct answer.
  4. A statement from a neighbour

Explanation

An official death certificate is the primary evidence that the life assured has died. The insurer may also request the policy document, proof of age and completion of its own claim forms.

Question 8Life Assurance

Information about a consumer's right to withdraw from a life assurance policy must be brought to the consumer's attention:

  1. Only after the first claim is made
  2. Within five years of the policy commencing
  3. Before or at the time the contract is concluded Correct answer.
  4. Only if the consumer telephones the insurer

Explanation

The right to withdraw must be made clear at the outset, typically in the notice of the right to withdraw and in the policy documentation issued when the contract is concluded. A consumer cannot exercise a right they were never told about.

Question 9Life Assurance

A lender taking out life cover on a borrower to protect a mortgage has insurable interest that is:

  1. Unlimited, as with a person's own life
  2. Limited to the outstanding debt Correct answer.
  3. Not required because the lender is a company
  4. Limited to the borrower's annual salary

Explanation

A creditor's insurable interest is confined to the sum that could actually be lost, which is the debt outstanding. Cover beyond that amount would amount to a wager and is not permitted.

Question 10Life Assurance

Where a life policyholder deliberately conceals a serious medical condition and the insurer would not have issued the policy had it known, the insurer may:

  1. Do nothing, because the policy is already in force
  2. Reduce the sum assured by 10 per cent
  3. Only increase the next premium at renewal
  4. Avoid the contract and keep the premiums Correct answer.

Explanation

Deliberate concealment is fraudulent, and fraud allows the insurer to treat the contract as never having existed. Because the applicant acted dishonestly, the insurer may also retain the premiums already paid.

Question 11Life Assurance

To complete a legal assignment of a life assurance policy to another person, the policyholder must give notice in writing to:

  1. The policyholder's bank
  2. The Financial Services and Pensions Ombudsman
  3. The life assurance company Correct answer.
  4. The Revenue Commissioners

Explanation

Written notice to the insurer is what makes the assignment legally effective against the insurer. Without notice the assignee holds only an equitable interest and may struggle to enforce the benefit.

Question 12Life Assurance

Writing a life assurance policy under trust is mainly intended to:

  1. Allow the insurer to vary the terms unilaterally
  2. Exempt the policyholder from paying premiums
  3. Allow the policyholder to increase the sum assured without underwriting
  4. Keep the proceeds out of the policyholder's estate on death Correct answer.

Explanation

Under a trust policy the trustees hold the benefit for the named beneficiaries, so the proceeds pass outside the deceased's estate. This normally avoids probate delay and keeps the money separate from estate debts and testamentary wishes.

Question 13Life Assurance

Before recommending a life assurance product to a consumer, an intermediary must first:

  1. Obtain sufficient information about the consumer's needs Correct answer.
  2. Confirm that the consumer holds a current bank account
  3. Obtain the consumer's PPS number and tax details only
  4. Get written confirmation that the consumer will not switch insurer

Explanation

Suitability rules require a documented fact find covering needs, financial position and objectives. The recommendation must be consistent with that information and be capable of being justified to the consumer and the regulator.

Question 14Life Assurance

An intermediary selling a life assurance policy must tell the consumer:

  1. How the intermediary is remunerated for the sale Correct answer.
  2. The insurer's internal profit margin on the product
  3. The identity of other clients who bought the same product
  4. The intermediary's personal tax rate

Explanation

Transparency rules require disclosure of the nature and amount, or at least the basis, of commission or fees received. This allows the consumer to judge whether any conflict of interest might affect the advice given.

Question 15Life Assurance

A consumer wishing to bring a complaint to the Financial Services and Pensions Ombudsman must generally do so no later than:

  1. 6 years after the event, or up to 3 years from becoming aware Correct answer.
  2. 3 months after the event complained of
  3. 20 years after the policy commenced
  4. 1 year after the event complained of

Explanation

The statutory time limits allow a complaint within six years of the conduct complained of, or within a further period of up to three years where the consumer only became aware of it later. The Ombudsman has limited discretion to extend time in appropriate cases.

Question 16Life Assurance

Under anti-money-laundering rules, a life insurer or intermediary must complete customer due diligence:

  1. Only for customers resident outside Ireland
  2. Only when a claim exceeds €1 million
  3. After the first five years of the relationship
  4. Before establishing the business relationship Correct answer.

Explanation

Customer due diligence means identifying and verifying the customer and, where relevant, the beneficial owner, and it must be completed before the relationship is established. Life assurance products with an investment element are specifically within the scope of the regime.

Question 17Life Assurance

If a life assurance policy has lapsed for non-payment and the policyholder seeks to have it revived, the insurer will normally require:

  1. Payment of a fixed penalty of one year's premium
  2. The consent of the insurer's reinsurer
  3. A new beneficiary nomination only
  4. Evidence of continued good health Correct answer.

Explanation

Revival restores cover that had already ended, so the insurer must be satisfied that the risk is still acceptable. It will usually ask for a health declaration or medical evidence along with payment of the arrears.

Question 18Life Assurance

Where it is discovered at claim stage that a policyholder understated their age at application, the insurer will normally:

  1. Pay the full original sum assured regardless
  2. Adjust the benefit to reflect the correct age Correct answer.
  3. Refer the matter to An Garda Síochána
  4. Cancel the policy and refund nothing

Explanation

Incorrect age is usually dealt with by adjusting the amount payable to what the premiums paid would have purchased at the true age. This keeps the contract in force rather than avoiding it, provided there was no dishonesty.

Question 19Life Assurance

The duty of utmost good faith in a life assurance contract:

  1. Applies only to the proposer
  2. Can be excluded by a clause in the policy
  3. Applies only after a claim is made
  4. Applies to both the insurer and the proposer Correct answer.

Explanation

Utmost good faith is reciprocal, so the insurer must also disclose material facts and must not mislead the proposer about the cover provided. A breach by either party can give the other a remedy.

Question 20Life Assurance

In a group life scheme, the 'free cover limit' is the amount of cover that:

  1. Is available to employees over age 65
  2. The employer may reclaim on an employee's death
  3. Is paid without a death certificate
  4. Is provided without individual medical evidence Correct answer.

Explanation

Group schemes set a free cover limit so that members whose benefit is below that level are accepted without individual underwriting. Cover above the limit normally requires medical evidence satisfactory to the insurer.

Question 21Life Assurance

For a consumer life assurance contract governed by the Consumer Insurance Contracts Act 2019, the consumer's main pre-contractual duty is to:

  1. Answer the insurer's questions honestly and with reasonable care Correct answer.
  2. Provide a medical examination at their own expense in all cases
  3. Volunteer every fact that any insurer might find useful
  4. Repeat the disclosure at each premium renewal

Explanation

The Act replaced the older duty to volunteer information with a duty to answer the insurer's questions honestly and with reasonable care. It also requires correct information on specified matters such as previous refusals, cancellations and claims.

Question 22Life Assurance

Once a life assurance policy has been properly placed under an absolute trust for named beneficiaries, the policyholder:

  1. May require the insurer to pay the proceeds directly to them
  2. Must obtain the insurer's permission to pay the next premium
  3. Cannot normally revoke the trust or reclaim the policy benefit Correct answer.
  4. May recover the proceeds by naming a different beneficiary in their will

Explanation

An absolute trust transfers beneficial ownership to the trustees for the beneficiaries and reserves no power for the settlor to take the benefit back. A later will cannot override the trust because the policy proceeds are no longer part of the estate.

Question 23Life Assurance

A company insuring the life of a key director can justify the cover because:

  1. The director is automatically an employee of the insurer
  2. The proceeds are always free of tax for the company
  3. The company would suffer financial loss on the director's death Correct answer.
  4. Company-owned policies need no insurable interest

Explanation

Insurable interest in another person's life can be founded on a financial loss that would follow their death. For key person cover, the sum assured is therefore limited to the measurable value of that loss to the business.

Question 24Life Assurance

A proposer completes a life application and, before the policy is issued, is diagnosed with a serious illness. The proposer should:

  1. Wait until the first premium is paid before saying anything
  2. Tell their doctor only
  3. Say nothing, because the application form is already submitted
  4. Inform the insurer before the contract is concluded Correct answer.

Explanation

The duty to disclose material facts continues until the contract is concluded, so a change in health after the application must be reported. Failing to do so means the insurer assesses a risk that no longer reflects reality.

Question 25Life Assurance

Under the Central Bank's Minimum Competency Code, a person providing advice on life assurance products to consumers must normally:

  1. Hold a current practising certificate from the Law Society
  2. Be a qualified actuary
  3. Be employed directly by an insurer
  4. Hold a recognised qualification such as the QFA Correct answer.

Explanation

The Minimum Competency Code requires staff who advise on or sell retail financial products, including life assurance, to hold an appropriate recognised qualification. They must also maintain their competence through ongoing continuing professional development.

Question 26Life Assurance

In relation to insurable interest and life assurance, which statement is correct?

  1. A person must prove insurable interest before insuring their own life.
  2. Insurable interest is required only for group life schemes.
  3. Insurable interest in one's own life ends at normal retirement age.
  4. Every person is presumed to have insurable interest in their own life. Correct answer.

Explanation

Insurable interest means having a financial or legal interest in the person whose life is insured. The law presumes that every person has an unlimited insurable interest in their own life, so no separate proof is needed when someone takes out cover on themselves. For the life of another person, insurable interest must exist at the time the contract is formed.

Question 27Life Assurance

A policyholder takes out a 10-year term assurance policy with no survival benefit and survives to the end of the term. What will the insurer pay?

  1. A full refund of all premiums paid.
  2. Nothing, as no insured event has occurred. Correct answer.
  3. The sum assured plus any bonuses added.
  4. The policy's surrender value at that date.

Explanation

Term assurance provides cover for a defined period and pays only if death occurs within that period. If the life assured survives to the end of the term, no claim arises and nothing is paid. Pure term policies also build no investment or surrender value.

Question 28Life Assurance

A life assurance policy is not written under trust and contains no valid nomination. On the death of the policyholder, the proceeds are:

  1. Part of the deceased's estate, passing under the will or intestacy rules. Correct answer.
  2. Held by the insurer until a beneficiary applies for probate.
  3. Paid to the insurer's trustees for distribution.
  4. Paid directly to the named beneficiary outside the estate.

Explanation

Where a policy is not held in trust and no valid nomination is in place, the death benefit is an asset of the deceased's estate. It is therefore distributed under the will, or under the intestacy rules where there is no valid will. Writing the policy under trust is what removes the proceeds from the estate.

Question 29Life Assurance

A policyholder assigns a life policy to a bank as security for a mortgage, with the intention that the policy returns to the policyholder once the loan is repaid. This arrangement is:

  1. A collateral assignment that ends on repayment of the debt. Correct answer.
  2. An absolute assignment of the policy to the bank.
  3. A nomination of the bank as beneficiary.
  4. A trust declared in favour of the bank.

Explanation

A collateral assignment transfers the policy to the lender only as security for a debt. Once the debt is discharged, the policyholder's rights are restored. An absolute assignment, by contrast, transfers ownership of the policy outright and permanently.

Question 30Life Assurance

A policyholder puts a life policy under a Section 60 trust for their spouse and children, then later becomes bankrupt. What happens to the policy proceeds?

  1. The trust is automatically revoked by the bankruptcy.
  2. They are held for the named beneficiaries and are protected from creditors. Correct answer.
  3. They fall into the bankrupt's estate for the benefit of creditors.
  4. The insurer must pay the proceeds to the Official Assignee.

Explanation

A policy properly written under a statutory trust for a spouse or children creates a beneficial interest in those beneficiaries. Because the policyholder no longer owns the policy, the proceeds do not form part of the estate available to creditors on bankruptcy. The protection depends on the trust being validly created and the beneficiaries falling within the permitted class.

Question 31Life Assurance

Under the Consumer Insurance Contracts Act 2019, where a consumer negligently misrepresents a fact and the insurer would have charged a higher premium had it known the truth, the insurer may:

  1. Cancel cover and refund all premiums with interest.
  2. Avoid the contract from inception and keep the premiums.
  3. Pay the claim reduced in proportion to the premium shortfall. Correct answer.
  4. Pay nothing while retaining the premium paid.

Explanation

The 2019 Act replaced avoidance with proportionate remedies for innocent and negligent misrepresentation by consumers. Where the true facts would have led to a higher premium, the insurer may reduce the claim payment in proportion to the premium actually paid against the premium that should have been paid. Avoidance and forfeiture remain available only for fraudulent misrepresentation.

Question 32Life Assurance

An employee who is a member of an employer's group life scheme leaves the company. A continuation option in the scheme typically allows the member to:

  1. Stay in the group scheme at the employer's expense.
  2. Take out individual cover up to a set limit without medical evidence. Correct answer.
  3. Receive a cash lump sum equal to the group cover.
  4. Move the group cover automatically to a new employer.

Explanation

A continuation (or conversion) option lets a departing member replace group cover with individual cover, usually up to a stated limit, without having to provide medical evidence. It protects members who might otherwise become uninsurable once the group cover ends. The new policy is the member's own and the member pays the premiums.

Question 33Life Assurance

An intermediary suspects that a client is using a life assurance policy to launder money. Under anti-money-laundering rules, the intermediary should:

  1. Complete the transaction and record the concern on file.
  2. Ask the client to explain the transaction before reporting it.
  3. Report the suspicion to the insurer's board of directors.
  4. Make a report to the Financial Intelligence Unit without telling the client. Correct answer.

Explanation

Suspicious activity must be reported to the Financial Intelligence Unit, normally through the firm's designated money-laundering reporting officer. The tipping-off rule makes it an offence to disclose to the client that a report has been or may be made. The firm is also expected to consider whether to proceed with or complete the transaction.

Question 34Life Assurance

Under the Central Bank's Minimum Competency Code, an accredited person must complete at least how many hours of continuing professional development each year?

  1. 25 hours
  2. 15 hours Correct answer.
  3. 10 hours
  4. 20 hours

Explanation

The Minimum Competency Code requires accredited individuals to undertake a minimum of 15 hours of continuing professional development per year. A portion of that time must cover ethics and, where relevant, legislative and regulatory updates. Firms must maintain records to evidence compliance.

Question 35Pensions

Which body is the statutory regulator for occupational pension schemes and PRSAs in Ireland?

  1. Central Bank of Ireland
  2. Department of Social Protection
  3. Revenue Commissioners
  4. Pensions Authority Correct answer.

Explanation

The Pensions Authority is the statutory regulator for occupational pension schemes and PRSAs under the Pensions Act 1990. It supervises compliance and prudential standards in those pension arrangements.

Question 36Pensions

For a standard PRSA, what is the maximum permitted annual fund management charge, expressed as a percentage of fund value?

  1. 1.5%
  2. 1% Correct answer.
  3. 5%
  4. 0.5%

Explanation

A standard PRSA is subject to a statutory cap of 1% per annum on the fund value. It is also subject to a cap of 5% on each contribution.

Question 37Pensions

Which statute is the primary legislation governing occupational pension schemes in Ireland?

  1. Central Bank Act 1942
  2. Trustee Act 1893
  3. Pensions Act 1990 Correct answer.
  4. Social Welfare Consolidation Act 2005

Explanation

The Pensions Act 1990, as amended, is the main statute regulating occupational pension schemes and related pension arrangements. It establishes the Pensions Authority and sets duties for trustees.

Question 38Pensions

Which body grants tax approval for pension arrangements in Ireland?

  1. Central Bank of Ireland
  2. Financial Services and Pensions Ombudsman
  3. Pensions Authority
  4. Revenue Commissioners Correct answer.

Explanation

Tax relief for pension arrangements depends on approval by the Revenue Commissioners under the Taxes Consolidation Act. The Pensions Authority is concerned with regulatory compliance rather than tax approval.

Question 39Pensions

The statutory funding standard under the Pensions Act applies primarily to which type of pension arrangement?

  1. PRSA products
  2. DB occupational schemes Correct answer.
  3. State pension scheme
  4. DC occupational schemes

Explanation

The funding standard is designed for defined benefit occupational schemes because they promise defined benefits that must be funded. Defined contribution and PRSA benefits depend on the accumulated fund rather than a promised benefit.

Question 40Pensions

What is the minimum period of qualifying service normally required before a member leaving an occupational pension scheme has a preserved benefit?

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

Explanation

Under the Pensions Act, a preserved benefit generally arises after two years of qualifying service. With shorter service, a refund of the member's contributions may be possible, subject to tax.

Question 41Pensions

Where an employer does not operate an occupational pension scheme, what must it do for employees in relation to PRSAs?

  1. Pay a minimum 10% employer contribution
  2. Provide access to a standard PRSA Correct answer.
  3. Establish an occupational DB scheme
  4. Provide company cars to all employees

Explanation

An employer without an occupational scheme must facilitate access to at least one standard PRSA for its employees. This access requirement does not by itself oblige the employer to contribute.

Question 42Pensions

Which body administers the State Pension (Contributory)?

  1. The Pensions Authority of Ireland
  2. The Central Bank of Ireland
  3. Department of Social Protection Correct answer.
  4. The Revenue Commissioners of Ireland

Explanation

The State Pension (Contributory) is a social insurance payment administered by the Department of Social Protection. It is not an occupational pension scheme regulated by the Pensions Authority.

Question 43Pensions

For a standard PRSA, what is the maximum permitted charge on each contribution?

  1. 5% Correct answer.
  2. 10%
  3. 1%
  4. 3%

Explanation

A standard PRSA may charge no more than 5% of each contribution. The separate annual fund management charge cap is 1% of fund value.

Question 44Pensions

A 45-year-old employee contributes to a PRSA. What is the maximum age-related percentage of net relevant earnings that can qualify for tax relief?

  1. 25% Correct answer.
  2. 40%
  3. 30%
  4. 20%

Explanation

The age-related relief bands allow 25% for a person aged 40 to 49. The relief applies to net relevant earnings, subject to the earnings cap.

Question 45Pensions

What is the earnings cap used to limit tax relief on pension contributions?

  1. €75,000
  2. €150,000
  3. €100,000
  4. €115,000 Correct answer.

Explanation

The age-related percentage applies to net relevant earnings up to a cap of €115,000. Earnings above that level do not qualify for further relief.

Question 46Pensions

What is the Standard Fund Threshold for pension tax purposes in Ireland?

  1. €2,500,000
  2. €2m Correct answer.
  3. €1,000,000
  4. €1,500,000

Explanation

The Standard Fund Threshold is €2 million. Pension capital values above the threshold can give rise to an excess fund charge.

Question 47Pensions

If a person has no guaranteed pension income of at least €12,700 per year, what minimum amount must generally be placed in an AMRF?

  1. €2,000,000, regardless of fund size
  2. €115,000, regardless of fund size
  3. €12,700, with no alternative basis
  4. €63,500 (or 75% if lower) Correct answer.

Explanation

Where the guaranteed income threshold is not met, €63,500 must be invested in an AMRF, or 75% of the fund if that is lower. The AMRF generally becomes an ARF at age 75.

Question 48Pensions

Which requirement is imposed on occupational pension schemes by the IORP II Directive?

  1. Own-risk assessment Correct answer.
  2. Purchase of an annuity at retirement
  3. Appointment of member trustees
  4. Annual audit by the Central Bank

Explanation

IORP II requires schemes to carry out an own-risk assessment covering the material risks they face. This is a governance and risk-management requirement, not a requirement to buy an annuity.

Question 49Pensions

Under the Pensions Act, to which body must scheme auditors and actuaries report certain prescribed matters?

  1. Department of Social Protection
  2. Pensions Authority Correct answer.
  3. Central Bank of Ireland
  4. Revenue Commissioners

Explanation

The Pensions Act imposes whistleblowing duties on auditors and actuaries to report prescribed matters to the Pensions Authority. This supports regulatory oversight of scheme compliance.

Question 50Pensions

What is a court order called when it directs pension scheme trustees to pay benefits to a former spouse on divorce?

  1. Approved minimum retirement fund
  2. Pension adjustment order Correct answer.
  3. Personal retirement savings account
  4. Approved retirement fund

Explanation

A pension adjustment order is made by a court in family law proceedings and requires trustees to provide benefits for a spouse or dependent. It is distinct from the tax-approved retirement products listed.