III IC-77 common mistakes
III IC-77 · Understand the traps and how to avoid them.
Treating insurable interest as a requirement that must exist only at the moment the claim arises, so the candidate marks a life policy void because interest had lapsed before death.
Candidates memorise 'insurable interest is required' without attaching it to the correct time test for each class, and general-insurance timing (inception and sometimes loss) gets confused with life-assurance timing (inception only).
What to do instead
Build a two-column table: life assurance - interest at inception, continuing interest not required, own life unlimited, key person and creditor cover limited to pecuniary loss; indemnity classes - interest at inception and generally at loss. Rehearse with a lapsed-interest scenario and a marine 'lost or not lost' clause scenario.
Calculating indemnity by paying the full new-replacement cost on a property claim where the policy is written on an indemnity (market value) basis, or ignoring average under a fire policy.
Candidates default to 'make the insured whole' as replacement cost and forget that the basis of settlement is a policy term, and that average reduces the claim proportionally when sums insured are inadequate.
What to do instead
Before computing, state the basis of settlement and the sum insured, then apply the average formula (sum insured ÷ value at risk × loss) and deduct any excess. Practise three variants of the same loss: indemnity, reinstatement, and average applied.
Answering liability questions by finding the insured negligent and stopping there, without establishing duty of care, breach, causation and quantum in sequence.
Negligence is learned as a single label, so candidates skip the elements and miss marks on causation and remoteness, and confuse civil liability with the policy trigger.
What to do instead
Use a fixed four-step template for every liability scenario: duty (established categories or foreseeability/proximity/fairness), breach (reasonable person standard), damage caused and not too remote, then quantum and any defence such as contributory negligence or volenti. State each step explicitly in the answer.
Confusing the principle of subrogation with contribution, or applying subrogation against the insured's own claim, in a multi-policy or third-party-recovery scenario.
Both are indemnity-supporting doctrines and both involve other parties, so candidates swap them; they also forget subrogation cannot operate against the insured personally before full indemnity.
What to do instead
Memorise the one-line distinction: subrogation transfers the insured's recovery rights against a third party; contribution apportions a loss among insurers covering the same interest. Then test with a scenario where an insurer pays and later sues a negligent third party, and a separate scenario with two fire policies on the same stock.
Treating 'utmost good faith' as an outdated absolute duty and ignoring the statutory disclosure regime (for example the Consumer Insurance (Disclosure and Representations) Act 2012 and Insurance Act 2015 proportionate remedies) in favour of old case names alone.
Study notes often lead with older case law, and candidates give historical answers where the question asks about the current duty of fair presentation and remedies for breach.
What to do instead
Learn the modern framework as a decision tree: consumer versus commercial; what must be disclosed (fair presentation, reasonable search); remedies graded by culpability (proportionate reduction, terms on different basis, avoidance). Cite the statute first and case law only as illustration.
Mixing up the roles of the underwriter, the broker and the agent when assessing whose knowledge binds the insurer, or assuming a broker is always the insurer's agent.
Intermediary roles are described loosely in study material, and candidates map 'agent' onto whoever is convenient in the scenario rather than the actual legal relationship.
What to do instead
Write a short role card: broker acts for the insured (but may be the insurer's agent for premium), agent acts for the principal named in the appointment, underwriter accepts risk for the insurer. Apply it to scenarios on non-disclosure knowledge, premium payment and waiver by conduct, and state the agency basis before reaching a conclusion.
Answering motor insurance questions without separating compulsory third-party liability from the policy's own-damage cover, and without applying the statutory untraced/uninsured driver route.
Motor questions blend road-traffic legislation with policy wording, and candidates answer from the policy alone, missing compulsory limits, the insurer's obligation to satisfy third-party judgments, and the Motor Insurers' Bureau route.
What to do instead
For every motor scenario, answer in layers: compulsory third-party cover and its statutory minimum; policy extensions (fire, theft, own damage); exclusions and conditions (e.g. unroadworthy vehicle, unlicensed driver); then the statutory fallback for untraced or uninsured drivers. Name each layer in the answer.
Applying life underwriting decisions without distinguishing moral hazard, medical hazard and financial hazard, or ignoring non-medical limits and the duty of fair presentation by the proposer.
Candidates treat 'underwriting' as a single yes/no decision and forget that the underwriter assesses several distinct hazards and applies financial underwriting limits based on income and existing cover.
What to do instead
Use a three-bucket checklist for each life case: medical (history, family history, build), lifestyle/moral (occupation, hazardous pursuits, claims history), financial (income multiples, existing sums assured, purpose of cover). Then state the underwriting outcome (standard, rated, exclusion, decline, postpone) and why.
Treating regulation as a list of names to recite, so answers describe a regulator's existence but not its statutory objectives, powers or the conduct rules that apply to the scenario.
Regulatory topics are memorised late and superficially, and candidates cannot connect a factual scenario (e.g. mis-selling, complaints, financial promotion) to the specific rule and remedy.
What to do instead
For each regulator and regime, learn four things: objectives, rule-making and enforcement powers, the key conduct requirements, and the customer remedy (complaint, ombudsman, redress). Practise by taking a scenario and naming the rule breached, the regulator's likely action and the customer's route to redress.
Ignoring the ethical dimension of a scenario and answering only on legal or contractual grounds, missing conflicts of interest, inducements, suitability and vulnerable-customer duties.
Candidates see ethics as opinion and prefer 'safe' technical answers, yet exam questions often reward identifying the conflict and the customer-protection principle, not just the policy clause.
What to do instead
End every scenario answer with a short protection paragraph: who is the customer, is the advice suitable, is there a conflict or inducement, is the customer vulnerable, what disclosure or record-keeping is required, and what the firm should do next. Keep it to specific behaviours rather than general statements about integrity.