IFMP Non-Life Insurance Agents Certification (NLIAC), Pakistan common mistakes
IFMP Non-Life Insurance Agents Certification (NLIAC), Pakistan · Understand the traps and how to avoid them.
Treating the principle of indemnity as meaning the insured always gets the full sum insured, and therefore answering 'sum insured' whenever a question asks how much a total-loss claim pays.
Candidates memorise 'indemnity = restore to pre-loss position' as a slogan but never connect it to the market-value/actual-cash-value calculation, and many have only seen sum-insured figures on fire policy schedules. They also confuse sum insured (the cap) with the measure of loss (the actual value of the thing lost).
What to do instead
Before answering any quantum question, write down three separate numbers: sum insured (the ceiling), subject-matter value at risk (what it was worth), and the loss amount. Then state the rule: payment = lesser of loss and sum insured, subject to average. Practise five short scenarios (total loss where value < sum insured, total loss where value > sum insured, partial loss, new-for-old, and a valued policy) and force yourself to justify each figure in one sentence.
Applying the principle of average (underinsurance) to every policy and every class, including marine cargo, personal accident, and policies where the sum insured is agreed as a valued policy.
Average is heavily emphasised in fire and property teaching in Pakistan, so candidates over-generalise it. They also do not distinguish 'sum insured' from 'value of the subject matter' in classes where the sum insured is a benefit limit rather than a measure of indemnity.
What to do instead
Build a one-page table with columns: class, is average applied, is the policy valued or unvalued, what is the basis of claim settlement. Populate it for fire/property, marine hull, marine cargo, motor, personal accident, and liability. In the exam, identify the class first, then decide whether average is even in play before doing any arithmetic.
Mixing up the duties of the insured and the duties of the insurer when answering 'who must do what' questions, for example saying the insurer must disclose all material facts or that the insured must issue the policy document.
Utmost good faith is taught as a single principle, so the two-sided nature of the duty is lost. Candidates also blur the proposal form (insured's disclosure) with the policy document and cover note (insurer's documents).
What to do instead
Draw a two-column list headed 'Insured' and 'Insurer' for each principle: disclosure, misrepresentation, non-disclosure, and remedies. Under 'Insured' put full and accurate disclosure in the proposal and at renewal, notification of material changes, and notification of loss. Under 'Insurer' put fair presentation of cover, prompt issue of documents, and clear policy wording. Rehearse the remedies separately: avoidance for the insurer, return of premium for the insured.
Confusing proximate cause with the last event, and answering that the last event in the chain determines whether the loss is covered.
The word 'proximate' suggests 'nearest in time' to many candidates, and case-style questions are written with a dramatic final event (a fire, a collapse) that draws attention away from the originating cause.
What to do instead
Use the 'dominant and effective cause' test explicitly in your answer: identify the initiating event, ask whether it set the others in motion without a new intervening cause, and state that the proximate cause is the dominant, not the latest, cause. Work through the classic chains (lightning causing fire causing explosion; theft causing a chase causing injury) and write one sentence per link explaining why it is or is not the proximate cause.
Treating insurable interest as something that must exist only at the time of loss, or only at the time of taking out the policy, instead of stating the correct timing rule for the class concerned.
The general rule is taught loosely, and candidates do not learn that the timing differs: generally insurable interest must exist at inception and at the time of loss, but in marine cargo it need only exist at the time of loss (and may be acquired after the policy is effected).
What to do instead
Memorise a short timing rule with the marine cargo exception attached to it. Then practise recognising insurable interest in non-obvious relationships: a bailee, a mortgagee, a carrier's liability to cargo, an employer's liability for staff, and a tenant's improvements. For each, state what the interest is, who holds it, and when it must exist.
Describing subrogation as the insurer 'taking over the insured's policy' or as the insurer recovering its own loss from the insured, and failing to state that it arises only after the insurer has paid and cannot improve the insured's position.
Subrogation and contribution are taught together as 'the insurer's rights', and candidates merge them. The words 'step into the shoes' get repeated without the conditions attached.
What to do instead
Write the definition in three clauses and check every answer against all three: (1) the insurer has indemnified the insured; (2) the insurer acquires the insured's rights of recovery against the third party; (3) recovery is limited to the amount paid and the insured keeps priority for any uninsured balance. Then contrast with contribution in one line: contribution is between insurers, subrogation is against a third party.
Calculating contribution between two policies by simply splitting the loss 50/50 or by adding the sums insured, rather than using the independent liability method or the rateable proportion method as the question requires.
Candidates learn one method, usually rateable proportion, and apply it mechanically even when the sums insured differ and the policies do not cover the same risks, where independent liability gives a different and correct result.
What to do instead
Learn both methods with a worked example each. Rateable proportion: each insurer pays loss x (its sum insured / total sums insured). Independent liability: each insurer pays what it would have paid if it were the only policy, then scale down if the total exceeds the loss. Practise a case where the two methods give different answers and write out why the question's wording points to one of them.
Answering motor insurance questions with the third-party liability limits, compulsory covers, and no-claim discount mechanics of another market, rather than the Pakistan framework, and inventing figures when unsure.
Candidates study from generic international material or from memory of another country's rules, and the exam expects the limits and structure applicable in Pakistan, including compulsory third-party cover and the role of the tariff and the regulator.
What to do instead
Build a fact sheet of the Pakistan-specific items you are least sure of: statutory third-party limits, compulsory classes, the tariff regime, and the regulator's role. Where you genuinely do not know a figure, do not guess in practice; mark it for review and look it up. In the exam, answer the principle (compulsory third-party liability, own-damage as optional cover) confidently and avoid stating a figure you cannot support.
Confusing the roles of agent, broker, and insurer in questions about who acts for whom, who receives premium, and who owes the duty of disclosure, and describing the agent as the insured's representative.
Everyday usage of 'agent' suggests someone acting for the customer, whereas in insurance the agent typically acts for the insurer, and the broker acts for the insured. Candidates also mix up who holds client money and who issues the cover.
What to do instead
Write a three-row table: party, acts for, main duties, who pays whom. Agent: acts for the insurer, solicits and services business, binds cover within authority, remits premium. Broker: acts for the insured, places the risk, owes disclosure and best-advice duties. Insurer: bears the risk, issues the policy, settles claims. Then answer role questions by naming the party and the direction of the duty in the first sentence.
Handling claims-timeline and claims-documentation questions from general knowledge, giving invented notification periods and lists of documents, instead of the policy conditions and the applicable regulatory requirements.
Claims procedure is often skimmed because it looks administrative, so candidates rely on intuition. They also merge 'notification of loss', 'submission of claim', and 'settlement' into one step and give one period for all three.
What to do instead
Learn the claim as a sequence with a distinct trigger and time limit at each stage: immediate notification of loss, submission of the completed claim form and supporting documents (police report, surveyor's report, invoices, proof of value), insurer's investigation and survey, offer, and settlement. For each stage, note who acts and what happens if the insured delays. Practise writing a four-line claims answer that names the stage, the party, the document, and the consequence of non-compliance.