Free IIQE Practice Questions
14 sample questions · Paper I, 7 Parts · answers & explanations
All questions are drawn from Paper I — Principles and Practice of Insurance, and are the same questions a non-premium user previews for free in the app (the first two questions of each of the 7 Parts). Tap an answer to check yourself and read the explanation. The full app has 1,110+ bilingual practice questions and 4 mock papers covering all 21 Parts of Papers I/II/III/V.
Which of the following statements about Definition of Risk are correct? I. The uncertainty concerning a potential loss II. The certainty of a certain type of loss III. The outcome of speculative financial activities
Why: According to the syllabus, 'risk' is defined as 'uncertainty concerning a potential loss' — we cannot be sure whether a loss will occur or how much will be lost. Statement II (certainty of a certain loss) is wrong because risk is about uncertainty, not certainty. Statement III (outcome of speculative financial activities) only describes one type of activity, not the general definition of risk; only Statement I is correct, so the answer is D.
Which of the following types of potential loss is generally NOT considered a commercially insurable risk?
Why: The syllabus clearly states that only financial and physical losses are likely to be commercially insurable risks. Emotional losses such as grief and sorrow cannot be measured in monetary terms and are therefore not commercially insurable. Options A, B and D all represent losses measurable in monetary terms and are thus insurable.
Under common law, what is the most accurate definition of a contract?
Why: A contract is a legally enforceable agreement between two or more parties. Not every agreement is a contract — it must have all essential elements (offer/acceptance/consideration etc.). A is wrong because a mere agreement is not necessarily enforceable; C is wrong because simple contracts can be oral; D is wrong because contracts are not limited to monetary dealings.
Which statement about a simple contract is correct?
Why: A simple (parol) contract may be oral, written, or partly oral and partly written. A describes a specialty contract (under seal), which must be in writing and sealed. B is wrong because simple contracts are not limited to oral form; D is wrong because no lawyer witness is required.
Which of the following statements about the Definition of Insurable Interest are correct? I. Insurable interest is a legally recognised financial relationship between the insured and the subject matter, capable of valuation in money. II. Insurable interest refers solely to the contractual relationship between the insured and the insurer. III. Insurable interest is a purely moral or emotional concern of the insured towards the subject matter.
Why: Insurable interest is a legally recognised relationship between the insured and the subject matter. The relationship must be financial and capable of valuation in money. Without insurable interest, the contract is void and treated as wagering.
One of the main purposes of the insurable interest principle is to:
Why: Insurable interest prevents the use of insurance for gambling or speculation. It also helps reduce moral hazard and over-insurance. This ensures the insurance contract has a legitimate purpose.
Which of the following best describes the product development function of an insurance company?
Why: Because competitors are eager to copy, product development is a never-ending process. Even compulsory classes have flexibility in presentation. The department develops new products, monitors trends, sets exclusions/conditions and determines policy wording.
Which of the following is NOT a key factor considered by an underwriter when assessing a risk?
Why: Underwriting is the assessment of risk for insurance purposes. Key factors include nature of risk, claims history and exposure. The applicant's favourite colour is unrelated to risk assessment; outcomes may be acceptance, sub-standard terms, decline or referral to reinsurers.
Which of the following statements about the Classes of Insurance Business under the Insurance Ordinance are correct? I. The Insurance Ordinance statutorily divides insurance business into Long Term Business and General Business. II. The Insurance Ordinance statutorily divides insurance business into Personal Business and Commercial Business. III. The Insurance Ordinance statutorily divides insurance business into Compulsory Business and Voluntary Business.
Why: The Insurance Ordinance divides business into Long Term (Classes A–H) and General Business. Long Term includes life, annuities, linked long-term and permanent health. General covers all other classes such as motor, fire, marine, liability and accident.
Which of the following statements about Insurance Regulatory Authority are correct? I. Insurance Authority (IA) II. Hong Kong Federation of Insurers (HKFI) III. Hong Kong Monetary Authority (HKMA)
Why: The Insurance Authority (IA) became the statutory regulator in 2019. It replaced the three previous self-regulatory organisations (SROs). HKFI is the representative body of insurers, not a regulator.
From which date are all insurance intermediaries directly licensed and regulated by the Insurance Authority (IA)?
Why: Since 23 September 2019, all insurance intermediaries have been licensed directly by the IA. Prior to that, a self-regulatory system operated through three SROs: IARB (Insurance Agents Registration Board), CIB (Hong Kong Confederation of Insurance Brokers) and PIBA (Professional Insurance Brokers Association). All three SROs ceased their self-regulatory functions on the same date.
Regarding the distinction between insurance agents and insurance brokers, which of the following is correct?
Why: Insurance agents represent one or more insurers and owe their duty to the insurer. Insurance brokers represent clients, independently sourcing suitable products for them. Hence their fiduciary duties are owed to different parties.
Which of the following statements about AML record retention is correct? I. Insurance intermediaries must retain AML/CTF-related records for at least 5 years from the end of the business relationship. II. Insurance intermediaries only need to retain AML/CTF-related records for 2 years before disposal. III. Insurance intermediaries only need to retain AML/CTF-related records for 3 years before disposal.
Why: Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and IA Guideline GL3, insurance intermediaries must retain AML/CTF-related documents and records for at least 5 years. The 5-year retention period runs from the end of the business relationship. Common confusion: tax records are kept 7 years; CPD records 3 years; but AML records are 5 years.
How many Data Protection Principles (DPPs) are there under the Personal Data (Privacy) Ordinance?
Why: The Ordinance sets out six Data Protection Principles. They cover collection, accuracy, use, security, openness and access/correction. The Ordinance applies to both public and private sectors.
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