Free SCI Basic Insurance Concepts and Principles (BCP) Practice Questions

Sample Practice Questions

Try these 10 sample questions from the SCI Basic Insurance Concepts and Principles (BCP) practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1Which Singapore insurance licence permits an insurer to write both life and general insurance business?

   1. A.Direct general insurer
   2. B.Direct composite insurerCorrect answer: B
   3. C.General reinsurer
   4. D.Captive general insurer

   Explanation: MAS states: "Direct composite insurers are licensed to write both life and general insurance business." This combined scope distinguishes a composite insurer from a general-only insurer, a reinsurer and a captive general insurer.

   Reference: MAS Types of Insurance Entities — Licensed Insurers — Direct Insurers

2. 2Which legislation provides the licensing framework for insurers and insurance brokers in Singapore?

   1. A.The Companies Act
   2. B.The Insurance ActCorrect answer: B
   3. C.The Personal Data Protection Act
   4. D.The Work Injury Compensation Act

   Explanation: The source states: "Insurers and insurance brokers are licensed and governed under the Insurance Act". The Insurance Act governs this licensing. Company formation, personal data and compulsory work-injury cover are separate legal subjects.

   Reference: MAS Insurance Regulation Overview — Types of Entities and Licences

3. 3What does buying insurance primarily change for a business exposed to an insured accidental loss?

   1. A.It replaces the possibility of an accident with a guaranteed safe outcome.
   2. B.It transfers specified financial consequences in return for a known premium.Correct answer: B
   3. C.It transfers the business's responsibility to maintain safe premises.
   4. D.It replaces the need to identify hazards with a fixed annual inspection.

   Explanation: The source states: "they have replaced the uncertainty of possible future loss with the certainty of the agreed premium.". Insurance transfers specified financial risk subject to policy terms; it does not prevent accidents, remove safety duties or replace hazard identification.

   Reference: CII Insurance, Legal and Regulatory Study Text — ch. 1, A2, p. 1/3

4. 4A collector wishes to insure a neighbour's sculpture simply because she admires it. What element is missing if she has no legal or financial relationship to it?

   1. A.A deductible agreed with the insurer
   2. B.A recent valuation of the sculpture
   3. C.An insurable interest in the sculptureCorrect answer: C
   4. D.A contribution clause covering other insurers

   Explanation: The source states: "a financial relationship recognised at law, between the insured and the subject-matter of insurance.". Admiration alone is not the legally recognised financial relationship needed for insurable interest. Valuation, deductible and contribution provisions cannot create that relationship.

   Reference: CII Insurance, Legal and Regulatory Study Text — ch. 4, A, p. 4/2

5. 5An insurer offers cover at a specified premium and excess. The proposer replies that she accepts only if the excess is reduced. What is the contractual effect of that reply?

   1. A.An unconditional acceptance of the insurer's offer
   2. B.A binding renewal of an existing insurance contract
   3. C.A counter-offer for the insurer to accept or rejectCorrect answer: C
   4. D.A payment of consideration completing the original offer

   Explanation: CII explains that a conditional acceptance "becomes a new offer (a counter-offer) which is open to be accepted or rejected by the person who made the original offer". Changing the excess therefore creates a counter-offer, rather than an unconditional acceptance, renewal or premium payment.

   Reference: CII Insurance, Legal and Regulatory Study Text — ch. 3, B2, p. 3/4

6. 6An agent helps a proposer complete an insurance proposal form. Under the GIA Agents' Code, whose responsibility are the answers and statements?

   1. A.The insurer's appointed claims adjuster's responsibility
   2. B.The agent's responsibility instead of the proposer's
   3. C.The prospective policyholder's own responsibilityCorrect answer: C
   4. D.The industry's dispute-resolution body's responsibility

   Explanation: The source states: "all the answers or statements given are the prospective policyholder’s own responsibility". Assistance does not make the proposal answers someone else's statements. The proposer remains responsible; the agent must not improperly influence the answers.

   Reference: GIA Code of Practice for Agents — s. 11.1(a), Disclosure of Underwriting Information, p. 6

7. 7An insurer appoints a professional to investigate a major property claim, assess policy response and recommend a settlement. Which professional is performing this role?

   1. A.An insurance underwriter setting renewal terms
   2. B.A loss assessor representing the policyholder
   3. C.A loss adjuster instructed by the insurerCorrect answer: C
   4. D.An actuary calculating a portfolio premium rate

   Explanation: The source states: "Loss adjusters are experts in processing claims from start to finish and acts for the insurer.". A loss adjuster investigates and recommends settlement for the insurer. A loss assessor acts for the insured; underwriting and actuarial pricing concern different functions.

   Reference: CII Insurance, Legal and Regulatory Study Text — ch. 2, H3, p. 2/22

8. 8A direct insurer has reinsured part of a customer's risk under an ordinary reinsurance arrangement. If a covered loss occurs, from whom does the customer seek the policy payment?

   1. A.The direct insurer, which separately pursues its reinsurance recoveryCorrect answer: A
   2. B.The reinsurer, which automatically replaces the direct insurer as contracting party
   3. C.The reinsurance broker, which assumes the insurer's payment obligation
   4. D.The industry association, which guarantees the reinsurance treaty

   Explanation: The source states: "If a claim occurs the insured will look to the insurer to meet the loss in full". Ordinary reinsurance does not create a contract between the original insured and reinsurer. The insurer remains responsible under the direct policy; its recovery is a separate matter.

   Reference: CII Insurance, Legal and Regulatory Study Text — ch. 2, G1, p. 2/19

9. 9An intermediary has a relationship with an insurer that may compromise her objectivity. Avoiding the conflict is not practicable. What does the GIA Industry Code require before arranging the insurance?

   1. A.Keep the relationship confidential until a claim is disputed.
   2. B.Disclose the conflict and material information affecting objectivity.Correct answer: B
   3. C.Disclose the relationship only to the insurer's claims adjuster.
   4. D.Wait until the customer requests a renewal quotation to disclose it.

   Explanation: The source states: "will disclose to the policyholder the conflict of interest". Where avoidance is not practicable, disclosure to the policyholder before arrangement is required, including material information affecting objectivity. Later or third-party-only disclosure does not meet that requirement.

   Reference: GIA Singapore General Insurance Industry Code — s. 2.5, Conflicts of Interest, p. 7

10. 10An insurance company principally insures risks of corporations in its own group. Which market participant does this describe?

    1. A.An authorised reinsurer
    2. B.A direct composite insurer
    3. C.An approved MAT insurer
    4. D.A captive insurerCorrect answer: D

    Explanation: MAS describes captive business as "principally of risks of its related corporations." The group relationship is the defining feature here; authorisation without local presence, composite scope and MAT approval describe different classifications.

    Reference: MAS Types of Insurance Entities — Licensed Insurers — Captive Insurers