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PRACTICE EXAM FOR CAIB 1 2026
QUESTIONS WITH COMPLETE ANSWERS
Insurers are in the business of assuming the financial risks of others which involves
entering into a formal contract. A contract is enforceable at law only when all legal
elements have been observed. Insurance contracts differ from other formal
agreements and are subject to what three additional elements? - ANSWER
Insurable Interest
Utmost Good Faith
Indemnity
Explain the meaning and disadvantage of the following approaches: Avoidance of
Risk & Control of Risk - ANSWER Avoidance: Avoidance means that all chance
of financial loss has been eliminated or a decision not to do something. The
disadvantage is its not very effective as often the elimination of one exposure
creates another in its place.
Control: taking measures to reduce the frequency and severity of losses. The
disadvantage is that not all losses can be controlled, because equipment will not
work of the time
Identify the three elements that are unique to contracts of insurance: - ANSWER
Insurable Interest, Utmost Good Faith, and Indemnity
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