Chartered Insurance Institute (CII) Qualifications Insurance, Legal and Regulatory Foundations (IF1 / R01) Flashcards

24 sample cards from the Insurance, Legal and Regulatory Foundations (IF1 / R01) deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. A property worth £200,000 is insured for £150,000 and suffers a £40,000 loss. Applying average, what is paid?

   $$£40{,}000 \times \frac{£150{,}000}{£200{,}000} = £30{,}000$$

2. Define proximate cause.

   The proximate cause is the active, efficient cause that sets in motion a chain of events producing the loss, without the intervention of any new and independent source. It is the dominant or effective cause, not necessarily the nearest in time.

3. Why does proximate cause matter when settling a claim?

   An insurer is liable only if the proximate cause of the loss is a peril insured against (and not an excluded peril). Identifying the real, dominant cause determines whether the policy responds.

4. In agency law, who is the principal and who is the agent, and what is the effect of the agent's authorised acts?

   The principal is the party on whose behalf another acts; the agent is authorised to create or affect legal relations between the principal and third parties. Acts of the agent within authority bind the principal as if done by the principal personally.

5. Distinguish the three types of authority an agent may have.

   Express authority (specifically granted, orally or in writing), implied authority (reasonably incidental to express authority or to the role), and apparent/ostensible authority (arising where the principal's words or conduct lead a third party to believe the agent is authorised).

6. Whose agent is an insurance broker normally, and how can this change?

   A broker is normally the agent of the insured (the customer). However, for certain functions — such as collecting premiums or issuing cover notes under a binding authority — the broker may act as agent of the insurer.

7. What are an agent's main duties to their principal?

   To obey lawful instructions, act with reasonable care and skill, act personally (not delegate without authority), act in good faith avoiding conflicts of interest and secret profits, and to account to the principal for money and property.

8. Which Act created the current UK 'twin peaks' regulatory architecture, and which bodies resulted?

   The Financial Services Act 2012 amended FSMA 2000 to replace the FSA with the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), overseen by the Bank of England and the Financial Policy Committee (FPC).

9. What is the regulatory remit of the FCA versus the PRA?

   The FCA regulates conduct of business for all firms and prudentially supervises firms not covered by the PRA. The PRA (part of the Bank of England) prudentially regulates systemically important firms — banks, building societies, insurers and major investment firms — focusing on safety and soundness.

10. State the FCA's strategic objective and its three operational objectives.

    Strategic objective: to ensure relevant markets function well. Operational objectives: (1) protect consumers, (2) protect and enhance the integrity of the UK financial system, and (3) promote effective competition in the interests of consumers.

11. What are the PRA's general (statutory) objectives?

    To promote the safety and soundness of the firms it regulates, and (specifically for insurers) to contribute to securing an appropriate degree of protection for policyholders. It also has a secondary objective to facilitate effective competition.

12. Under FSMA 2000, what is the 'general prohibition' regarding regulated activities?

    No person may carry on a regulated activity in the UK (or purport to do so) unless they are an authorised person or an exempt person. Breaching the general prohibition is a criminal offence and may render agreements unenforceable.

13. What is the difference between authorisation and the approved/Senior Managers & Certification Regime (SM&CR)?

    Authorisation is permission for a firm to carry on regulated activities. SM&CR governs individuals: Senior Managers are pre-approved and accountable for areas of the business, certification staff are assessed as fit and proper by the firm, and conduct rules apply to most staff.

14. What is an appointed representative (AR) and who is responsible for it?

    An AR is a firm or person who carries on regulated activities under a contract with, and under the responsibility of, an authorised 'principal' firm. The principal accepts full regulatory responsibility for the AR's regulated activities, so the AR need not be separately authorised.

15. What does the FCA's Principles for Businesses require, and name three key principles.

    They are fundamental obligations binding all authorised firms. Examples: Principle 1 – integrity; Principle 2 – skill, care and diligence; Principle 6 – treat customers fairly (TCF). Principle 12 introduces the Consumer Duty for retail business.

16. What is the Consumer Duty and its central standard?

    An FCA requirement (Principle 12) that firms act to deliver good outcomes for retail customers. Its outcomes cover products and services, price and value, consumer understanding, and consumer support — going beyond simply treating customers fairly.

17. Outline the key UK money-laundering legislation and the three principal offences under POCA 2002.

    Main legislation: Proceeds of Crime Act 2002 (POCA), the Terrorism Act 2000, and the Money Laundering Regulations 2017. The three principal POCA offences are concealing, arranging, and acquisition/use/possession of criminal property; plus failure to disclose and tipping off.

18. What are the three stages of money laundering?

    Placement (introducing criminal cash into the financial system), layering (moving funds through transactions to disguise their origin), and integration (returning the laundered funds to the criminal as apparently legitimate wealth).

19. What is a firm's obligation when it suspects money laundering, and to whom is a report made?

    Staff must report suspicions internally to the Money Laundering Reporting Officer (MLRO/nominated officer), who, where appropriate, submits a Suspicious Activity Report (SAR) to the National Crime Agency (NCA). Tipping off the suspect is a criminal offence.

20. Which body handles consumer complaints that a firm cannot resolve, and what is the firm's time limit to respond?

    The Financial Ombudsman Service (FOS) handles eligible complaints free to the consumer. A firm must issue a final response within 8 weeks (under the new DISP rules, generally within 8 weeks); if unresolved, the complainant may refer it to the FOS, normally within 6 months of the final response.

21. What is the role of the Financial Services Compensation Scheme (FSCS) and the protection level for general insurance?

    The FSCS is the UK's compensation 'fund of last resort' when an authorised firm fails. For general insurance, protection is generally 90% of the claim with no upper limit, rising to 100% for compulsory insurance (such as motor third-party and employers' liability) and certain long-term/protection policies.

22. State the core duties set out in the CII Code of Ethics.

    The CII Code requires members to: comply with the Code and all relevant laws and regulations; act with the highest ethical standards and integrity; act in the best interests of each client; provide a high standard of service; and treat people fairly regardless of background or group.

23. Why are professionalism and continuing professional development (CPD) important to insurance practitioners, and what does CII require?

    They ensure practitioners remain technically competent, act ethically and maintain public trust. CII members must complete a minimum amount of structured CPD each year (typically 35 hours, of which at least 21 structured) and abide by the Code to retain their qualification/designation status.

24. Outline a structured approach to ethical decision-making in practice.

    Gather the facts; identify the ethical issue and affected stakeholders; consider relevant law, regulation and the CII Code; evaluate the options against principles (integrity, client's best interests, fairness); choose and act on the option giving the best ethical outcome; and review/document the decision. A useful test is whether the decision would withstand public scrutiny.

What this deck covers

Insurance, Legal and Regulatory Foundations (IF1 / R01) flashcards FAQ