2024 NECO INSURANCE: 2025 NECO Insurance (insurance) Verified Questions and Answers 2025 (2750)

(1a)

An assignment refers to the transfer of a policy’s benefits or proceeds to a third party, such as a lender or a beneficiary.

(1b)

(i) Coinsurance:
Coinsurance is a provision in an insurance policy that requires the policyholder to share a percentage of the loss with the insurer. This means that the policyholder pays a portion of the claim, and the insurer pays the remaining portion.

(ii) Contribution:

Contribution refers to the sharing of losses among multiple insurers who have covered the same risk. When multiple policies cover the same loss, each insurer contributes a proportionate share of the loss based on their policy limits and coverage.

(iii) Endorsement:

An endorsement is a written amendment or addition to an insurance policy that modifies or 'copied from e x a m p l a z a . c o m free' expands the coverage. Endorsements can add or remove coverage, change policy terms, or update policy information.

(1c) 

(i) CIIN provides professional education and training for insurance professionals in Nigeria.
(ii) CIIN awards professional certifications, such as the Associate of the Chartered Insurance Institute of Nigeria (ACIIN) and Fellow of the Chartered Insurance Institute of Nigeria (FCIIN), to qualified members.
(iii) CIIN promotes high standards of practice and ethics in the insurance industry, ensuring that members adhere to a code of conduct.
(iv) CIIN represents the interests of the insurance industry in Nigeria, engaging with regulatory bodies, government agencies, and other stakeholders to promote the growth and development of the industry.

(2a) 

(i) Insurer: The insurer, also known as the insurance company or underwriter, is the entity that provides insurance coverage to policyholders. The insurer assesses the risks associated with insuring a particular individual or asset, determines the premium to be charged, and agrees to compensate the policyholder for covered losses under the terms of the insurance contract. The insurer pools the premiums collected from many policyholders to pay for the claims of those who experience a loss.

(ii) Policyholder: The policyholder is the individual or entity that owns the insurance policy and pays premiums to the insurer in exchange for coverage. The policyholder has the right to make claims against the insurance policy if a covered event occurs. In return for paying premiums, the policyholder receives financial protection against specified risks, such as damage to property, liability for injuries, or loss of income.

(2b) 

(i) Cash payment 
(ii) Replacement

EXPLANATION:

(i) Cash Payment: In this method, the insurer compensates the policyholder with a cash payment equal to the amount of the loss, up to the limit of the policy. This method provides the policyholder with the funds needed to repair or replace damaged property, cover medical expenses, or address other covered losses. The cash payment method is straightforward and allows the policyholder to handle repairs or replacements as they see fit.

(ii) Replacement: Under the replacement method, the insurer replaces the damaged or lost item with a new one of similar kind and quality. This is common in property insurance policies, where the insurer may replace a damaged roof, vehicle, or other property with materials or items that are equivalent to those lost. This method ensures that the policyholder receives a functional replacement without having to manage the repair or replacement process themselves.

(2c) 

(i) Facts that lessen the risk.
(ii) Facts 'copied from e x a m p l a z a . c o m free' that are of common knowledge.
(iii) Facts which the insurer already knows.
(iv) Facts which the insurer ought to know.
(v) Facts which are waived by the insurer.
(vi) Facts which need not be disclosed by reason of a policy condition.

(3a)

(i) Risk Level: The higher the risk associated with a policyholder, the higher the premium loading. Insurers assess risk based on factors like age, health, location, and driving record. Policyholders with a higher risk profile are more likely to file claims, increasing the insurer’s costs. As a result, insurers charge higher premiums to account for the increased risk.

(ii) Administrative Costs: Insurers add a loading to premiums to cover operational expenses, such as salaries, marketing, and claims processing. Efficient insurers with lower costs may charge lower premiums, while those with higher costs may charge more. Administrative costs can vary significantly between insurers, impacting premium prices. Insurers strive to balance their costs with competitive pricing to attract policyholders.

(iii) Profit Margin: Insurers add a margin to premiums to generate profits and invest in their businesses. The size of the margin can vary depending on market conditions, competition, and target profit levels. Insurers must balance their profit goals with competitive pricing to attract and retain policyholders. A reasonable profit margin ensures the 'copied from e x a m p l a z a . c o m free' insurer’s long-term sustainability and ability to pay claims.

(3b) 

(i) Cancellation of policy before inception.
(ii) Misrepresentation or fraud by the insurer.
(iii) Non-payment of premium not due to fault of policyholder.
(iv) Policyholder’s death before policy inception.
(v) Return of policy within cooling-off period.
(vi) Cancellation due to insurer’s error.
(vii) Policyholder’s bankruptcy or insolvency.
(viii) Regulatory or legal requirements mandating premium return.

(3c) 

(i) Poor maintenance or neglect of regular servicing.
(ii) Manufacturing defects or faulty design.
(iii) Accidental damage or external factors like floods or fires.

(4a) 

(i) Risk Diversification: Insurers use reinsurance to spread the risk of large losses across multiple insurance companies. By ceding a portion of their risk to reinsurers, primary insurers can protect themselves from the financial impact of significant claims. This diversification helps stabilize their financial performance and ensures that a single large loss does not severely impact their capital and solvency.

(ii) Capacity Enhancement: Reinsurance allows insurers to underwrite policies with higher limits or larger quantities than they would be able to handle on their own. By transferring part of the risk to reinsurers, primary insurers can increase their capacity to write more business or take on larger individual risks. This enables them to grow their market share and offer more comprehensive coverage to their clients.

(4b) 

(i) Physical Hazard: Physical hazards refer to tangible conditions or characteristics of the insured property or environment that increase the likelihood or severity of a loss. These hazards can be inherent in the property itself, such as 'copied from e x a m p l a z a . c o m free' the age of a building, the presence of flammable materials, or the location of the property in a flood-prone area. Physical hazards are typically observable and can be assessed during an inspection or evaluation process.

(ii) Moral Hazard: Moral hazard arises from the behavior or attitudes of the insured that increase the likelihood or severity of a loss. This type of hazard is related to the insured’s conduct and may involve intentional actions or negligence. For example, if a policyholder becomes less cautious about protecting their property because they know it is insured, they may engage in riskier behavior, such as failing to maintain their property adequately or even committing fraud. Insurers often use underwriting criteria and policy conditions to mitigate moral hazards.

(4c)

(i) Policyholder’s name
(ii) Description of the insured property or risk
(iii) Period of coverage
(iv) Sum insured or coverage limits
(v) Name of the insurer
(vi) Temporary cover note number

(5a) 

(i) Investigate the circumstances of the accident.
(ii) Assess the extent of damage to the vehicle.
(iii) Determine the cause of the accident.
(iv) Verify the validity of the insurance policy.
(v) Evaluate repair costs and suggest repair methods.
(vi) Negotiate settlement amounts with the claimant.
(vii) Prepare and submit detailed reports to the insurer.
(viii) Identify any potential fraud or discrepancies in the claim.

(5b)

(i) The insurer must have paid the claim to the insured.
(ii) The loss must be covered under the insurance policy.
(iii) The insured must have a right to recover the loss from a third party.
(iv) The insurer’s payment must fully or partially indemnify the insured.
(v) The insured must cooperate with the insurer in 'copied from e x a m p l a z a . c o m free' pursuing recovery from the third party.

(5c) 

(i) Name of the proposer.
(ii) Address of the proposer.
(iii) Description of the property or risk to be insured.
(iv) Sum insured or coverage amount requested.
(v) Previous insurance history and claims experience.
(vi) Details of any existing insurance policies.
(vii) Specific questions related to the type of insurance being applied for (e.g., for motor insurance: vehicle make, model, year, registration number).