WAEC Insurance 2022
Questions & Answers

Students might mistakenly select assessing claims, thinking agents handle payouts after damage occurs. Selling policies to clients is the correct choice because an insurance agent acts as an intermediary to market policies, explain coverage options, and guide clients, while adjusters assess claims and reinsurers handle risk spreading. Common mistake: Mixing up the sales role of an agent with the claims assessment duties of an adjuster.

One might mistakenly select sharing losses, confusing subrogation with the principle of contribution. Recover costs from the party at fault is the correct option because subrogation allows the insurer to step into the insured's shoes after paying a claim and pursue the responsible third party to prevent double recovery. Common mistake: Confusing the insurer's right to recover from a third party with co-insurer loss-sharing arrangements.

A student might mistakenly choose more than the actual value, assuming over-insurance triggers this specific clause. Less than the actual value is correct because the average clause acts as an under-insurance penalty, scaling down the claim payout in direct proportion to the coverage deficit. Common mistake: Applying the average clause to over-insured properties instead of under-insured assets.

Options like savings with protection might seem plausible for someone looking at general financial products. Pure protection for a limited time is the correct choice since term assurance delivers temporary, cost-effective life coverage for a fixed duration without any investment or savings component. Common mistake: Assuming term assurance builds cash value like permanent or endowment policies.

A student might mistakenly choose premium pricing or claim settlements, assuming regulators directly control day-to-day business operations. Solvency and market conduct is the correct option because NAICOM oversees financial stability so insurers can meet liabilities alongside enforcing fair industry practices. Common mistake: Believing the insurance commission dictates individual policy pricing rather than ensuring systemic financial health.

One might mistakenly select third-party risks only, forgetting that comprehensive insurance provides broader coverage. Own vehicle damage and third-party is the correct answer because comprehensive policies bundle protection for the insured's own car against accidents, fire, and theft alongside third-party liability. Common mistake: Confusing comprehensive coverage with basic third-party motor policies.

A student might mistakenly select extending the coverage period or reducing the sum insured, viewing an endorsement as limited to just one modification. All of the above is correct because an endorsement serves as a written amendment that can alter various terms, adjust sums, or extend durations to match evolving risks. Common mistake: Thinking policy endorsements can only modify specific minor details rather than change core contract terms.

Options like marine perils or building fires might look plausible if one ignores the distinct focus of agricultural policies. Drought and pests is the correct choice because agricultural insurance schemes protect farmers specifically against crop and livestock losses from natural hazards, weather events, and biological threats. Common mistake: Applying general property or transport perils to farming operations.

A student might mistakenly select pay premiums on time, confusing financial obligations with the legal doctrine of disclosure. Disclose all relevant information is the correct option because utmost good faith demands that both parties honestly reveal every material fact that could influence risk evaluation. Common mistake: Treating timely premium payments as fulfilling the duty of utmost good faith.

One might mistakenly pick group policy or single premium policy, confusing multi-life coverage with payment structures or large pools. Joint life policy is the correct choice because it covers two or more individuals under a single contract, paying out upon the occurrence of specified deaths. Common mistake: Confusing a multi-life policy for couples with a group scheme meant for large organizations.

1) Distractor check: Students might mistakenly select basic fire only because the core policy is named after fire, but standard packages exclude perils like storms unless explicitly added. 2) Reasoning to the answer: Basic fire protection leaves out environmental hazards, whereas extended fire cover bridges this gap by incorporating storm, tempest, flood, and riot. Meanwhile, earthquake and nuclear events are treated as specialist exclusions or require dedicated separate policies. 3) Common mistake: Assuming basic fire policies automatically protect against all property disasters.

1) Distractor check: A student might choose location and history or age and occupation individually, missing that both sets of variables are combined by underwriters. 2) Reasoning to the answer: Actuaries calculate premiums by evaluating personal characteristics like age and occupation alongside risk metrics such as location and claims history. Although government bodies may regulate or cap rates for specific insurance lines, they do not solely determine the price. 3) Common mistake: Forgetting that personal and environmental risk indicators are evaluated together.

1) Distractor check: Students might select public liability due to the word liability, but public policies focus on third-party physical injury rather than professional advice. 2) Reasoning to the answer: Errors and omissions insurance shields professionals such as lawyers and accountants against lawsuits alleging negligence or mistakes in their services. This is precisely synonymous with professional indemnity, whereas public liability applies to third-party injury, product liability covers defective goods, and fidelity guarantee deals with employee theft. 3) Common mistake: Mixing up professional service mistakes with general third-party physical injuries.

1) Distractor check: Learners might confuse non-life policies with life contracts and select 31 days. 2) Reasoning to the answer: General insurance or non-life policies typically allow a grace period of 30 days following policy expiry to pay late premiums while keeping coverage active, though late fees might apply. By contrast, life policies commonly feature a 31-day window. 3) Common mistake: Confusing the 30-day non-life grace period with the 31-day term typical of life insurance.

1) Distractor check: A student might guess immediate claim payment, confusing a reserve fund with standard operational claim settlements. 2) Reasoning to the answer: The sinking fund method acts as a depreciation reserve technique where periodic funds are set aside to replace aging assets at their end-of-life, and insurers may cover the fund shortfall. It has no role in issuing premium rebates or settling claims directly. 3) Common mistake: Believing a sinking fund is used to pay out standard insurance claims.

1) Distractor check: Choosing uncertain events is a frequent mistake because both fall under the broad financial protection umbrella. 2) Reasoning to the answer: Life assurance addresses certain occurrences like death or policy maturity, whereas general insurance indemnifies against uncertain events such as fires and accidents. Additionally, assurance functions with a savings element while insurance strictly operates on indemnity principles. 3) Common mistake: Overlooking the distinction between inevitable occurrences and unpredictable risks.

1) Distractor check: One might select brokers only or insurance intermediaries, overlooking that the regulatory body's reach extends to underwriting companies too. 2) Reasoning to the answer: NAICOM maintains regulatory oversight over the entire insurance market in Nigeria by licensing and supervising insurers, reinsurers, brokers, agents, and other intermediaries to guarantee financial stability and regulatory compliance. 3) Common mistake: Assuming insurance regulators only oversee agents and brokers rather than the whole market.

1) Distractor check: Students might pick agreed value, mixing up open policies with valued policies. 2) Reasoning to the answer: An unvalued or open policy does not pre-determine a fixed payout sum; instead, compensation is calculated using the actual cash value or market value at the time of loss. Valued policies use a pre-agreed amount, and replacement cost is simply one method to determine actual value. 3) Common mistake: Confusing open policies with policies that feature a pre-agreed payout value.

1) Distractor check: Students might choose natural disasters due to the broader context of property insurance claims. 2) Reasoning to the answer: Fidelity or fidelity guarantee insurance indemnifies employers specifically against financial losses caused by employee dishonesty, fraud, or theft. Natural disasters pertain to property coverage, market fluctuations represent investment risks, and legal disputes fall under professional liability. 3) Common mistake: Confusing internal workplace fraud with external natural hazards.

1) Distractor check: A student might select policy exclusions because Latin legal maxims often sound like restrictive clauses. 2) Reasoning to the answer: Translated as the proximate cause is that which is in the cause, this phrase identifies the dominant or effective cause of a loss that dictates whether coverage applies. Exclusions form separate clauses, and while negligence can influence a claim, it does not define this legal principle. 3) Common mistake: Translating proximate cause concepts as standard policy exclusions.