WAEC Insurance 2023
Questions & Answers

Students may wrongly guess underwriting risks or settling claims directly, confusing the duties of the insurer with those of an intermediary. To deduce the correct answer, consider that an insurance broker acts as an intermediary representing the client, advising on suitable covers and arranging policies with insurers. Underwriting is strictly the insurer's role, claims settlement involves adjusters, and premium investment is handled by the insurer. Common mistake: Assuming an independent intermediary holds underwriting authority.

A test-taker might incorrectly choose more than the loss suffered, hoping to gain a profit from an unfortunate event. To reach the right conclusion, understand that indemnity restores the insured to their pre-loss financial position, compensating exactly for the proven loss without profit. Fixed sums apply instead to life assurance rather than standard indemnity-based policies. Common mistake: Believing that property coverage can serve as a source of financial gain.

A student might mistakenly select claim, renewal, or lapse, assuming the legal requirement applies throughout the duration of the policy. To determine the correct timing, note that for life assurance, insurable interest must exist at the policy's inception or proposal to prevent wagering. However, this interest does not necessarily need to persist at the time of a claim, which differs from property insurance rules. Common mistake: Applying property insurance continuity rules to life policies.

Learners might mistakenly pick whole life assurance or endowment assurance, confusing temporary protection with long-term savings vehicles. To identify the correct policy, recognize that term assurance provides temporary cover for a fixed period and pays the sum assured only if death occurs within that specific term, leaving no maturity benefit if survival occurs. Common mistake: Confusing pure risk-protection term plans with investment-linked endowments.

A candidate might mistakenly select profit margin or market share, confusing regulatory solvency mandates with commercial performance metrics. To arrive at the correct statutory requirement, recall that Nigeria's Insurance Act mandates a solvency margin, which is the minimum capital relative to liabilities ensuring insurers can meet claims, and this is regulated by NAICOM. Common mistake: Mixing up internal financial profitability with mandatory statutory solvency capital.

Students could mistakenly select collision damage, theft, or fire damage, assuming all destructive events are excluded. To determine the correct exclusion, recognize that standard motor policies exclude cover if the driver is under the influence of alcohol or drugs, because this constitutes negligence. Other perils like collision, theft, and fire are typically included in the standard package. Common mistake: Assuming policy exclusions apply to accidental property damage rather than reckless behavior.

A student might select only endorsement or only rider, failing to recognize that terminology can overlap. To choose the correct option, understand that both an endorsement and a rider modify policy terms by adding, deleting, or altering cover, and these terms are used interchangeably in insurance documentation. Common mistake: Forgetting that different technical terms can refer to the exact same policy modification document.

A learner might mistakenly choose marine insurance or fire insurance, confusing agricultural hazards with shipping or property risks. To arrive at the right choice, note that agricultural insurance covers farm risks like crop failure due to weather or pests, which is entirely distinct from marine shipping, fire property, or liability third-party claims. Common mistake: Grouping specialized rural perils under standard property or marine categories.

Students could mistakenly select utmost good faith or subrogation, confusing the post-event duty of the insured with pre-contractual honesty or recovery rights. To find the correct principle, apply mitigation of loss, which requires the insured to prevent or reduce damage post-event, upholding indemnity by avoiding unnecessary claims. Common mistake: Confusing the obligation to minimize damage with disclosure duties.

A test-taker might mistakenly choose single life only or property only, ignoring the multi-party nature of family policies. To deduce the correct answer, understand that joint life policies insure multiple lives such as spouses under one contract, paying on the first death for shared financial dependencies. Common mistake: Assuming a single contract can only ever apply to one individual.

A student might incorrectly choose basic perils or excluded risks, assuming civil disturbances fall outside standard fire policies entirely. To reach the correct category, look to extended perils in fire policies, which include riots, strikes, and malicious damage, extending protection beyond basic fire, lightning, and explosion. Common mistake: Believing that social disturbances are never covered under property fire policies.

A learner might mistakenly choose market forces only or client's income, assuming pricing is driven entirely by external competition or individual wealth. To determine the correct basis, understand that actuarial science uses statistics to assess risks and calculate premiums ensuring profitability and solvency, considering probability and loss severity. Common mistake: Overlooking statistical risk modeling in favor of pure market pricing.

Students could mistakenly select property damage or employee theft, confusing professional liabilities with physical asset or fidelity risks. To select the correct option, recognize that professional indemnity covers legal liability for errors, omissions, or negligence in advice or services provided by practitioners like doctors or lawyers. Common mistake: Confusing expert service malpractice with physical property or internal workplace losses.

A candidate might mistakenly choose 7 days or 60 days, guessing at arbitrary timeframes for premium delays. To determine the correct duration, note that a 30-day grace period allows continued cover despite late payment, preventing immediate lapse as a standard feature in life policies. Common mistake: Underestimating the length of time allowed for late premium payments in life assurance.

A student might mistakenly select pay death benefits or insure vehicles, confusing capital accumulation funds with life or motor covers. To arrive at the right purpose, recognize that sinking fund policies accumulate value to replace depreciating assets like machinery, effectively combining assurance with savings. Common mistake: Confusing asset replacement funds with mortality-based life insurance benefits.

A learner might mistakenly select fixed benefits or payable on survival, confusing general insurance with life policies. To find the correct feature, note that non-life or general insurance policies renew annually or periodically, unlike life policies which are long-term contracts without annual renewals. Common mistake: Assuming general lines share the permanent, non-renewable nature of life assurance.

A student might incorrectly choose banks only or stock markets, confusing the insurance regulator with financial or capital market authorities. To reach the correct answer, recognize that NAICOM oversees insurance market conduct, solvency, and consumer protection under the Insurance Act 2003. Common mistake: Mixing up insurance oversight bodies with central banking or securities commissions.

A learner could mistakenly choose premium amount or claim procedure, confusing the valuation of an asset with pricing or operational guidelines. To determine the correct feature, recall that valued policies pre-agree the sum insured as the value, simplifying claims for items like art and avoiding disputes. Common mistake: Confusing an agreed asset valuation clause with standard premium calculations.

Students might mistakenly select property by fire or goods in warehouse, confusing cash protection with standard property perils. To identify the correct coverage, understand that money insurance protects against theft or loss of cash during transit or stored in safes and vaults. Common mistake: Confusing physical inventory risks with liquid cash asset protection.

A candidate might mistakenly select only remote cause is ignored or only insured must prove cause, missing the broader scope of the doctrine. To arrive at the right choice, recognize that causa proxima holds the insurer liable for the dominant effective cause while remote causes are ignored and the burden of proof rests on the insured, making all of the above correct. Common mistake: Forgetting that proximate cause requires evaluating the most dominant chain of events.