S-08- Loss of Profits Insurance Mock Test 16
S-08 Loss of Profits Insurance explains important policy conditions, standing charges, variable expenses, claims procedures, and the role of surveyors. The MLOP policy specifies time limits for submitting claims and circumstances in which the policy may be avoided. Standing charges are fixed expenses that continue despite reduced turnover, while variable expenses may decrease proportionately with turnover. The chapter also discusses developments in Indian insurance, including the 2001 revision of the Fire tariff based on the nature of business and process. Loss of Profit claims require strong accounting, investigation, policy interpretation, and practical assessment skills, making them complex and specialized for surveyors and loss assessors.
1. What does Condition (p) state about the time limit for filing a claim under the MLOP policy?
a) In no case shall the Company be liable in respect of any claim after one year from the end of the indemnity period, or after three months from the date on which payment shall have been made or liability admitted, unless the claim is pending arbitration
b) Claims must be filed within 6 months of the loss
c) Claims can be filed at any time within the policy period
d) The time limit is set by the arbitration panel
e) No specific time limit exists for claim filing
2. Which item number is Provident Fund, Superannuation, Family Pensions, Gratuity, Perquisites, Benefits, Welfare etc. in the Standing Charges list?
a) Item 17
b) Item 18
c) Item 19
d) Item 20
e) Item 21
3. Which of the following is listed as item 9 in the examples of Standing Charges?
a) Laboratory expenses
b) Motor car expenses
c) Conveyance, Stationery, Postage, Telephone expenses
d) Office and General Establishment expenses
e) Insurance premiums
4. What does the chapter conclude about Loss of Profit claims and the Surveyors who handle them?
a) LOP claims are simple and require minimal expertise
b) Loss of Profit claims are by far the most complex claims for Assessors and claim settlers. Accordingly, these are also most rewarding for the Assessors as the Survey fee payable is the best in the market. Surveyors and Loss Assessors learn these tricks of trade over a period of time through lots of hard work and experience, and must exercise abilities in accounting, investigation, knowledge of policy, knowledge of concepts and various other factors
c) LOP claims are best handled by general insurance specialists
d) LOP claims have a standard rate-card for settlement
e) LOP surveyors are paid the lowest fees in the market
5. What are Standing Charges in the context of Turnover elements?
a) Expenses incurred in producing the goods that vary with production
b) Taxes paid on business income that vary with profits
c) Government levies that change based on business size
d) Charges imposed by fire safety authorities
e) These expenses are fixed in amount irrespective of the volume of business transacted and cannot be reduced in direct proportion to any reduction of business – e.g. Taxes, Bank Interest, Salaries to permanent staff
6. Under condition (c)(i) and (c)(ii), when shall the policy be avoided?
a) If the business is not profitable for two consecutive years
b) If the business is wound up or carried on by a liquidator or receiver or permanently discontinued, OR if the insured's interest ceases otherwise than by death, OR if any alteration is made whereby the risk of an accident is increased
c) If the insured fails to maintain adequate standby parts
d) If the insured changes ownership of the machinery
e) If the insured moves the machinery to a different city
7. What important development happened in the Indian insurance industry in 2001 related to Nature of Business?
a) All Indian insurers were privatised
b) Foreign investment was fully opened
c) New insurance products were launched
d) Government monopoly was ended completely
e) A Giant step was taken in 2001 when the Fire tariff was revised and the premium rates were fixed based on the nature of business and process being carried out in the insured premises
8. After a fire, if turnover is reduced, what happens to variable expenses?
a) Variable expenses increase during a fire period
b) Variable expenses remain the same even if turnover reduces
c) Variable expenses may also be reduced in the same proportion as turnover – the insured suffers no loss on this account – but Standing Charges are not reduced in the same proportion
d) Variable expenses are always fully compensated by insurance
e) Variable expenses are converted to fixed costs during a fire
9. What does Chapter 4 state about reader familiarity with fire insurance?
a) Readers do not need any knowledge of fire insurance to understand CL policies
b) All fire insurance concepts must be relearned for CL policies
c) Only the premium calculation is shared between fire and CL policies
d) For the purpose of this book it is assumed that the reader is familiar with Basics of Standard Fire and Special Perils Insurance or other policies for which Consequential Loss policies are available
e) The CL Policy is entirely separate from fire insurance concepts
10. What is the basic principle on which every business is conducted according to Chapter 4?
a) That revenue must always equal expenses to avoid any profit or loss
b) That minimum wages must always be paid to employees regardless of revenue
c) That tax must always be paid before any profit is calculated
d) Total income should exceed total expenditure so that a profit is earned
e) That government regulations must be followed at all times
