Pass the IIC Chartered Insurance Professional (CIP) C11 Questions and answers with CertsForce

Apolicyis a legal contract issued by theinsurer, not the broker and not the policyholder. Therefore, the individuals who sign the policy are usually the insurer’s authorized signing officers.

These are typically:

The CEO or President, and

Another authorized senior officer, such as the Administrative Manager or Underwriting Officer.

In the table:

Cathy(CEO) is an authorized signer.

Alan(Administrative Manager) is also an authorized insurer representative.

The insured (Simone) doesnotsign the actual policy document; their signature is not required for the policy to be valid. The broker (Denis) also doesnotsign policies; he facilitates placement but is not a party to the contract.

Thus, the correct pair isAlan and Cathy.

To be insurable, a peril must befortuitous, measurable, and not within the direct control of the insured.Cybersecurity risksmeet these criteria, which is why insurers offercyber liability and data breach insurance. These policies cover hacking, ransomware, privacy breaches, and business interruption caused by cyber events.

Mismanagement (B) is uninsurable because it results from internal decision failure.

Under-capitalization (C) is a business failure, not a fortuitous peril.

Product obsolescence (D) is a predictable business cycle risk and cannot be insured.

Thus, the only insurable peril listed isA: Cybersecurity.

Net income is calculated by subtractingexpensesfromrevenues:

Net Income=Revenues−Expenses\text{Net Income} = \text{Revenues} - \text{Expenses}Net Income=Revenues−Expenses

For this retailer:

$250,000−$100,000=$150,000\$250{,}000 - \$100{,}000 = \$150{,}000$250,000−$100,000=$150,000

The projection of $50,000 sustained growth next year is irrelevant because the question asks specifically forlast year’snet income. Many insurance-based financial questions test the ability to isolate actual financial performance from future projections.

Options B, C, and D incorrectly combine revenue, expense, or growth figures.

Thus, the correct net income isA: $150,000.

Indemnity means restoring the insured to the financial position they occupied immediately before the loss—no better, no worse. Since the loss amount is$180,000, this is the amount required to fully indemnify the insured.

Although the policy limit is$400,000, the insurer does not pay policy limits unless the loss equals or exceeds the limit. The ACV of $380,000 is irrelevant here because the loss ispartial, not total. ACV only caps reimbursement in cases of total loss or when replacement cost is not available.

Option B ($200,000) has no basis in any indemnity or co-insurance formula.

Options C and D refer to total loss payouts, not applicable here.

Thus, the amount that indemnifies Kamal isA: $180,000.

Post-loss objectives focus on how an organization continues functioningafter a loss has occurred. One of the most important objectives ismaintaining stable earnings. Even after a major loss event—such as fire, equipment breakdown, or business interruption—the organization aims to minimize financial volatility and continue operating with predictable revenue. Insurance and effective recovery planning help achieve this stability.

Option A (peace of mind) is apre-losspsychological benefit. Option C (internal obligations) is vague and not defined as a post-loss risk management goal. Option D (external development) relates to business growth, which is unrelated to loss response.

Therefore, the recognized post-loss objective isB: Stable earnings.

An oral binder is a legally recognized temporary contract that provides immediate insurance coverage before a written policy is issued. While oral binders are valid in all Canadian provinces, their reliability depends entirely on whether the intermediary actually has binding authority from the insurer. If the broker or agent who gives the oral binder doesnothave the authority to commit the insurer, then the binder may not be valid, and coverage may not exist. This makes lack of authority the primary risk associated with oral binders.

Option A is incorrect—oral binders are legal across Canada.

Option B is incorrect—a binder cannot override policy warranties; it simply provides temporary coverage.

Option C is unrelated; privacy documentation is not what makes a binder valid or invalid.

Thus, the key problem is that the intermediary may not have binding authority, making D the correct answer.

Thesubject of insuranceis the property, person, or legal liability exposure that is being insured. This is the central object of the policy—what the insurer agrees to indemnify or protect. For example, a house in a homeowner’s policy, a vehicle in an automobile policy, or a person’s life in a life insurance contract. Identifying the subject of insurance is essential because underwriting, policy wordings, rates, and coverage conditions all revolve around what is being insured.

Option B refers toperils, which are the causes of loss, not the insured item. Option C refers to the insurer itself and is unrelated to the definition. Option D refers to policy language but not the underlying exposure.

Thus, the correct meaning of the term isA: the thing being insured.

Brokers without claims-handling authority must be extremely careful in the statements they make to insureds, especially at the time of a loss. Samuel improperly promised coverage, something he had neither the authority nor sufficient information to confirm. Claims are determined by the insurer based on policy wording, exclusions, and investigation. The proper action would have been to reassure the insured emotionally while clearly stating that the insurer must first investigate the circumstances before any determination of coverage can be made.

Option B is inappropriate; the insured should not admit liability at the scene. Option C is improper because a broker has no authority to intervene in a police investigation. Option D is also incorrect; Samuel cannot deny coverage, as this is solely the insurer’s role. Therefore, the only correct response is A, which aligns with proper professional conduct and avoids misrepresentation

Insurers must ensure they collect enough premium to cover potential losses while remaining competitive. One of the most important methods is maintaining a good spread of risk—diversifying exposures across different geographical areas, classes of business, and types of insureds. This spreads the impact of losses, reducing the chance that a single catastrophic event or concentration of similar risks will threaten the insurer’s financial stability.

Option B, specialization, increases dependence on a narrow market segment and may elevate risk volatility. Option C is unrealistic because insurers cannot rely solely on “superior risks,” nor can they guarantee such a selection. Option D—concentrating business in one location—is dangerous because natural disasters, economic downturns, or localized events could cause severe aggregated losses.

Thus, insurers most effectively manage loss volatility through A: a good spread of risk.

Insurers in Canada are heavily regulated in the way they invest their capital because they must remain financially strong to pay future claims. Government regulations—federal for federally regulated insurers and provincial for provincially regulated insurers—set out specific investment restrictions, including prohibiting certain high-risk or illiquid investments. These rules protect policyholders by ensuring insurers maintain solvency and liquidity.

Insurers must invest prudently in order to meet long-term obligations, and therefore regulators specify the classes of investments deemed too risky or unsuitable. This includes limits on speculative investments or holdings that could jeopardize stability.

Option A is incorrect because insurers arenotrequired to invest in non-liquid assets; in fact, liquidity is important.

Option B is incorrect; although some foreign investments may be allowed, the statement is not a broad principle of regulation.

Option C is incorrect because insurers face significant restrictions, not complete freedom.

Thus, D is the correct answer.