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

To operate as a federally regulated insurance company in Canada, an insurer must receive authorization from OSFI after meeting all incorporation and capital requirements. Once OSFI is satisfied that the insurer has complied with statutory conditions, it issues an Order to Commence and Carry On Business—commonly referred to as an order of commencement. This document grants the insurer the legal authority to start underwriting and selling insurance in Canada.

Option A is not an official document under Canadian insurance regulation. Option C does not exist in federal insurance legislation. Option D is incorrect because the establishment of an insurer is handled through incorporation documents, not a post-approval "establishment" certificate.

Therefore, the correct OSFI authorization document is B: Order of commencement.

A hazard is a condition that increases the likelihood or severity of a loss. Installing anti-slip flooring reduces the chance of slips and falls, thereby reducing a hazard. This is an example of loss prevention—altering physical conditions to make an environment safer.

Option B increases danger because high beams on a busy highway can blind other drivers. Option C significantly increases fire hazard because sprinkler systems provide automatic fire suppression. Option D exposes items to damage during transit, increasing rather than decreasing hazard.

Therefore, the only option that clearly reduces a hazard is A: installing anti-slip floor tile.

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.

The typical privacy-breach response sequence used in Canadian insurance organizations follows four steps:

Contain the breachand secure the data (stop further exposure).

Evaluate the risks— determine sensitivity of data, potential harm, affected individuals, and severity.

Notifythose who must be informed (affected clients, regulators, privacy commissioners, insurers, or law enforcement).

Prevent recurrence— investigate causes and implement corrective measures.

Since Step 1 is containment and Step 2 is risk evaluation, thethirdstep isnotification.

Therefore, the correct answer isC.

Anet premiumis the amount remainingafter commission is deducted. Therefore, the policy premium must behigherthan the net premium, because the insurer must pay the broker their commission out of the gross premium.

Formula:

Net Premium=Policy Premium×(1−Commission Rate)\text{Net Premium} = \text{Policy Premium} \times (1 - \text{Commission Rate})Net Premium=Policy Premium×(1−Commission Rate)4,000=P×0.804,000 = P \times 0.804,000=P×0.80P=4,0000.80=5,000P = \frac{4,000}{0.80} = 5,000P=0.804,000​=5,000

Thus, the policyholder must be charged$5,000, so that:

$1,000 (20%) goes to the broker, and

$4,000 remains as the net premium for the insurer.

Correct answer:C: $5,000.

Chattelrefers tomovable personal property(as opposed to real property/land). Insurance policies that cover chattels protect items such as furniture, machinery, mobile homes, and other movable property.

Amobile homeis specifically recognized as chattel because it is transportable and not permanently affixed to land. Therefore, a mobile home qualifies for chattel insurance coverage.

Option A is atravel insurancerisk.

Option C is anevent prize indemnity risk, not related to chattel.

Option D isprofessional liability(errors & omissions), which covers negligence, not movable property.

Thus, the risk insurable under chattel coverage is amobile home, makingBthe correct choice.

Avalued contractis one in which the insurer and insured agreein advanceon the value of the insured item. If a total loss occurs, the insurer pays this predetermined amount, regardless of the item’s actual cash value at the time of loss. This type of contract is common in areas such as fine arts, antiques, life insurance, or items whose value is difficult to measure after loss. The purpose is to eliminate disputes over valuation after a loss occurs.

Option A incorrectly describes replacement cost coverage.

Option B misstates contract rights; insureds cannot force payouts beyond contractual terms.

Option C describes structured settlements, not valued contracts.

Thus, the correct definition isD.

Comprehensive Explanation (150–250 words):

When a vehicle is deemed a total loss, the insurer typically pays theactual cash value (ACV)minus thedeductible. If the insured decides to keep the salvage, thesalvage valuemust also be deducted from the settlement, because the insured retains something of monetary worth.

The formula for this situation is:

Settlement=ACV−Deductible−Salvage Value\text{Settlement} = \text{ACV} - \text{Deductible} - \text{Salvage Value}Settlement=ACV−Deductible−Salvage Value

Using Ivana’s numbers:

ACV = $17,000

Deductible = $1,500

Salvage value = $3,000

17,000−1,500−3,000=12,50017,000 - 1,500 - 3,000 = 12,50017,000−1,500−3,000=12,500

Therefore, Ivana receives$12,500, and she keeps the damaged vehicle, which she values for personal reasons.

Option B ($14,000) ignores the salvage deduction.

Option C ($15,500) ignores the deductible.

Option D ($17,000) ignores both deductible and salvage, which is not permitted.

The only correct settlement amount is$12,500.

The principle of utmost good faith (uberrima fides) is fundamental to all insurance contracts. It requires a higher standard of honesty than ordinary commercial agreements because the insurer must rely on the applicant to disclose all material facts that could affect the underwriting decision. The insured has superior knowledge of the risk, and failure to disclose material information can jeopardize the insurer's ability to assess the exposure properly.

Option B is incorrect because utmost good faith is not required inalllegal contracts—only in specific types where one party must rely heavily on the full disclosure of the other, such as insurance. Option C is partially related—breachescanlead to policy voidance—but that is a consequence, not the definition. Option D is incorrect because utmost good faith refers to the presence of elevated honesty, not the absence of negligence.

Therefore, the best explanation is A: Requires a high standard of honesty.

A company chooses provincial incorporation when it intends to operate only within that specific province. This minimizes regulatory complexity because only the provincial Superintendent of Insurance regulates its operations. If Maritime Insurance plans to conduct business exclusively in Nova Scotia, incorporation under the Nova Scotia Insurance Act is simpler, less expensive, and avoids federal-level compliance requirements.

Option A is incorrect because capitalization is required under both federal and provincial laws. Option C may create confusion about naming conflicts, but name disputes do not determine the appropriate jurisdiction of incorporation. Option D is incorrect because selling insurance nationally requires federal licensing; a provincially incorporated insurer cannot operate beyond its home province unless licensed separately in each province—an inefficient approach.

Thus, the insurer would choose Nova Scotia incorporation only if it intends to operate solely within Nova Scotia, making B correct.