1

CHARTERED INSTITUTE OF
PERSONNEL MANAGEMENT OF NIGERIA
PROFESSIONAL EXAMINATIONS

FEBRUARY 2019

CIPM/PE1/003: INSURANCE AND PENSIONS MANAGEMENT (Regular)

Instruction: Answer all questions in Section A and any other

four complete questions of your choice in Section B

Time Allowed: 3 hours

SECTION A

MULTIPLE CHOICE QUESTIONS

Choose the correct answer from the list of options provided

1. In insurance practice, the decrease in or disappearance of value is known as:

(A) Risk
(B) Uncertainty
(C) Loss
(D) Peril

2. A Speculative risk will possibly result to:

(A) Loss or No loss

(B) Loss Breakeven or Gain
(C) Loss, No loss or Breakeven
(D) Loss, No loss or No Breakeven

CIPM/PE1/003/DOC Turn Over

 2

3. All are examples of risk identification tools except:

(A) Organizational Chart

(B) Hazard
(C) Flowchart
(D) Checklist

4. An Insurance company will only provide cover for one of the following risks:

(A) Particular risk

(B) Speculative risk
(C) Credit risk
(D) Investment risk

5. An Insurance company set up primarily to underwrite the risks of its parent company is
called:

(A) Mutual Insurer

(B) Specialist Insurer
(C) Subsidiary Insurer
(D) Captive Insurer

6. The principle that enables the insurer to stand in the place of the insured and avail
himself of all the rights and remedies of the insured is called:

(A) Contribution
(B) Indemnity
(C) Subrogation
(D) Proximate Cause

7. The government agency charged with responsibility of regulating insurance business in

Nigeria is known as:

(A) Nigerian Insurance Commission

(B) National Insurance Council
(C) Nigerian Insurance Corporation
(D) National Insurance Commission

8. One of the following is not an association of professionals in the Nigerian Insurance

Industry:

(A) Institute of Loss Adjusters of Nigeria

(B) Chattered Insurance Institute of Nigeria
(C) Professional Reinsurers Association of Nigeria
(D) Nigerian Corporation of Registered Insurance Brokers

CIPM/PE1/003/DOC Turn Over

 3

9. A document designed by the insurance firm to elicit relevant information from a

prospective policy holder is referred to as:
(A) Policy Form
(B) Proximate Form
(C) Proposal Form
(D) Premium Form

10. An Employers Liability Insurance Policy provides cover for the following except:

(A) Injury suffered by third party

(B) Medical expenses of injured employees
(C) Disability benefits to workers
(D) Death benefits in case an employee die while working

11. The act of an insurer transferring risk to another insurance company is referred to as:

(A) Risk transfer

(B) Coinsurance
(C) Retrocession
(D) Reinsurance

12. A regular payment given to someone who is no longer working, having put in the
maximum number of years of service is known as:

(A) Annuity
(B) Pension
(C) Contribution
(D) Benefit

13. The type of hazard involving leaving the car key in an unlocked car is an example of:

(A) Physical
(B) Moral
(C) Morale
(D) Legal

14. An organization that chooses to suspend a production activity perceived to expose it to

risk is practicing what type of risk treatment technique:

(A) Avoidance
(B) Reduction
(C) Control
(D) Financing

CIPM/PE1/003/DOC Turn Over

 4

15. Premium paid by the insured in an insurance contract represent:

(A) Offer
(B) Consideration
(C) Acceptance
(D) Insured’s intention

16. The duty of disclosure as required under the principle of utmost good faith is expected
from one of the following:

(A) Insured only

(B) Both Parties
(C) Insurer only
(D) Policyholder only

17. One of the following is not a type of warranty:

(A) Expressed Warranty

(B) Implied Warranty
(C) Continuing Warranty
(D) Excess Warranty

18. An insurance policy procured by an organization to cover the cost of replacing an

important employee is known as:
(A) Employer’s Liability Insurance
(B) Employee’s replacement Insurance
(C) Key Person Insurance
(D) Workmen Compensation Insurance

19. According to the Pension Reform Act 2014, the monthly contribution to an employee’s
retirement savings account by both employer and employee will
be…and…respectively:

(A) 7.5% and 7.5%

(B) 8% and 10%
(C) 10% and 8%
(D) 10% and 5%

20. An employer remits the total contributions in respect of an employee’s pension directly
to:

(A) Pension Fund Custodian

(B) Pension Fund Administrator
(C) National Pension Commission
(D) Nigerian Social Insurance Trust Fund
[2 marks each = 40 marks]

CIPM/PE1/003/DOC Turn Over

 5

SECTION B

Attempt any four complete questions of your choice from this section.

QUESTION 2

(a) Outline four reasons for setting up a captive insurance company. [6 marks]

(b) As a way of reducing the total cost of managing risk in your organization, the
management is planning to establish a captive insurance company. During the
meeting to take decision on the most suitable type of captive insurance company for
your firm, you are required as an insurance expert to mention and describe any six
forms of captive insurance company suitable for your organization to adopt.
[9 marks]
[Total = 15 marks]
QUESTION 3
You are the Human Resource Manager of ABC Nigeria Limited. There was an accident on
the factory floor leading to serious injuries to one of the employees. He was rushed to the
hospital and after staying for up to 13 months he was confirmed physically and permanently
disabled. He would need to use a wheel chair for the rest of his life. As at the time of this
unfortunate incident his remuneration details were as below:

(a) Basic Salary/month - N150,000.00

(b) Housing Allowance/month - N225,000.00
(c) Transport Allowance/month - N 75,000.00
(d) Children’s Education Allowance/month - N 7,500.00
(e) Entertainment Allowance/year - N180,000.00
(f) Outfit Allowance/year - N180,000.00

Calculate the total benefit due to him under the:

(a) Employee’s Compensation Act 2010. [12 marks]
(b) Occupational Group Life Insurance cover (as prescribed by the Pension
Reform Act 2014) [3 marks]

[Total = 15 marks]

CIPM/PE1/003/DOC Turn Over

 6

QUESTION 4

The Insurance fundamental principle of Utmost Good Faith is based on disclosure of material
facts and representations by both the proposer and the Insurer during the formation of the
contract.
(a) What are Utmost Good Faith, material facts and representations? [6 marks]
(b) How has the principle been modified by Nigeria Law [4 marks]

(c) What are the facts that need not be disclosed by the proposer? [5 marks]
[Total = 15 marks]

QUESTION 5

The major reason for putting an insurance policy or cover in place is for the policyholder or
the insured to get paid by the insurer when a loss, damage, destruction or liability crystalizes.
As a Human Resources Management Practitioner, provide six circumstance under which the
payment from the insurer for a lost would be lower than the sum insured or limit of liability.

[15 marks]

QUESTION 6

An Insurance policy is the evidence of the contract between an insured or policyholder and
the insurer.
(a) List out any five of the sections of this document. [7½ marks]
(b) Briefly explain the five sections mentioned above. [7½ marks]

[Total = 15 marks]

CIPM/PE1/003/DOC Turn Over

 7

QUESTION 7

Ten of the employees of your company were sent to a 14 day intensive training in the
Republic of South Africa. Unfortunately one of them had her baggage containing personal
effects and money stolen on arrival; two of them fell ill on the second day of arrival while
another one got her arm fractured due to a fall on the staircase on the third day. Both the sick
and injured employees were hospialized and could not come back to the country on the 14th
day when their Visas expired. The company expended the sum of N20m (Twenty Million
Naira) to sort out these issues which your mangement felt could have been recovered under
an insurance policy.
As the Human Resource Manager, you are to advice on:

(a) The type of insurance policy suitable for these circumstances. [3 marks]
(b) Any six benefits covered by the policy. [12 marks]
[Total = 15 marks]

CIPM/PE1/003/DOC Turn Over