IIQE Paper 1 Risk and Insurance question: ancillary benefits of insurance

IIQE Paper 1Risk and Insurance

Which three of the following illustrate ancillary benefits of insurance? (i) a bridge project obtains bank finance once it is insured (ii) an insurer employs local claims staff (iii) a fire victim receives a claim payment (iv) a surveyor's report leads a factory to improve fire safety

A (i), (ii) and (iii)
B (i), (ii) and (iv)
C (i), (iii) and (iv)
D (ii), (iii) and (iv)

Show the answer and explanation

Answer: B. (i), (ii) and (iv)

Answer: (i), (ii) and (iv). Statements (i), (ii) and (iv) are true; (iii) is not.(i) True. Economic growth and development.(ii) True. Employment.(iii) False. Compensation to insured victims is the primary benefit.(iv) True. Loss prevention and loss reduction.Why not the others:• (i), (ii) and (iii): includes (iii), which is false, and leaves out (iv), which is true.• (i), (iii) and (iv): includes (iii), which is false, and leaves out (ii), which is true.• (ii), (iii) and (iv): includes (iii), which is false, and leaves out (i), which is true.Watch out: Treating the claim payment as ancillary; it is the primary benefit.Rule: Ancillary benefits include economic development, employment and loss control; compensation is primary.Source: IA P1 Study Notes, 2024 Edition (8th ed., Nov 2024; for exams from 17 Feb 2025), 1.2(b), p. 1/4