R05 Value of advice: free practice questions

1. Question 1 of 5

   Which is a key benefit of buying protection through an adviser?

   Option A: It is always the quickest way to get cover in place, with no forms to completeOption B: A needs analysis, suitable cover and features, and an appropriate trustOption C: Premiums are always lower than when buying directOption D: No underwriting is required for advised applications

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   The answer is B: A needs analysis, suitable cover and features, and an appropriate trust

   An adviser can assess needs, set appropriate cover and features and arrange trusts so proceeds reach the right people promptly. Complex applications may take longer, however.

   Why the other options are wrong

   A

   Advised applications can take longer, especially complex ones.

   C

   Advised premiums aren't always lower than buying direct.

   D

   Advised applications are still underwritten.

2. Question 2 of 5

   Which of the following is NOT a recognised problem with selling protection without advice?

   Option A: High upfront marketing costs to create interestOption B: Customers buying the wrong type or level of coverOption C: Guaranteed higher persistency than advised salesOption D: Compliance and underwriting issues hindering straight-through processing

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   The answer is C: Guaranteed higher persistency than advised sales

   Without advice, persistency may be poor as customers cancel when reviewing spending. The other problems are recognised challenges of non-advised sales.

   Why the other options are wrong

   A

   This is a recognised problem: generating interest without an adviser means high upfront marketing costs.

   B

   This is a recognised problem: without advice, customers may buy the wrong type or amount of cover.

   D

   This is a recognised problem: compliance and underwriting requirements can stop proposals going straight through.

3. Question 3 of 5

   Through which channel are sales of protection products more likely to be achieved?

   Option A: Television adverts aloneOption B: Price comparison sites for complex productsOption C: Unsolicited postOption D: Face-to-face interaction with an adviser

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   The answer is D: Face-to-face interaction with an adviser

   Most providers sell both through advisers and direct, but sales are more likely where there is face-to-face interaction with an adviser.

   Why the other options are wrong

   A

   TV adverts alone are less effective than face-to-face advice.

   B

   Complex products are hard to buy on price alone on comparison sites.

   C

   Unsolicited post isn't the most effective channel.

4. Question 4 of 5

   How has technology affected insurer expenses and underwriting?

   Option A: Expert systems enable straight-through processing for many proposalsOption B: It has made selling protection online impossibleOption C: It has removed the need for any application questionsOption D: It has increased insurers' administration and underwriting costs significantly

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   The answer is A: Expert systems enable straight-through processing for many proposals

   Competition and IT have reduced expenses. Expert underwriting systems can accept a high percentage of proposals, often upwards of 50%, with much less time and evidence.

   Why the other options are wrong

   B

   Technology has made online protection sales easier, not impossible.

   C

   Application questions are still needed; expert systems use the answers to make faster decisions.

   D

   Competition and IT have reduced insurers' expenses rather than increasing them.

5. Question 5 of 5

   After the Retail Distribution Review, why have commentators been concerned about access to protection advice?

   Option A: Average consumers may find advice harder to access as firms move upmarketOption B: Protection advice was banned for firms that charge their clients feesOption C: Commission became compulsory on all protection salesOption D: Insurers stopped selling their products direct to consumers

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   The answer is A: Average consumers may find advice harder to access as firms move upmarket

   As bancassurance shrinks and advisers move towards high net worth fee models, average consumers may find advice harder to access, even though commission is still allowed on protection.

   Why the other options are wrong

   B

   Protection advice wasn't banned for fee-charging firms.

   C

   Commission is still allowed on protection, but it isn't compulsory.

   D

   Insurers still sell direct; the concern is access to advice.

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