Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

What happens if the required monthly reports are not filed after a loss under the Monthly Average Basis?

1. The insured may receive the full amount of the loss

2. The insured may face a penalty resulting in less payment than the actual loss

3. The insurer will cancel the policy

4. There will be no consequences for the insured

The correct answer is: The insured may face a penalty resulting in less payment than the actual loss

When required monthly reports are not filed after a loss under the Monthly Average Basis, the insured may face a penalty resulting in less payment than the actual loss. This scenario typically arises because the basis for loss payment is dependent on the information provided in those monthly reports. If the reports are incomplete or missing, the insurer may not have an accurate basis to assess the extent of the loss or the correct amount that should be compensated. The Monthly Average Basis focuses on capturing the insured’s average monthly values, which is vital for determining how much coverage was in place at the time of loss. Failure to submit these reports can result in a lower calculated value and thus less payment, reflecting the penalty for non-compliance with policy requirements. This serves as a reminder to policyholders about the importance of timely and accurate reporting to ensure they receive the full benefits of their coverage.