CII Certificate in Insurance - Financial Protection (R05) Practice Exam

The scenario where a policy has a sum assured of £100,000 but pays out only £55,000 can often be attributed to underwriting adjustments. Underwriting adjustments typically occur when the insurer evaluates the risk during the underwriting process and decides to apply certain limitations or exclusions to the coverage. This can result in a reduced payout despite the nominal sum assured outlined in the policy.

In other cases, while policy debt, inadequate premium payments, and accidental exclusion clauses could contribute to reduced payouts, they do not commonly explain a straightforward difference like the one described. Policy debt due to prior claims would generally indicate owed amounts that may not affect the payout directly in this context. Inadequate premium payments would lead to issues like policy lapses rather than a mere payout adjustment. Accidental exclusion clauses typically pertain to specific circumstances or events and wouldn’t usually result in a simple cut in the payout amount without prior consent or acknowledgment from the policyholder. Therefore, underwriting adjustments remain the most plausible explanation for the reduced payout amount.