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2026 Statistics
Key Facts: COI Diploma Exam
3
Modules of Study
Module I, II, and III
70%
Final Exam Weight
30% Continuous Assessment
70%
Passing Mark
For each academic unit
1-2 Yrs
Course Duration
Full-time or distance learning
AIIK
Awarded Title
On IIK membership registration
Yes
Internship Required
Mandatory after Module II
The College of Insurance (COI) Kenya Diploma in Insurance is a comprehensive 1-to-2 year modular program leading to the professional Associate (AIIK) designation. It comprises three modules covering foundational principles, general and life insurance, and management specializations. Assessments include coursework (30%) and final written exams (70%) with a passing score of 70%.
Sample COI Diploma Practice Questions
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1Which of the following insurance principles states that the insured should not profit from a loss and should be restored to their pre-loss financial position?
A.Principle of Utmost Good Faith
B.Principle of Insurable Interest
C.Principle of Indemnity
D.Principle of Subrogation
Explanation: The Principle of Indemnity ensures that the insured is compensated only for the actual financial loss suffered, preventing them from making a profit. This restores them to the same financial standing they had immediately before the loss. It applies to most general insurance policies but not to life assurance.
2In insurance terms, a moral hazard is best defined as:
A.A physical condition that increases the probability of a loss
B.An attitude or character defect in an individual that increases the frequency or severity of a loss
C.An act of God, such as an earthquake or flood, that causes physical damage
D.A legal ruling that increases the cost of claims payouts
Explanation: Moral hazard arises from dishonesty or character defects in the insured, such as intentionally causing a loss or exaggerating a claim to profit. This differs from physical hazard, which relates to tangible characteristics of the risk. Understanding moral hazard is critical for underwriters to prevent fraudulent claims.
3Which fundamental principle of insurance requires the applicant to disclose all material facts to the insurer during the negotiation of a contract?
A.Principle of Contribution
B.Principle of Utmost Good Faith
C.Principle of Proximate Cause
D.Principle of Subrogation
Explanation: The Principle of Utmost Good Faith (uberrimae fidei) mandates that both the proposer and the insurer disclose all material facts that could influence the decision to accept the risk or set the premium. Failure to disclose material facts makes the policy voidable at the option of the aggrieved party. In Kenya, this duty continues until the contract is concluded.
4An insurable interest must exist in a life assurance contract at which specific point in time under common law?
A.Only at the time of the claim
B.Only at the inception of the policy
C.Both at the inception of the policy and at the time of the claim
D.At any point during the policy term, regardless of inception
Explanation: For life assurance, insurable interest must exist at the inception of the contract when the policy is taken out. It is not required to exist at the time of the claim (death of the life assured). This was established by the case Dalby v. India and London Life Assurance Company (1854) and remains applicable under Kenyan insurance law.
5What is the primary objective of the principle of subrogation in insurance?
A.To allow the insured to collect compensation from both the insurer and the negligent third party
B.To ensure that the negligent party escapes financial liability for the damage caused
C.To prevent the insured from recovering more than the actual loss when a third party is liable
D.To force the insurer to pay the claim even if the loss was not covered by the policy
Explanation: Subrogation is a corollary of the principle of indemnity. It prevents the insured from getting double recovery (recovering from both the insurer and the tortfeasor) and ensures that the ultimate liability rests on the negligent party. The insurer, after paying the claim, acquires the right to sue the third party in the insured's name.
6The active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source, describes which principle?
A.Utmost Good Faith
B.Contribution
C.Proximate Cause
D.Indemnity
Explanation: This is the classic definition of Proximate Cause (causa proxima). It is the dominant and effective cause of the loss, which must be identified to determine if the loss was caused by an insured peril, an excluded peril, or an uninsured peril. The principle is vital in claims adjustments.
7Which of the following is a key element that must be present to establish the principle of contribution?
A.The policies must cover different insurable interests
B.The policies must cover different subject matters of insurance
C.The policies must be issued by the same insurance company
D.The policies must cover the same peril that caused the loss
Explanation: For the principle of contribution to apply, several conditions must be met: the policies must cover the same interest, the same subject matter, the same peril that caused the loss, and both must be active at the time of the loss. They do not have to be issued by the same insurer (in fact, it usually involves different insurers).
8In Kenyan insurance practice, a 'material fact' is defined as any fact that would influence the judgment of:
A.A prudent underwriter in determining whether to accept the risk and at what premium
B.The insured in deciding whether to buy the policy or seek a competitor
C.An insurance broker in negotiating their commission rate with the insurer
D.The Insurance Regulatory Authority (IRA) in auditing the insurance company
Explanation: Under insurance law, a material fact is one that would affect the mind of a prudent underwriter in deciding whether to take the risk and what premium to charge. This objective standard determines what must be disclosed by the proposer under the duty of utmost good faith.
9Which of the following describes a 'pure risk'?
A.A risk that offers the potential for either a profit or a loss
B.A risk that involves only the possibility of loss or no loss
C.A risk associated with trading shares on the Nairobi Securities Exchange
D.A risk created by an entrepreneur when starting a new business venture
Explanation: A pure risk is one where the only outcomes are loss or no loss (e.g., the risk of fire, theft, or premature death). There is no possibility of financial gain. Insurance is primarily designed to cover pure risks, while speculative risks (which involve the chance of gain) are generally uninsurable.
10What does the term 'pooling of risks' refer to in insurance?
A.Combining the assets of multiple insurance companies to pay a single massive claim
B.Group underwriting of high-hazard physical risks to avoid individual liability
C.Spreading the losses of a few among a large group of individuals exposed to similar risks
D.Accumulating premium payments in bank accounts to invest in government treasury bonds
Explanation: Pooling of risks is the core mechanism of insurance. By collecting premiums from a large number of people exposed to similar risks, the insurer creates a common fund. This fund is used to pay for the relatively few losses that actually occur, substituting a small, certain cost (premium) for a large, uncertain loss.
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