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Cms 200: Insurance And Risk Management Question Paper
Cms 200: Insurance And Risk Management
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
1
UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE I EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CMS 200: INSURANCE AND RISK MANAGEMENT (Weekend)
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION FIVE
(a) Supporting your recommendation, advise on the specific insurance/assurance policies to be
effected to meet the needs below
(i) Mikopo bank worried that there might be default on loans due to premature death of the
borrowers (2 Marks)
(ii) An airline worried that passengers might be injured or die on its premises (2 Marks)
(iii)A surgeon worried that he could be sued if death or disability arises from an operation
(2 Marks)
(iv) Tom worried that his laptop may be accidentally lost or damaged (2 Marks)
(v) Jane who has bought a new car on loan worried that it might be stolen (2 Marks)
(b) Tabaka insurance company has a surplus treaty reinsurance in place for property business. Its
retention is Kshs.20,000. The company has a five line first surplus treaty and a five line second
surplus treaty.
(i) If Tabaka has been presented with a risk for a sum insured of Kshs.150,000, how will it
be reinsured? (3 Marks)
(ii) If the sum insured was Kshs.500,000, how will it be reinsured? (4 Marks)
(iii) If the sum insured was Kshs.250,000, how will it be reinsured? (3 Marks)
2
(c) An insured scratched his leg with his thumb nail while removing his socks. Six days later the
wound turned sceptic, on the tenth day septicemia set in and on the twentieth day the insured died
of septic pneumonia. The policy covered death by accident but excluded death by disease. Giving
supporting reasons, identify the proximate cause of death and advise the insured’s family on
whether the claim is payable. (10 Marks)
QUESTION FIVE
a) Giving relevant examples, discuss the main ways in which risks can be classified. (10 Marks)
b) Jeremy wants to effect insurance cover but has not seen a policy document before. He has
approached you to advise him on the main components of the policy document. Advise him
appropriately. (10 Marks)
QUESTION THREE
(a) John’s car is damaged and the assessors have valued the loss at Ksh.200,000. The car was
comprehensively insured for Ksh.400,000, yet its valuation at the time was Ksh.600,000. The
policy is subject to average.
(i) If the policy had an excess of 2% of the sum insured, what is the insurer’s net liability?
(5 Marks)
(ii) If the policy was subject to a franchise of 3% of the sum insured, what is the insurer’s
net liability? (5 Marks)
(b) Briefly discuss the main ways in which risk control can be exercised. (10 Marks)
QUESTION FOUR
a) Discuss the circumstances under which an insurer may pay less than indemnity. (10 Marks)
b) Njeri when proposing for life assurance cover in 1990 indicated that she had not suffered from T.B
in the last five years. She subsequently died after two years of issuance of the policy. The death
certificate indicated the cause of death as T.B. The insurance company on writing to the usual
medical physician of the late Njeri, received a response that she had been diagnosed of T.B 10
years ago which had been made known to her. As claims manager, advise on the position of the
claim. (10 Marks)
3
QUESTION FIVE
(a) Wekesa effected a third party only insurance policy for his public service vehicle (matatu)
operating on the Kisumu- Nairobi route. He warranted that the vehicle would carry 14 passengers
at all times. The vehicle was involved in an accident with 20 passengers on board. Wekesa was
held liable for a Kshs 30 million award, which he passed to his insurer for indemnity. The insurer
repudiated the claim. Giving your reasons, advise wekesa on whether he is entitled to indemnity
(10 Marks)
(b) Briefly discuss the benefits of insurance as a risk transfer mechanism (10 Marks)
END
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