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Introduction To Insurance Question Paper

Introduction To Insurance

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
BMS 101: INTRODUCTION TO INSURANCE

DATE: THURSDAY, 12TH JUNE 2008
TIME: 11.00 A.M. – 1.00 P.M.
______________________________________________________________________

INSTRUCTIONS: Answer question ONE and any other TWO questions.

QUESTION ONE

(a)
Distinguish between the following terms as used in insurance:-

i.
Risk avoidance and risk reduction

(2 marks)

ii.
Peril and hazard

(2 marks)

iii.
Fundamental and particular risk

(2 marks)

(b)
In response to the tough economic times and the uncertainty about it, the
main investors have organized a consultative seminar to search for the way
forward. You have been chosen to represent the insurance industry to present
a paper on „the challenges facing Kenya?s insurance industry today?. Discuss.

(10 marks)

(c)
“Underwriting forms the base for a successful insurance business at all levels”.

Required:-

i.
Explain what you understand by insurance underwriting claims? (2 marks)

ii.
Describe the underwriting process.

(7 marks)

iii.
Briefly explain the sources of information to underwriters.
(5 marks)

2

QUESTION TWO

Mr. Taabu wishes to take a loan of Ksh.2,800,000 from Bora Bank Ltd., but has no security of
any kind to offer to the bank which is demanding such. The bank is however willing to accept
personal guarantees from two persons who are creditworthy. Mr. Taabu approaches two of his
good friends, Mr. Mwema and Mr. Wetu, who both agree to help their friend out. Mr. Mwema
guarantees a sum of Ksh.1,200,000 and Mr. Wetu guarantees the balance of Ksh.1,600,000.
The bank releases the loan to Mr. Taabu on the strength of the two guarantees. One year later,
Mr. Taabu has been able to repay a part of the loan, but fails to a sum of Ksh.1,200,000. The
bank calls upon the guarantors to pay this amount and threatens to go to court, to enforce the
guarantees, unless payments are received at the earliest.
Required:-
(a)
Determine the amount that each guarantor should pay.

(6 marks)
(b)
Discuss in detail when contribution can arise under insurance?

(7 marks)
(c)
Discuss the individual methods of providing indemnity.

(7 marks)

QUESTION THREE

(a)
Define an insurance contract and briefly explain its basic parts.

(4 marks)
(b)
Discuss the functions of insurance industry.

(8 marks)
(c)
Discuss the role of the government in the operations of the insurance
industry.

(8 marks)

QUESTIONS FOUR

(a)
Discuss the main techniques of risk management.

(8 marks)
(b)
Explain six major principles underlying insurance contracts.

(12 marks)

*****************

Introduction To Insurance Question Paper

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