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Insurance &Amp; Risk Management Question Paper
Insurance &Amp; Risk Management
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
UNIVERSITY EXAMINATIONS: 2010/2011
SECOND YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CMS 200: INSURANCE & RISK MANAGEMENT (Saturday)
DATE: AUGUST 2011 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
Question One
(a)Supporting your recommendation, advise on the specific insurance/assurance policies to be effected
to meet the needs below
i) ABD bank worried that there might be default on loans due to premature death of the borrowers
(2 Marks)
ii)XY airline worried that passengers might be injured or die on its premises (2 Marks)
iii) Bawani, a surgeon worried that he could be sued if death or disability arises from an operation
(2 Marks)
iv) Kamau worried that his laptop may be accidentally lost or damaged (2 Marks)
v)Nafula who has bought a new car on loan worried that it might be stolen (2 Marks)
(b)Explain the essential features that must subsist for insurable interest to apply (10 Marks)
(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)
2
Question Two
a) Giving relevant examples, discuss the main ways in which risks can be classified. (10 Marks)
b) Giving relevant examples, discuss the main benefits of insurance as a risk transfer mechanism.
(10 Marks)
Question Three
(a) Briefly discuss the circumstances under which an insurer may pay less than indemnity. (10 Marks)
(b) Briefly discuss the main ways in which risk control can be exercised. (10 Marks)
Question Four
(a)Briefly discuss the key considerations in setting non-life insurance premiums (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)
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) Giving relevant examples, review the rules for the application of proximate cause. (10 Marks)
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