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Insurance And Risk Management Question Paper
Insurance And Risk Management
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
FIRST YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CMS 200 INSURANCE AND RISK MANAGEMENT(WEEKEND)
DATE: APRIL 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer QUESTION ONE and Any other TWO Questions
QUESTION ONE
a) Briefly discuss the scope of the cover accorded by the below listed policies in addressing various
insurance/assurance needs:
i) Decreasing term assurance (2 Marks)
ii) Permanent Health Insurance (2 Marks)
iii) Professional indemnity insurance (2 Marks)
iv)All Risks Insurance (2 Marks)
v) Floating policy (2 Marks)
b) Explain the essential features that must subsist for insurable interest to apply (10 Marks)
c) Tom argues that insurance cover is available for all risks while Jane believes otherwise. Discuss
this statement with specific reference to the characteristics of insurable risks. (10 Marks)
QUESTION TWO
a) Giving relevant examples, discuss the main benefits of insurance as a risk transfer mechanism.
(10 Marks)
2
b) Giving relevant examples, review the rules for the application of proximate cause. (10 Marks)
QUESTION THREE
a) John’s car is damaged and the assessors have valued the loss at Ksh.300,000. The car was
comprehensively insured for Ksh.500,000, 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 circumstances under which an insurer may pay less than indemnity.
(10 Marks)
QUESTION FOUR
(a) Mariakani Church effected a fire policy for a sum insured of Ksh 2,000,000. During the policy
period, the peril of fire destroyed the church. The church management filed a claim for the loss.
In the meantime they made an appeal to the congregation to raise revenues for reconstruction.
The insurer settled the claim at Ksh.2, 000,000. Subsequently the congregation raised Ksh.3,
000,000 which was given to the church management. The insurer on learning of this is seeking
to recover the proceeds from the church management. The church management has approached
you for advice on whether to comply or not. Supporting your recommendation, advise the
management appropriately. (10 Marks)
(b) Briefly discuss the key considerations in setting non-life insurance premiums (10 Marks)
QUESTION FIVE
(a) ‘Having taken on risks, insurance companies seek to insure again’. Explain the reasons
necessitating this (10 Marks)
(b) Briefly explain the intermediaries operating within the insurance Market. (10 Marks)
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