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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: 2008/2009
SECOND YEAR STAGE 1 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CMS 200: INSURANCE AND RISK MANAGEMENT (WEEKEND CLASS)
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
Zama Auctioneers with a staff establishment of 30, 10 motor vehicles and several properties has faced
numerous challenges recently. On two occasions it has been sued of wrongful attachment of property.
Four employees were attacked while on a repossession mission by hostile owners of property. In
addition some staff members have misappropriated money paid in cash, where a repayment schedule
had been agreed by the defaulters. The management is concerned and has retained you to advice on
the following:
i) Identify the major risks facing Zama (10 Marks)
ii) Risk control measures that can be instituted, with specific reference to reduction, retention and
transfer (10 Marks)
iii) Recommend the appropriate insurance/assurance covers that Zama needs to effect (10 Marks)
QUESTION TWO
(a) “Contribution and subrogation are corollaries to indemnity”. Discuss this statement with
specific reference to the three principles, giving relevant examples where appropriate.
(10 Marks)
(b) Briefly explain the non commercial considerations taken into account in arriving at a non-life
insurance premium rate. (10 Marks)
2
QUESTION THREE
(a) Explain the main functions of insurance to the Kenyan economy. (10 Marks)
(b) Briefly discuss the intermediaries available in the insurance Market place. (10 Marks)
QUESTION FOUR
(a) Yekoyodo’s car is involved in a road accident with that of Kipngetich. Yekoyodo’s car is
extensively damaged and the police abstract blames Kipngetich for the accident. Yekoyodo’s
insurer settles the claim to him ex-gratia at Ksh 500,000. Subsequently Yekoyodo sues
Kipngetich and the court awards him Ksh 600,000 for the total damage to his car. Yekoyodo’s
insurer on learning of this seeks to recover from Yekoyodo. Stating your reasons, advise
Yekoyodo on whether he should comply with the insurer’s demand, if so how much should be
refunded. (10 Marks)
(b) Njeri 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 her
appropriately. (10Marks)
QUESTION FIVE
(a) Giving relevant examples, explain the circumstances under which contribution can apply
(10 Marks)
(b) Supporting your recommendation, advise on appropriate insurance covers or policies to meet
each of the needs below:
(i) A bank worried that there might be default on loans granted due to premature
deaths of the borrowers. (2 Marks)
(ii) A company that would like to provide for its laptops used by field officers against a
wide range of perils. (2 Marks)
(iii) An engineering firm undertaking construction works worried that the project may
not be completed strictly as per contract due to unforeseen events. (2 Marks)
(iv) A cigarette manufacturing company concerned that its products could cause harm
to its clients. (2 Marks)
(v) Mr Komen who has purchased a new car through a loan facility. (2 Marks)
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