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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:2009

UNIVERSITY EXAMINATIONS: 2008/2009
SECOND YEAR STAGE I EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CMS 200: INSURANCE AND RISK MANAGEMENT - WKND
DATE: AUGUST 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
(a) Briefly discuss the ways in which subrogation rights can arise. (10 marks)
(b) Taka enterprises insured the same property with two insurance companies, Teke and Zele for
Ksh.4, 500,000 and Ksh 1,000,000 respectively. The value of the property is Ksh.4, 500,000.
Zamazile has suffered a loss of Ksh.450, 000 and both policies are subject to average.
Determine the liability of each insurer. (8 marks)
(c) ABC insurance company has surplus treaty reinsurance in place for property business. Its
retention is Kshs.20, 000. The company has a ten line first surplus treaty and a five line second
surplus treaty.
i.) If ABC has been presented with a risk for a sum insured of Kshs.150, 000, how will
it be reinsured? (2 marks)
ii.) If in (i), the insured paid a premium of Ksh 8,000 and has suffered a loss of Ksh
70,000, how will the premium and claim be apportioned? (5 marks)
iii.) If the sum insured was Kshs.500,000, how will it be reinsured? (5 marks)
2
QUESTION TWO
(a) Kamau’s car is involved in a road accident with that of Kipngetich. Kamau’s car is extensively
damaged and the police abstract blames Kipngetich for the accident. Kamau’s insurer settles
the claim to him at Ksh 500,000. Subsequently Kamau sues Kipngetich and the court awards
him Ksh 700,000 for the total damage to his car. Kamau’s insurer on learning of this seeks to
recover from him. Stating your reasons, advice Kamau on whether he should comply with the
insurer’s demand, if so how much should be refunded. (10 marks)
(b) John 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) Karani’s car is damaged and the assessors have valued the loss at Ksh.200, 000. The car was
comprehensively insured for Ksh.300, 000, yet its valuation at the time was Ksh.400, 000. The
policy is subject to average.
i.) If the policy had an excess of Ksh.20, 000, what is the insurer’s net liability?
(5 marks)
ii.) If the policy was subject to a franchise of Ksh.20, 000, what is the insurer’s net
liability? (5 marks)
(b) Briefly discuss the sellers of insurance at the market place. (10 marks)
QUESTION FOUR
(a) “Insurance is premised on the doctrine of indemnity; however there are circumstances where
an insurer may pay more than indemnity”. Discuss (10 marks)
(b) Briefly discuss the facts that need NOT be disclosed when proposing for insurance cover.
(10 marks)
QUESTION FIVE
(a) Briefly discuss the functions of insurance (10 marks)
(b) Discuss the circumstances that can give one insurable interest (10 marks)

Insurance And Risk Management Question Paper

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