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Bmgt 211:Introduction To Risk And Insurance August 2010 Question Paper
Bmgt 211:Introduction To Risk And Insurance August 2010
Course:Bachelor Of Education Arts
Institution: Kabarak University question papers
Exam Year:2010
KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2009/2010 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF EDUCATION
COURSE CODE: BMGT 211
INSTRUCTIONS:
1. The paper contains SIX questions
2. Answer ANY FOUR questions
3. All the questions carry EQUAL marks
4. Mark are allocated at the end of each question
QUESTION ONE:
a) Self insurance like any of the other risks management techniques, should be used when it is
the most effective technique for dealing with a particular risks
i. Explain the main reasons for self insurance (10marks)
ii. State and explain the disadvantages of self insurance (10marks)
b) Distinguish between the following types of risk:
i. Pure risk Vs speculative risk
ii. Fundamental Vs particular risks (5marks)
(TOTAL 25 MARKS)
QUESTION TWO:
a) Risk management is a scientific approach used in dealing with pure risks i.e. individuals
and business. However risk management differs with insurance management in several
ways
Required
i. Clearly discuss four major differences between risk management and insurance
management (8marks)
ii. Why is it desirable to have a separate risk manager in the corporation when independent
agents or brokers are available to perform this function? (8marks)
b) Although no risk completely meets all the ideal requirements of an insurance risk,
some risks come much closer to meeting them than others. Briefly list and explain the
ideal requirements of an insurable risk. (9marks)
(TOTAL 25 MARKS)
QUESTION THREE:
a) A hazard is anything that either causes or increases the likelihood of a loss. Hazards are
conditions that increase the probability or expected magnitude of a loss. Examples include
smoking when considering potential healthcare losses, poor wiring in a house when
considering losses due to fires, or a California residence when considering earthquake damage
or gas furnaces are a hazard for carbon monoxide poisoning.
Required
i. Distinguish between a peril and a hazard (2marks)
ii. Discuss three types of hazards giving an example for each (3marks)
b) Many businesses have policy statements issued by top management with the aim of defining o
to the top management the aim of defining to the organisation the risk management objectives
as well duties and responsibilities of the risk manager. Such statements assist the organisation
in identifying broad direction and the controls of risk management activity.
Required:
i. Explain any five advantages of such a policy statement (10marks)
ii. Explain any five desirable characteristic of such a policy statement (10marks)
(TOTAL 25 MARKS)
QUESTION FOUR:
a) A policy may stipulate that losses are to be reimbursed only in excess of a stated threshold
amount, called a deductible. For example, consider insurance that covers a loss resulting from
an accident but includes a 500 deductible. If the loss is less than 500 the insurer will not pay
anything to the policyholder. On the other and, if the loss is more than 500, the insurer will
pay for the loss in excess of the deductible. In other words, if the loss is 2000, the insurer will
pay 1500.
Required
i. Explain three Reasons for deductibles (3marks)
ii. Explain the problems associated with deductibles (4marks)
b) With examples clearly explain any four principles of insurance (12marks)
c) Insurance like most industries provide benefits and costs to society. State any four such
benefits and costs. (6marks)
QUESTION FIVE
a) The progressive technical society has been appointed the head of risk management at
Wananchi transporters company Ltd. Among his first assignment is to prepare a risk
management.
Required:
i) Explain the benefits that wananchi transporters company Ltd. Would derive from
a well-prepared risk management policy statement. (7marks)
ii) Explain the techniques that The Progressive Technical Society would use to
identify the company’s pure loss exposures. (6marks)
iii) State the merits and demerits of using commercial insurance in a company’s risk
management program. (7marks)
b) Outline the major management events which can be activated once the inherent risk
exposure has been identified. (5marks)
(TOTAL 25 MARKS)
QUESTION SIX
Risk identification involves the risk to which a firm is exposed to, that is, it is the process of
delineating the perils, hazards and vulnerable points/areas in order to reduce the possibility of
overlooking risks facing the business. There are many techniques which have been developed for
carrying out risk identification in order to ascertain the risk to which a firm is exposed.
Required:
a) Discuss with relevant examples any such four such techniques. (20marks)
b) Differentiate between
i. Proportion land non proportional re-insurance
ii. Facultative and treaty methods of reinsurance (5marks)
(TOTAL 25 MARKS)
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