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Bmgt 211:Introduction To Risk And Insurance April 2010 Question Paper
Bmgt 211:Introduction To Risk And Insurance April 2010
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2010
KABARAK UNIVERSITY
UNIVERSITY EXAMINATION
2009/2010 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF
COMMERCE
COURSE CODE: BMGT 211
COURSE TITLE: INTRODUCTION TO RISK &
INSURANCE
STREAM: Y2S2
DAY: TUESDAY
TIME: 4:00 – 6:00 P.M.
DATE: 06/04/2010
INSTRUCTIONS:
1. Answer question ONE and ANY OTHER TWO questions.
QUESTION 1
a) Supporting your recommendation, advice on the specific insurance/assurance policies to
be effected to meet the needs below.
(i) Mikopo bank worried that passengers might be injured or die on
its premises. (2 marks)
(ii) An airline worried that passengers might be injured or die on its premises.
(2 marks)
(iii) A surgeon worried that he could be sued if death or disability arises from an
operation. (2 marks)
(iv) Tom worried that his laptop may be accidentally lost or damaged. (2 marks)
(v) Jane who has bought a new car on loan worried that it might be stolen. (2 marks)
b) Tabaka insurance company has surplus treaty reinsurance in place for property business.
Its retention is Kshs.20,000. The company has a five line first surplus treaty and a five
line second surplus treaty.
(i) If Tabaka has been presented with a risk for a sum insured of Kshs.150,000, how
will it be reinsured? (3 marks)
(ii) If the insured was Kshs.500,000, how will it be reinsured? (4 marks)
(iii) If the sum insured was Kshs.250,000, how will it be reinsured? (3 marks)
c) An insured scratched his leg with his thumb nail while removing his socks. Six days later
the wound turned septic, 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)
QUESTION 2
a) John’s car is damaged and the assessors have valued the loss at Ksh.200,000. The car was
comprehensively insured for Ksh.400,000, yet its valuation at the time was Ksh.600,000.
The policy is subject to average.
(i) If the policy had an excess of 20% 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 main ways in which risk control can be exercised. (10 marks)
(a) Discuss the circumstances under which an insurer may pay less than indemnity.
(10 marks)
(c) 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, advice on the position of the claim. (10 marks)
QUESTION 4
a) Wekesa affected 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) Briefly discuss the benefit of insurance as a risk transfer mechanism. (10 marks)
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