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Bmgt 211:Introduction To Risk And Insurance December 2008 Question Paper
Bmgt 211:Introduction To Risk And Insurance December 2008
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2008
KABARAK UNIVERSITY
EXAMINATIONS
2008/2009 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF COMMMERCE
COURSE CODE: BMGT 211
INSTRUCTIONS:
Answer Question ONE and any other TWO Questions
Question 1
a) Discuss the ways in which subrogation rights can arise (10 marks)
b) Zamazile enterprises insured the same property with two insurance companies,
Teke and Zele for Kshs. 4,500,000 and Kshs. 1,000,000 respectively. The value
of the property is Kshs. 4,500,000. Zamazile has suffered a loss of Kshs.
450,000 and both policies are subject to average. Determine the liability of each
insurer. (8 Marks)
c) Nakale insurance company has a 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 Nakale has been presented with a risk for a sum insured of Kshs.
150,000, how will it be reinsured? (2 marks)
i) If in (i), the insured paid a premium of Ksh. 8,000 and has suffered a
loss of Kshs. 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)
Question 2
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 Kshs. 500,000.
Subsequently Kamau sues Kipngetich and the court awards him Kshs. 700,000
for the total damage to his car. Kamau’s insurer on learning of this seeks to
recover from him. Stating your reasons, advise 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 3
a) Karani’s car is damaged and the assessors have valued the loss at Kshs.
200,000. The car was comprehensively insured for Kshs. 300,000, yet its
valuation at the time was Kshs. 400,000. The policy is subject to average.
i) If the policy had an excess of Kshs. 20,000, what is the insurer’s net
liability? (5 marks)
ii) If the policy was subject to a franchise of Kshs. 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 4
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)
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