Insurance — DU Bachelor of Management Studies Previous Year Question Papers

Instructions to Candidates: Q1 Answer the questions from the following caselets (a) Mr. Amarnath lost his factory machinery valued (market value) at Rs. 20,00,000 as on the date of fire. He wanted to recover a claim of Rs 25,00,000 for he had a policy of Rs 50,00,000. On enquiry, it was found that the same new machinery's cost is Rs 17,50,000. If you were the insurer, what amount of claim would have been passed for Mr Amarnath? Explain the principle governing your answer. (b) Ratnam Manufacturers got their stock insured against fire during the year. During Diwali celebrations, accidently, a burning cracker caused fire in the warehouse and firemen were able to remove undamaged stock from the burning building to avoid its involvement in the fire. It was stacked in the open yard and subsequently got damaged by rain. What was the proximate cause of the damage, the fire or rain? Also, explain the principle of proximate cause. (c) Mr. Ranjith made a proposal to an insurance company for an insurance policy on his life for Rs.8,00,000. He truthfully answered all questions on the proposal form and had disclosed all relevant facts. A few days later, but before the proposal was accepted, Mr. Ranjith fell ill with pneumonia. The proposal was accepted by the company the next day. Two days later Mr. Ranjith died of pneumonia and the company learnt for the first time of his illness. Is the insurance company liable to make the payment? Explain your answer with reference to the basic principle of insurance applicable in this situation. (3 x 6 = 18) Q2. Define Insurance. Based on your definition, identify and explain the basic characteristics of insurance and characteristics of ideally insurable risk. (18) risk. They proposed certain methods of risk management for different situations. For each of the following, what method for handling risk is used? Explain your answer. a. The decision not to carry earthquake insurance on a firm's main manufacturing plant b. The installation of an automatic sprinkler system in the office. c. The decision not to produce a product that might result in a product liability lawsuit d. Requiring retailers who sell the firm's product to sign an agreement releasing the firm from liability if the product injures someone. e. Having contracts with several suppliers for timely supply of raw materials. f. Taking marine insurance against the risk of loss of goods during shipment. (6 x 3=18)