Banking and Insurance — DU B.Com (P) Previous Year Question Papers

3. Parts of the questions to be attempted together. 1. (a) What is deposit insurance. Explain its relevance. (9) (b) What is Basel Norms. Explain the capital requirement under Basel III. (9) (a) Explain what is Asset Liability Mismatch. How does it affect the Bank? (b) Explain on-balance sheet and off-balance sheet items. (e) (b) Explain the reasons for tight regulations ofbanks. Explain with examples. (a) What do you understand by the term fund based and fee based activities. (b) Explain size, risk and maturity transformation with the help of examples. (e) J (a) What do you understand about asymmetric information? How it affects the decision making process ? Explain in the light of insurance industry. (9) (b) Explain different type of insurance and their relevance. (e) (a) What is reinsurance. What is the purpose of reinsurance. What are the various methods of reinsurance. (9) (b) Explain the need of insurance regulatory authority in India. What are the main objectives of IRDA. (9) 4. (a) What is captive Insurance. Explain the need for it for India's development. (b) Whv is Pricing of Life Insurance varies amongst individuals. What are the factors that determine insurance premium. (9) (a) What is Motor Insurance. Explain the various policy coverages, add on coyers and general exclusions in relation to motor insurance. (9) (b) What is catastrophe Insurance. What are the various types of catastrophe insurance. (9) 5. (a) Read the following case let and answer the questions that follows- (18) There are two health insurance companies, Co. A and Co. B. Both provide insurance to customers. Due to competition amongst each other, Co. A introduces a new low-premium health insurance plan that does not require a detailed medical check-up. Customers only need to self-declare their health status. Initially, many people join the plan. However, Co. A soon notices that a large proportioa ofnew customers are those who have pre-existing illnesses, high medical risks, or a history of frequent hospital visits. Meanwhile, young and healthy individuals; who rarely fall i1l avoid the plan because they think the premium is too high for their low risk level. As more high-risk customers join, Co. A's cost of claim rises sharply. To cover the losses, the company increases premiums for the next year. This makes even more healthy people drop out, while high-risk customers continue because they expect to need medical care. Eventually, the plan becomes fi nancially unsustainable. 1 . What asymmetric information problem is Co. A likely facing? Explain using evidence from the case. What asymmetric information issue seems to be affecting Co. B? Identify the behaviour that indicates this. How can the problems faced by both companies affect the sustainability of their insurartce pians? Suggest two measures each company can adopt to reduce the issues arising fr om asymmetric information. Small Finance Ltd. Is a smail financial company that gives long-term loans(