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Examination Paper of Insurance Management

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IIBM Institute of Business Management

IIBM Institute of Business Management

Examination Paper MM.100

Insurance Management

Section A: Objective Type & Short Questions (30 Marks)

 This section consists of Multiple Choices & Short Note type questions.

 Answer all the questions.

 Part One carries 1 mark & Part Two carries 5 marks each.

Part One:

Multiple choices:

1. India‟s first insurance company was established in

a. 1818

b. 1817

c. 1718

d. 1950

2. The word „Ombudsman‟ in Insurance means

a. Appointment of an official to sell the goods.

b. Appointment of an official to investigate the complaints.

c. Appointment of an official to inspect the quality of goods.

d. Appointment of an official to supervise the work force.

3. Insurance is a

a. Contract

b. document

c. Agreement

d. Both (a) & (b)

4. „Asha deep‟ is an Insurance

a. Related to dreaded disease or death

b. Related to theft

c. Related to fire

d. Related to crops

5. „Actuary‟ is

a. A book that contains death data

b. A book that contains statics of production

c. A person expert in statics

d. A person expert in agent ship

6. „Snobbish‟ customers are :

a. Self loving or egoist customer

b. Those who lack confidence

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IIBM Institute of Business Management

c. Those who take quick and immediate decision

d. Logical customers who ask a lot of questions

7. What stands for „I‟ in AIDAS related with the knowledge of selling process

a. Ideal

b. Idol

c. Income

d. Interest

8. Endowment Policy is

a. Sum of Term Assurance and Pure Endowment

b. Difference of Term Assurance and Pure Endowment

c. Sum of Endowment Assurance and Pure Endowment

d. Difference of Endowment Assurance and Pure Endowment

9. In case of Suicide in India

a. It is not a crime

b. It is a crime

c. It has no relation with the Insurance Policy

d. None of the above can be said

10. USP stands for

a. Unique Sales Promotion

b. Unique Sales Process

c. Unique Selling Proposition

d. None of the above

Part Two:

1. Elaborate the functionality of „Married Women‟s Property Act‟ of India.

2. What are the necessary documents that have to be submitted for getting a License for agent

ship in Insurance Business?

3. Mention any two Insurance Policies for Handicapped.

4. What is „Charter Parity‟?

Section B: Caselets (40 marks)

 This section consists of Caselets.

 Answer all the questions.

 Each caselet carries 20 marks.

 Detailed information should form the part of your answer (Word limit 200 to 250 words).

END OF SECTION A

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IIBM Institute of Business Management

Caselet 1

Insurance Business- The Difference in Providing Services

With increasing competition and changing customer preference, companies both in the

manufacturing and service sectors, are increasingly focusing on services to differentiate their

offering from each other. The need is being felt more than ever before as the tangible features of

„products‟ offered by manufactures and service providers tend to get imitated easily. This implies

that companies will need to find certain intangibles that can differentiate their respective „Products‟.

The insurance sector in India was a government controlled till very recently. As of 1989-99, life and

non-life insurance business generated a premium of Rs 3,19,638 million (US $ 8.2 billion) which

was about 2.6 per cent of the company‟s Gross Domestic Product (GDP). However in absolute

terms, India‟s insurance business is not just small, it is miniscule compared to the economically

advanced countries. India‟s share in the world insurance market is only 0.39 per cent as against

34.17 per cent of the US, 21.02 per cent of Japan and 8.5 per cent of the UK. The Insurance sector

comprises life and non-life business. During 1998-99 the former accounted for a lion‟s share of the

total insurance market with a share of 73 per cent (US $ 6 billion). The non-life insurance geared

towards risk, which accounted for 85 per cent non-life business. Of the balance 15 per cent, liability

insurance accounted for three per cent and personal non-life insurance for only 12 per cent, through

the share of personal non-life according to a report. This report states that the personal non-life

business is likely to grow four thousand million rupees in 1998-99 to fifty thousand million rupees in

2009-10.

With the passage of the IRDA Bill in October, 1999, the character of the insurance industry in

general and the personal non-life segment in particular is likely to change, specifically with regard to

rising customer expectations. Given the development, it is imperative for existing insurance firms

and new entrants to understand customer‟s changing expectations to develop strategies for the future.

It is importing to go through the following:

 Understand the salient features of personal non-life

 Insurance business

 Understand the key expectations of customers

 Examine sources of customer‟s dissatisfaction

 Suggest strategies for building customers loyalty

 Personal Non-Life Insurance

Personal non-life insurance schemes can be categorized into four major groups relating to property,

health, accident and liability. The basic objective of these schemes is to meet the personal risk

protection needs of individuals.

Insurance policy for these products is basically individuals who own certain consumer items or

properties.

Health-related insurance schemes cater to the needs of individual to protect themselves from the

uncertainties of ill health/accident at home or abroad.

Accident-related products include various policies that cover personal accident and other specific

contingencies. The liability offers cover to professionals.

Customer Expectations in Personal Line of Business.

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IIBM Institute of Business Management

These are the six major areas where customers expect a lot from the insurance companies.

Resolution of Customer Anxiety

In a service industry, one of the factors that motivates a customer to opt for a service is whether the

service provider is able to reduce his or her anxieties, articulated or not, in relation to the same, in

case of insurable products, perhaps, the only exception to the city-centric strategy will be Reliance‟s

push, which is expected to reach even small town and villages in the districts of Gujarat and

Maharashtra, the two states where the petrochemical major is a household name.

It also has an investor base of five million which can be tapped as an initial point of contact for

marketing products beside this; it plans to leverage its large customer base in the retail segments

(textiles and cellular phones) to sell insurance. In development markets, even retail chains are used

to sell policies and that too could happen here.

Products

A lot will depend on the kind of products that these outfits launch. Initially, multinationals are

expected to push familiar products to test the markets. Incidentally, each product will need clearance

from IRDA before launch. Royal Sundaram Alliance, foe example will, launches a mix of personal

and commercial insurance policies. This will cover fire, motor, personal accident and health

insurance. HDFC – Standard life will launch two core life insurance products and then another dozen

will be disability and health-related (life insurance covers you in case of death: but others will also

take into account these riders.) Insiders reveal that in the run up to launch, many new private players

have quietly conducted market research to figure out what will work here Max New York life has

spent eight month conducting exhaustive research and its officials say that their policies will be

drafted keeping the feedback in mind. One of them will be credit risk insurance. Under this, a person

can get his housing loan or car loan insured. So, in case the person cannot repay the loan amount

because of disability or death, the asset will not be impounded because the insurance company will

cough up the outstanding amount. A variation of this product could be attaching a life insurance

policy to a loan. In this case, due to death or disability the bank or the institution pick up the

insurance amount and the asset stays with the survivors. This works like a double collateral.

Some bit of preliminaray segmentation of the market is also appearing. IFFCO-Tokyo marine, for

instance, is planning to target the 35,000 old farmers cooperatives to sell its policies. In the process,

it will create a whole new range of insurance policies for farmers. It will introduce farmer‟s credit

insurance and weather insurance among other things. So, the farmers need not to be unduly worried

in case of a drought or flash floods. On the ground, the change the mind set of people, more so in life

insurance. In India, life insurance is seen more as tax-saving mechanism rather than a safety net in

case of death. The battle for talent for already begun to recruitment advertisement in the newspapers

bears testimony to that. According to industry watchers, given the emphasis on marketing policies,

managers with a background in fast moving consumer goods (FMCGs) are in great demand. Salaries

are also according to some report going through the roof. FMCG salaries insurance salaries are

reportedly between a multiple of three to four. The other industry which appears to have become the

favourite hunting grounds for insurance companies to tap talent is the hospitality industry.

Predictably, since more of the recruits have no prior insurance background, a lot of emphasis is

being out on training and development of the sales force. It will create trained agents on the field,

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IIBM Institute of Business Management

along with classroom training. Training will largely be abroad for one to three weeks to get an idea

about how insurance is handled there. Some entrants like HDFC- Standard lfe have decided to

outsource training need to speed up the process.

Price

This is the one aspect of strategy that‟s completely hush-hush. But most insurance executives say

that given that the Indian customer is extremely price-sensitive they will price their policies close to

existing price points of product from the public sector outfits. HDFC‟s Tawlaker adds that at least in

life insurance, the sum insured of most of the policies will range between Rs 50,000 and 1 lakh.

“This‟s where the volumes live”.

1. What are the basic factors required as you feel for further improvement in Pricing?

2. According to some industry watchers, the big players like Reliance the Tata, and the Birlas

contribute to almost 30% of the total premium collected by GIC and its four subsidiaries. And to

the extent, GIC and its subsidiaries could see their business shrink. Comment.

Caselet 2

A fire occurred on 15th December, 1999 in the premises of ABC Co. Ltd. From the following

figures, calculate the amount of claim to be lodged with insurance company for loss of stock:

Rs

Stock at cost as on 1st April 1998 20,00,000

Stock at cost as on 1st April 1999 30,00,000

Purchases for the year ended 31st March

1999

40,00,000

Purchases from 1st April 1999

to 15th December 1999

88,00,000

Sales for the year ended 31March 1999 60,00,000

Sales from 1st April 1999 to

15th December 1999

1,05,00,000

During the accounting year 1999-2000, cost of purchases rose by 10 percent above the previous

year‟s level, while selling prices went up by 5 percent.

Salvage value of stock after fire was Rs 2,00,000. The policy was for Rs 55,00,000 and was subject

to average clause.

1. What according to you, ABCL should have used to claim its best insurance refunds?

END OF SECTION B

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IIBM Institute of Business Management

Section C: Applied Theory (30 marks)

 This section consists of Long Questions.

 Answer all the questions.

 Each question carries 15 marks.

 Detailed information should form the part of your answer (Word limit 150 to 200 words).

1. How does Money Back Policy differ from Endowment Assurance? Which one is a better option

and why?

2. How important is the Consumer Protection Act an in today‟s world of consumerism?

END OF SECTION C

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IIBM Institute of Business Management

IIBM Institute of Business Management

Examination Paper MM.100

Risk Management and Insurance

Section A: Objective Type & Short Questions (30 Marks)

 This section consists of Multiple Choices and Short Note type questions.

 Answer all the questions.

 Part One carries 1 mark each & Part Two carries 5 marks each.

Part One:

Multiple Choices:

1. HMOs charge employers a monthly fee called____________

a. A coverage fee

b. The pro rata plan fee

c. The subrogation payment

d. The capitation payment

2. Which of the following alternatives is not a typical dividend option?

a. Cash

b. A lifetime income annuity

c. Reduction of the next premium

d. Accumulation of the next premium

3. Choose the True statement about industrial life insurance.

a. It is less expensive than ordinary life insurance

b. It is more expensive than ordinary life insurance

c. It is also called discount life insurance

d. It is widely used in estate plans

4. Replacement cost at the time of loss less depreciation is the definition of:

a. Actual cash value

b. Fair market value

c. The maximum covered loss

d. The maximum replacement of loss

5. Assets that are readily available to pay claims are called_____________

a. Admitted assets

b. Accepted assets

c. Real assets

d. Standard operating assets

6. Stare demises means:

a. All things considered

b. Innocent parties prevail

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IIBM Institute of Business Management

c. It is impolite to stare

d. To stand by decisions

7. In most states the insurance commission is:

a. Impeached

b. Elected

c. Appointed by the government

d. Appointed by the governor

8. The federal law that promotes a safe working environment for workers is:

a. OSHA

b. CERCLA

c. Equal Opportunities Act

d. Superfund

9. The organization that collects data on insurance applicants is the:

a. CBS

b. MIB

c. CIA

d. FCAS

10. The percent of uninsured Americans in 2001 was about:

a. 14 percent

b. 2 percent

c. 4 percent

d. 10 percent

Part Two:

1. How would you explain Moral and Morale hazards?

2. What do you understand by „Subsidization‟?

3. What are „Waiver‟ & „Estoppel‟?

4. Write a short note on „Patient‟s bill of rights.

Section B: Caselets (40 marks)

 This section consists of Caselets.

 Answer all the questions.

 Each caselet carries 20 marks.

 Detailed information should form the part of your answer (Word limit 200 to 250 words).

Caselet 1

END OF SECTION A

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IIBM Institute of Business Management

Vacancy Clause

The Roberts family owned a house in Alabama. It was insured with a fire insurance policy issued by

the Sparkler Mutual Insurance Company. On April 1, the Roberts moved to Tennessee. Their son,

Bob, remained in the Alabama home for an additional month. Thereafter, the home was rented to a

tenant who lived in the home for the month of May. Mr. Roberts returned to the home irregularly,

remaining overnight on July 4 and on a few other occasions. A few pieces of furniture remained in the

home until August. On or about August 4, the home and its contents were destroyed by fire.

Questions:

1. Do you think that Sparkler Mutual should pay for the loss? Explain your reasons.

2. Did the family‟s absence affect the chance of loss in this case?

Caselet 2

Case for Discussion

Ed “Bonzo” Jones was a college student. He played outfielder on his fraternity‟s softball team. A

home run was hit, and the ball went into an area of electrical transformers operated by the local

utility, Total Power and Light Company. The electrical transformers were surrounded by a 5-foot

wire fence that Jones claimed to retrieve the ball. Warnings signs were posted by the utility indicating

the area was dangerous. It was later determined the gate to the area was left unlocked, although Jones

did not use it to gain access. In retrieving the ball, Jones made contact with some equipment and was

severely burned by the electrically. He was hospitalized for three months and suffered permanent

disfigurement. His medical bills amounted to $300,000.

Questions:

1. What arguments would you make if you were planning the legal defense of Total Power and

Light Company?

2. If you were on the jury in this case, would you award a judgment for damages to Jones? Explain

your reasons.

Section C: Applied Theory (30 marks)

 This section consists of Long Questions.

 Answer all the questions.

 Each question carries 15 marks.

 Detailed information should form the part of your answer (Word limit 150 to 200 words).

1. If you were a large business with $ 10 million of property, would you want your primary insurer

to purchase reinsurance? Explain your reasons. Would you prefer to deal with a small primary

insurer who reinsured your risk or a large primary unsurer who did not purchase reinsurance?

END OF SECTION B

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IIBM Institute of Business Management

2. Do you think a college education is necessary to perform the following occupations effectively?

a. Life insurance agent

b. Loss adjuster

c. Property insurance underwriter

d. Actuary

S-2-300813

END OF SECTION C