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Rs.150 each
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Fall-2013
Master of
Business Administration - MBA Semester 4
MF0018–Insurance
and Risk Management-4 Credits
(Book ID:
B1816)
Assignment
(60 Marks)
Note: Answers
for 10 marks questions should be approximately of 400 words. Each question is
followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.
Q1. What do you understand by the
term risk and uncertainty? Explain different types of risk facing business and
individuals.
Answer. Risk is the weighing potential costs to a
particular idea or activity. Uncertainty
is the inability to calculate risks or benefits. The difference between them is
a matter of knowledge.
Risk is the
potential of loss (an undesirable outcome, however not necessarily so)
resulting from a given action, activity and/or inaction, foreseen or
unforeseen. The notion implies that a choice having an influence on the outcome
sometimes exists (or existed). Potential losses themselves may also be called
"risks" without any indication of cause. Any human endeavor carries
some risk, but some
Q2. Identify the role of insurance in
managing risk financing. Explain the importance of insurance transaction.
Discuss in different perspectives of insured and insurer.
Answer. Rising insurance premiums and the
occasional inability to obtain coverage at any cost have changed the
traditional role of insurance. Obtaining coverage for every insurable risk is
being replaced by the risk management concept. Risk management, which includes
insurance coverage, is intended to minimize the costs associated with assuming
certain types of risk and providing prudent protection. It
Q3. Explain the reasons that have
been responsible for the privatization of the insurance industry in the
country. Identify the problems and prospects of public insurance enterprises.
Answer. Over the past century, Indian
insurance industry has gone through big changes. It started as a fully private
system with no restriction on foreign participation. After the independence,
the industry went to the other extreme. It became a state-owned monopoly. In
1991, when rapid changes took place in many parts of the Indian economy,
nothing happened to the institutional structure of insurance: it remained a
monopoly. Only in 1999, a new legislation came into effect signaling a change
in the insurance industry structure.
Q4. Explain the creation and
application of insurable interest. Give the differences between wagering and
insurance.
Answer. Insurable interest exists when an insured person derives
a financial or other kind of benefit from the continuous existence of the
insured object (or in the context of living persons, their continued survival).
A person has an insurable interest in something when loss-of or damage-to that
thing would cause the person to suffer a financial loss or other kind of loss.
Typically,
insurable interest is established by ownership, possession, or direct relationship.
For example, people have insurable interests in their own homes and vehicles,
but not in their
Q5. Give the important activities of Life
Insurance Company. Describe the important historical milestones in the
development of the life insurance sector in India.
Answer. Important activities of Life
Insurance Company:
An important
development in the financial markets of several industrial countries in recent
decades has been the growth of long-term institutional investors and their
increasing domination of the capital market. Aided by both demographic and
financial market trends, it seems likely that this development will continue in
the future. However, the nature and the importance of this change - including
the global dimensions of the trend towards institutionalization - have often
been overlooked or underestimated by market commentators and observers.
Q6. Give short notes on:
(a) Pricing objectives.
(b) Pricing elements.
(c) Rate computation.
Answer. (a) Pricing objectives
A goal that
guides a business in setting the cost of a product or service to potential
consumers. A pricing objective underlies the pricing process for a product, and
it should reflect a company's marketing, financial, strategic and product
goals, as well as consumer price expectations and the levels of available stock
and production resources. Some examples of pricing objectives include
maximizing short run profits, increasing sales volume, matching competitors'
prices, encouraging smaller
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