FIN404 - Insurance and Risk Management

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Master of Business Administration - MBA Semester 4

FIN404 - Insurance and Risk Management

Set – 1

Q1. An organization is a legal entity which is created to do some activity of some purpose. There are elements of a life insurance organization. Explain the elements of life insurance organization.

[Important activities-2

Internal organization-3

Distribution system-2

Functions of the agent-3]

Answer. Important activities

•          Procuring applications or proposals from prospective buyers of life insurance.

•          Scrutinizing and making decisions on the proposals for insurance. This is called underwriting.

Q2. Business organizations and individuals take insurance policies. These insurance policies help them to cover the losses in case of any emergency. Explain how insurance works, the need for insurance and some examples.

Answer.  How insurance works

An agreement wherein a stipulated payment called a premium is paid by one party to another upon a specific loss is called an insurance. This claim payment amount can be either fixed or can be reimbursed in part. Premiums paid by the policyholder may reflect any special characteristics of the particular policy. Thus, insurances covers the financial losses of the policyholder. Thus, the

Q3. Explain the marketing mix (7 P’s) for insurance companies

Answer. Marketing Mix (7 P’s) for Insurance Companies

Marketing for insurance companies implies marketing insurance services with the objective to create a

Set - 2

Q1. Explain the benefits of reinsurance. Elaborate on the application of reinsurance.

Benefits of reinsurance

Application of reinsurance

Answer. Benefits of Reinsurance

(i) Increase in risk-taking capacity

As the direct insurer can reinsure part of certain risks, it can therefore accept more of the original risk. It could be that a particu-lar insurer has calculated that it would not want to provide fire insurance cover for manufacturers of plastic goods for the sum insured in excess of `10,00,000. Should it then receive an enquiry from a potential insured for a sum of `40,00,000, it would be in a difficult position if there was no reinsurance. The said insurer could accept only ` 10,00,000 and ask the

Q2. To assess some cases, the underwriter needs more additional information; it can be procured from various sources. Explain them.

Answer. To assess some cases, the underwriter needs more additional information. The additional information required could be as small as the response to a single question that was left blank on the application or as extensive as the results of a complete medical examination. Additional information could be procured from various sources, some of

Q3.  Explain the term ‘Agent’, ‘Criteria for appointment of an Agent’ and ‘functions of an Agent’.

Answer. To avail a license, an agent must meet the following conditions:

• He/she must be not less than 18 years of age.

• Should have passed

(i)         Senior secondary  

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