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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 damageto 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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