UNIVERSITI TUNKU ABDUL RAHMAN, ACADEMIC YEAR 2015/2016 APRIL EXAMINATION UECM2423 GENERAL INSURANCE. SATURDAY, 14 MAY 2016 ‘TIME: 2.00 PM — 4.00 PM (2 HOURS) BACHELOR OF SCIENCE (HONS) ACTUARIAL SCIENCE, Instruction to Candidates: Answer any four (4) questions. This question paper consists of 5 questions on 4 printed pages.@ (b) (©) @ © (b) (©) RAN Right on Target Furniture Shop is a sole proprietorship located in a small town. The store is owned and operated by Carl Gibson. The store sells a small range of furniture. Carl Gibson employs two sales representatives. Carl's agent advises him to purchase a businessowners policy (BOP) to cover property and liability exposures. Identify various property and liability loss exposures to Carl’s furniture store that can be covered by a BOP. (Tmarks) How does claims-made coverage differ from occurrence-based coverage? Explain the impact on the insurers for each form of the coverage. (6 marks) What are the major differences between surety bonds and insurance? What are the major types of surety bonds? (6 marks) Explain how a professional liability claim may arise against a professional. (6 marks) [Total: 25 marks} What are the advantages and disadvantages of “uninsured motorists coverage” (UMC) as a method of compensating innocent automobile accident victims? (6 marks) What is the difference between a collision loss and an “other-than-collision” (OTC) loss under the personal auto policy (PAP)? (6 marks) Richard has a PAP with coverage for OTC loss that is subject toa $500 deductible. After enjoying a night out at the movies with his friends, Richard discovers that his car has been stolen from the theatre parking lot. He immediately reports the loss to the police and to his insurer. The next morning, Richard rents a substitute auto for $40 a day. Thirty-six hours after the theft, the police report that they have found the car intact. Richard determines that the only items stolen were his compact disks (CDs), valued at approximately $500. (What dollar amount, if any, will Richard's PAP pay for his rented auto? @ marks) Gi) What dollar amount, if any, will Richard's PAP pay for the rented auto if his car was recovered after being missing for a total of seven days? (4 marks) This question paper consist of 5 questions on 4 printed pages.UECM2423 GENERAL INSURANCE, 2. (Continued) Q. Qa. () @ (b) © @ @ (b) (©) ‘What factors should you consider when shopping for automobile insurance coverage? (6 marks) (Total: 25 marks} Why do property insurance policies contain exclusions? Illustrate your answer with examples from the Homeowners 3 policy (HO-3). Will exclusion result in partial recovery’? (6 marks) All insurance policies impose certain duties on the insured. In order to perfect, the claim and obtain insurance proceeds, the insured must comply with the various duties or establish that he or she was excused from compliance. List some of the duties of an insured after a loss occurs. What can happen if the insured fails to perform these duties? (9 marks) Name ANY three circumstances in which the insurer will pay for damage caused following a fire, as itis so closely connected with the fire that it is regarded as covered by the policy. (5 marks) The replacement cost of a home covered under the HO-2 policy is $100,000. Assume the home is insured for $50,000 and a $10,000 loss occurs (replacement cost). Also assume depreciation is set at 10% and a $500 deductible applies. How much will the insured recover if the damage is repaired? Explain your answer. (5 marks) [Total: 25 marks] Identify the two basic types of reinsurance transactions. What are the two principal approaches that reinsurers use to allocate losses? Give examples illustrating the above two principal approaches that reinsurers use to allocate losses. (6 marks) Identify and describe the two principal types of loss reserves. (7 marks) Describe the differences between an insurance agent and an insurance broker. Are these differences important to the insurance consumer? (5 marks) This question paper consist of 5 questions on 4 printed pages.Q5. (a) (by (c) @ What are the benefits an independent agent network can offer to its members? Why ownership of expiration lists an advantage to an independent agency? (7 marks) [Total: 25 marks] What is products liability insurance designed to do? (6 marks) What are some of the loss exposures an underwriter would consider for products liability coverage applications? (7 marks) Progressive Insurance Company has incurred underwriting expenses of $5 million, incurred losses and loss adjustment expenses of $14 million, net written premiums of $25 million, and eared premiums of $20 million. (Determine Insurance Company's trade-basis combined ratio. (4 marks) (ii) What does this ratio indicate regarding Insurance Company's use of its premium dollars? (2 marks) What is a mass-merchandi: ng plan in property and liability insurance? (6 marks) [Total: 25 marks] This question paper consist of 5 questions on 4 printed pages.