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DRIVE Winter 2016

PROGRAM MBA
SEMESTER 4
SUBJECT CODE &
NAME
MF0018 & INSURANCE AND RISK MANAGEMENT

1. Explain price risk and its types. Explain Risk management methods
Explanation of price risk and types
Explanation on risk management methods

Answer: Price risk

Price risk represents the uncertainty about the magnitude of cash flows because of the probable
changes in the input and output prices. Output price risk stands for the risk of changes in the
prices which an

2. 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.
Issuing

3. Explain the doctrine of indemnity, doctrine of subrogation and warranties and its types
and classification.
Explanation of doctrine of indemnity
Explanation of doctrine of subrogation
Explanation of warranties and its types and classifications
Answer: Doctrine of indemnity
The contract of marine insurance is in the nature of indemnity. In any situation the insured is not
allowed to earn a profit out of a claim. Profits could be made in the absence of the principle of
indemnity. The insurer agrees to indemnify the assured only in the manner and only to the extent
agreed upon.

4. Give short notes on :

Evidence and claim notice.
Subrogation
Salvage

Answer: Evidence
To admit a claim, appropriate evidence related to the policy is needed. In marine insurance the
policy is generally issued on mutual understanding and good faith of both the parties. However,
at the time of claim, the insurer should satisfy itself about the information furnished by the
insured. The value of subject matter, nature of the subject matter, warranties, insurable interest,
etc., are some of the matters to be considered at the time when the claim arises. For these
purposes, the

5. Explain the marketing mix (7 Ps) for insurance companies

Explanation on the marketing mix for insurance companies

Answer: Marketing Mix (7 Ps) for Insurance Companies

Marketing for insurance companies implies marketing insurance services with the objective to
create a customer base and make profit by the means of customer satisfaction. This emphasizes
on forming an appropriate marketing mix for insurance business for the insurance organization to
sustain in the

6. 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.

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