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Master of Business Administration - MBA Semester 4
MF0018-Insurance and Risk Management
(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

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 deals with pure risks that are characterized by
chance occurrence and that

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

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.

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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

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

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