2 marks

1. What is an Actuary:
An actuary is a highly trained statistician with expertise in evaluating various types of
risks. Roughly 60% of actuaries are employed by insurance companies, and play a
key role in setting the terms and conditions of insurance policies, including premium
rates. An actuary also has career opportunities in pension fund management,
forecasting future payouts and determining current contributions and investment
policies in light of them. Additionally, actuaries (either in-house or consultants) help
companies in all industries design and implement policies and procedures to mitigate
risks in various aspects of their operations.
An actuary is a business professional who deals with the financial impact of risk and
uncertainty. Actuaries provide expert assessments of financial security systems, with a focus
on their complexity, their mathematics, and their mechanisms (Trowbridge 1989, p. 7).

ROLE of an actuary?
Through their knowledge of statistics, finance, and business, actuaries assess the risk of events
occurring and help create policies for businesses and clients that minimize the cost of that risk. For
this reason, actuaries are essential to the insurance industry.
Actuaries analyze data to estimate the probability and likely cost to the company of an event such as
death, sickness, injury, disability, or loss of property. Actuaries also address financial matters, such as
how a company should invest resources to maximize return on investments, or how an individual
should invest in order to attain a certain retirement income level. Using their expertise in evaluating
various types of risk, actuaries help design insurance policies, pension plans, and other financial
strategies in a manner which will help ensure that the plans are maintained on a sound financial
basis. Most actuaries are employed in the insurance industry, specializing in either property and
casualty insurance or life and health insurance.

2. What Does Moral Hazard Mean?
The risk that a party to a transaction has not entered into the contract in good faith, has provided
misleading information about its assets, liabilities or credit capacity, or has an incentive to take
unusual risks in a desperate attempt to earn a profit before the contract settles.
Moral hazard can be present any time two parties come into agreement with one another. Each party
in a contract may have the opportunity to gain from acting contrary to the principles laid out by the
agreement. For example, when a salesperson is paid a flat salary with no commissions for his or her
sales, there is a danger that the salesperson may not try very hard to sell the business owner's goods
because the wage stays the same regardless of how much or how little the owner benefits from the
salesperson's work.




3. What is Subrogation
In its most common usage refers to circumstances in which an insurance company tries to recoup
expenses for a claim it paid out when another party should have been responsible for paying at least
a portion of that claim.
More specifically, subrogation is the legal technique under common law by which one party,
commonly an insurer (I-X) of another party (X), steps into X's shoes, so as to have the benefit of X's
rights and remedies against a third party such as a defendant (D). Subrogation is similar in effect
to assignment, but unlike assignment, subrogation can occur without any agreement between I-X and
X to transfer X's rights. Subrogation most commonly arises in relation to policies of insurance, but the
legal technique is of more general application. Using the designations above, I-X (the party seeking to
enforce the rights of another) is called the subrogee. X (the party whose rights the subrogee is
enforcing) is called the subrogor.
In each case, because I-X pays money to X which otherwise D would have had to pay, the law
permits I-X to enforce X's rights against D to recover some or all of what I-X has paid out. A very
simple (and common) example of subrogation would be as follows:
1. D drives a car negligently and damages X's car as a result.
2. X, the insured party, has Collision insurance, and claims (i.e., asks for payment) under his
policy
[1]
against I-X, his insurer.
3. I-X pays in full to have X's car repaired.
4. I-X then sues D for negligence to recoup some or all of the sums paid out to X.
5. I-X receives the full amount of any amounts recovered in the action against D up to the
amount to which I-X indemnified X. X retains none of the proceeds of the action against D
except to the extent that they exceed the amount that I-X paid to X.

4. What is indemnity
Is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor
(A) may or may not be responsible for the loss suffered by the indemnitee (B). Forms of indemnity
include cash payments, repairs, replacement, and reinstatement
Indemnity is often used as a synonym for compensation or reparation. While it is true, that all three
can be construed as obligations to act on an injured party's behalf given the occurrence of a
contractually-specified event.
However, indemnity as a legal concept, has a much broader meaning than the other two terms;
namely, an indemnity is to make a party to a contract "whole" again should that contractually-specified
event occur.
While the event may be specified by the contract, the actions that must be taken to make the injured
party "whole" again are largely fact-based and unknown to the parties until the event occurs, while the
maximum liability is often expressly limited by the contract.
A car insurance policy is an example of indemnification. If a purchaser of car insurance policy is
involved in an accident wherein the liability for the accident is undisputedly of their insured driver, then
the insurance carrier has the duty to indemnify their insured driver in very specific ways to make them
"whole" again.

5. What are the corollaries of Indemnity?




6. What is assignment?
Transfer by the holder of a life insurance policy (the assignor) of
the benefits or proceeds of the policy to a lender (the assignee), as a collateral for
a loan. In the eventof the death of the assignor, the assignee is paid first and
the balance (if any) is paid to the policy's beneficiary. Othertypes of insurance
policies may not be used for this purpose.

7. How is inflation contained by growth of insurance business
8. What is hazard? Give example
A hazard is a situation that poses a level of threat to life, health, property, or environment. Most
hazards are dormant or potential, with only a theoretical risk of harm; however, once a hazard
becomes "active", it can create an emergency situation. A hazard does not exist when it is not
happening. A hazardous situation that has come to pass is called an incident. Hazard
and vulnerability interact together to create risk. Hazards are sometimes classified into three modes:
[1]

Dormant - The situation has the potential to be hazardous, but no people, property, or
environment is currently affected by this. For instance, a hillside may be unstable, with the
potential for a landslide, but there is nothing below or on the hillside that could be affected.
Armed - People, property, or environment are in potential harm's way.
Active - A harmful incident involving the hazard has actually occurred. Often this is referred to not
as an "active hazard" but as an accident,emergency, incident, or disaster.









5 marks
1. Objectives of IRDA
Objectives of IRDA:
To p r ovi d e f or t h e es t ab l i s hment of a n a u t h or i t y t o pr ot ec t t he
i nt er e s t s of hol d er s of insurance policies, to regulate, promote and ensure orderly
Creator of the insurance industry.Important changes brought through IRDA act:1)Insurance
business is opened up to private sector thus ending the monopoly of
LIC/GIC.2) Pa r t i ci p a t i on of f or ei gn co mpa ni es i n col l a b or at i on wi t h I ndi
a n i ns ur a nc e co mpa ni es i s allowed: subject to the condition that the foreign
Companys share capital shall not exceed26% of the paid up capital of the Indian
insured.3)Controllers of insurance ceases of exist and all functions are vested with
IRDA.4)Appointment of chief agents and special agents is revived.5)The concept of
insurance brokers is introduced

Regulations:

The following Regulations have been notified in the Gazette of India:

1) Appointed Actuary

2) Actuarial Report and Abstract

3) Assets, Liabilities, and Solvency Margin of Insurers

4) Licensing of Insurance Agents

5) General Insurance - Reinsurance

6) Registration of Indian Insurance Companies

7) Insurance Advertisement and Disclosure

8) Obligations of Insurers to Rural Social Sectors

9) The IRDA (Meetings)

10) The Insurance Advisory Committee (Meetings)

11) Investments (Life and General)

12) Statements of Accounts in a zipped file

13) The IRDA (Staff)

14) Surveyors and Loss Assessors

15) Reinsurance Life

16) Modified Investment Regulations


2. Financial loss which results in pure risk. What are the objectives of risk
mgt function
Money.
To identify and prioritise potential risk events
Help develop risk management strategies and risk management plans
Use established risk management methods, tools and techniques to assist
in the analysis and reporting of identified risk events
Find ways to identify and evaluate risks
Develop strategies and plans for lasting risk management strategies

3. General principles of insurance contracts
Principle of utmost good faith
Principle of insurable interest
indemnity
contribution
subrogation
loss minimization
nearest cause







3. How could morul huzurd urlse ln llfe lnsurunce?
y 2EYlously the fuct thut llfe lnsurunce coYers sulclde creutes u tremendous morul huzurd. People wlth uctlYe llfe
lnsurunce huYe u flnunclul lncentlYe to commlt sulclde! There ls umple eYldence thut thls lncentlYe hus u reul effect, us
detulled ln Sumuel Hsln-yu Tsengs puper, The Effect of Llfe Insurunce Pollcy ProYlslons on Sulclde Rutes.
y $s fur us I cun tell, the excluslon perlod stems from u mu|orlty of stute regulutlons. Llfe lnsurunce ls reguluted ut the
stute leYel, und (us of 2005, lEld. puge 4) 36 stutes requlre llfe lnsurers to coYer sulclde ufter no more thun two yeurs of
the pollcy Eelng uctlYe.
y $s u consumer I would llke to Ee uEle to Euy lnsurunce contructs thut dont puy u sulclde Eeneflt. Such pollcles would
Ee suEstuntlully cheuper.
y The lrony: 2ur goYernment forElds unyone from Eelng compensuted for donutlng orguns to suYe the llYes of others
(supposedly Eecuuse of the morul huzurd of such un lncentlYe), yet lt requlres lnsurers to creute un lncentlYe to commlt
sulclde!