Gauhati University BCom Insurance Solved Question Paper Solution 2012
2012
Insurance
Full Marks: 80
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. Answer the following as directed: 1x10=10
a) General Insurance Corporation of India (GIC) now acts as a _______. (Fill in the blank)
Answer: Reinsurer. GIC now focuses on reinsurance, supporting other insurance companies.
b) In life insurance, insurable interest must prevail at the time of _______ of a policy. (Fill in the blank)
Answer: Taking. Insurable interest must exist when the policy is started.
c) Third party administrator is applicable in case of marine insurance. (State true or false)
Answer: False. Third party administrators (TPAs) are mainly used in health insurance, not marine insurance.
d) Perils of the sea are not covered by a marine insurance policy. (State true or false)
Answer: False. Perils of the sea, like storms or sinking, are covered by marine insurance.
e) A boy or girl below the age of 18 years cannot be brought under a life insurance policy cover. (State true or false)
Answer: False. Minors can be covered under life insurance, usually by a parent or guardian.
f) National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company now act as a subsidiary of GICI. (State true or false)
Answer: False. These companies are not subsidiaries of GIC (General Insurance Corporation of India); they are separate public sector insurers.
g) In case of fire insurance policy, a fire claim is admissible only when the cause of fire or ignition is _______. (Fill in the blank)
Answer: Accidental. The fire must be unintentional for a claim to be valid.
h) In case of marine insurance policy, a claim of loss arising from the reason of deviation of the usual course of route or path by the ship, is not admissible. (State true or false)
Answer: True. Deviation from the usual route can make a claim invalid unless it’s justified (e.g., to avoid danger).
i) Under the doctrine of subrogation, after the insured is fully indemnified for the loss of the goods he has sustained, the right of ownership of such property passes on to the insurer. (State true or false)
Answer: True. After paying the claim, the insurer gains rights to recover from others responsible for the loss.
2. Write brief answer to the following in about 100 words each: 2x5=10
a) State the meaning of risk insured against.
Answer: Risk insured against is the danger or event that an insurance policy protects you from. For example, in fire insurance, the risk is damage by fire; in life insurance, it’s the risk of death. The policy promises to pay if that specific risk happens. It doesn’t cover every problem—only the risks listed, like theft, accident, or natural disasters. The premium you pay depends on how likely the risk is. Insurance reduces worry by covering these uncertain events.
b) State the meaning of insurance agent.
Answer: An insurance agent is a person who works for an insurance company to sell its policies. They meet people, explain different insurance plans, and help customers choose the right one. Agents earn a commission for each policy sold. They also assist with paperwork and sometimes help with claims. In India, agents must be trained and licensed by the IRDAI. They act as a link between the company and the customer, making insurance easy to understand and buy.
c) Give the meaning of claim.
Answer: A claim is a request made to an insurance company for payment when something bad happens, like a fire or accident, that’s covered by the policy. For example, if your insured car is damaged, you file a claim to get money for repairs. The insurer checks if the claim is valid based on the policy terms. If approved, they pay to cover the loss. Claims are how policyholders get the benefit of insurance after a risk occurs.
d) What is premium?
Answer: Premium is the money you pay to an insurance company to get coverage. It’s like a fee for protection against risks. You can pay it monthly, yearly, or all at once, depending on the policy. The amount depends on factors like the type of insurance, the value of what’s insured, and the chance of a claim. For example, a car in a risky area has a higher premium. In return, the insurer promises to help if something goes wrong.
e) State the meaning of insurance.
Answer: Insurance is an agreement where a company promises to pay you money if something bad happens, like a loss or damage, in exchange for regular payments called premiums. It protects against risks, like death, theft, or accidents. For example, life insurance pays your family if you die. Insurance spreads the cost of big losses so you don’t suffer alone. It gives peace of mind and financial safety by planning for uncertain events.
3. Write short notes on any four of the following: 5x4=20
a) Livestock insurance.
Answer: Livestock insurance covers animals like cows, goats, or poultry against risks such as death, disease, or theft. Farmers buy it to protect their income, as livestock is valuable for milk, meat, or farming work. For example, if a cow dies in an accident, the insurer pays its market value. The policy may also cover vet costs or loss from natural disasters like floods. In India, it’s popular in rural areas and often supported by government schemes. It helps farmers recover financially and continue their work without big losses.
b) GICI’s mission and functions.
Answer: The General Insurance Corporation of India (GIC) was set up in 1972 to manage general insurance in India. Its mission is to provide reinsurance support and promote insurance growth. After private companies entered, GIC became India’s main reinsurer. Its functions include: (1) reinsuring policies sold by other insurers, reducing their risk; (2) investing premiums to earn money; (3) helping design new insurance products; and (4) supporting national insurance goals, like covering crops or disasters. GIC ensures stability in the insurance sector and backs companies during big claims.
c) Assignment and nomination in a life policy.
Answer: In a life insurance policy, assignment means transferring the policy’s rights to someone else, like a bank, often as loan security. The original owner (assignor) gives up control, and the new owner (assignee) can claim the money. It needs written notice to the insurer. Nomination is naming a person (nominee) to receive the policy amount if the policyholder dies. For example, a spouse or child can be a nominee. Nomination doesn’t transfer ownership—it just ensures easy payout. Both help manage the policy’s benefits effectively.
d) Types of marine insurance policy.
Answer: Marine insurance protects sea transport and has different types: (1) Voyage Policy covers one trip, like Mumbai to Dubai; (2) Time Policy covers a period, like one year, for multiple trips; (3) Mixed Policy combines voyage and time for flexibility; (4) Valued Policy sets a fixed payout amount for ship or cargo; (5) Unvalued Policy pays based on loss value at the time. These policies cover ships, cargo, and freight against risks like storms or piracy, suiting different shipping needs.
e) Reinsurance.
Answer: Reinsurance is when an insurance company buys insurance from another insurer to reduce its own risk. For example, if a company insures a costly factory and a fire causes a huge claim, reinsurance helps share the cost. The reinsurer (like GIC in India) pays part of the claim, keeping the original insurer safe from big losses. It’s common for large risks, like natural disasters or ships. Reinsurance spreads risk across companies, ensuring they can handle claims and stay financially strong.
4. Discuss the origin of insurance and its development. 10
Answer: Insurance began centuries ago as a way to manage risks. Its origin traces back to ancient times—like in Babylon (2000 BC), where merchants paid extra to cancel debts if goods were lost at sea. In the 14th century, Italian traders started marine insurance to protect ships and cargo from storms or pirates, using written contracts. By the 17th century, London’s coffee houses, like Lloyd’s, became hubs for insuring ships, marking the start of modern insurance. Fire insurance grew after the Great Fire of London (1666), when people saw the need to cover property losses.
Life insurance started in the 18th century in England, with companies offering payouts on death. Over time, insurance spread globally, evolving with new risks—like cars or health. In India, insurance began in the 19th century under British rule with companies like Oriental Life (1818). After independence, the government nationalized life insurance in 1956 (forming LIC) and general insurance in 1972 (forming GIC). Private companies entered in 2000 after IRDAI was set up, boosting competition and coverage. Today, insurance includes everything from crops to cyber risks, showing its growth from simple trade protection to a vast industry.
5. Discuss the procedure of taking out a life insurance policy. 10
Answer: Taking out a life insurance policy involves these steps:
Choosing a Policy: Decide the type—like term insurance (only death benefit) or endowment (death plus savings). Consider your needs, like family support or loan coverage.
Contacting an Insurer: Approach a company (e.g., LIC) or agent. They explain options, premiums, and benefits based on your age, income, and health.
Filling the Proposal Form: Submit a form with personal details—name, age, occupation, and health history. Be honest, as this affects the policy’s validity.
Medical Check-Up: For big policies, the insurer may ask for a health test (e.g., blood or urine tests) to check risks like diabetes or heart issues.
Premium Calculation: The insurer sets the premium based on your age, health, policy term, and sum insured. For example, a 30-year-old may pay less than a 50-year-old.
Submitting Documents: Provide ID proof (Aadhaar), address proof, and income proof (salary slip) to verify identity and ability to pay.
Policy Issuance: If approved, the insurer issues the policy document with details like sum assured, premium, and terms. You sign it to agree.
Payment: Pay the first premium—monthly, quarterly, or yearly—via cash, cheque, or online. The policy starts once payment is made.
This process ensures the policy fits your needs and the insurer knows your risk. It usually takes a few days to weeks, depending on checks.
6. Discuss the entry of private sector insurance organizations in India and scope left for them. 10
Answer: Private sector insurance companies entered India in 2000 after the government opened the market. Before this, only public firms like LIC (life insurance) and GIC (general insurance) operated, nationalized in 1956 and 1972. The Insurance Regulatory and Development Authority Act (1999) allowed private players and foreign companies (up to 26% stake, later raised to 74%) to join. Companies like ICICI Prudential, HDFC Life, and Bajaj Allianz started, bringing competition, new products, and better service. They used technology—like online policies—and offered plans like unit-linked insurance (ULIPs), which mix insurance with investment.
The scope for private insurers is still huge. India has a low insurance penetration rate (less than 4% of GDP), meaning many people don’t have coverage. Rural areas, small businesses, and new risks (cyberattacks, climate change) are untapped markets. Private firms can grow by offering affordable micro-insurance, health plans, or crop insurance with government schemes. They’ve increased awareness and customer choice, but face challenges like high costs, trust issues, and competition from public giants like LIC. With innovation and better reach, their future looks promising.
7. Describe the services of surveyors and loss assessors in insurance sector. 10
Answer: Surveyors and loss assessors are experts who help insurance companies settle claims fairly. Their services are vital, especially in general insurance like fire, marine, or motor policies. Here’s what they do:
Inspection: After a claim (e.g., a car accident), they visit the site to check the damage. They look at what happened—like a fire’s cause or a ship’s cargo loss.
Cause Analysis: They find out why the loss occurred. For instance, was the fire accidental (covered) or intentional (not covered)? This decides if the claim is valid.
Damage Assessment: They estimate the loss value. For a damaged house, they calculate repair costs or replacement value, considering depreciation (e.g., old furniture isn’t worth its original price).
Report Preparation: They write a detailed report for the insurer, including photos, evidence, and their findings. For example, “Flood damaged goods worth Rs. 5 lakh.”
Advice: They suggest ways to reduce future risks—like better wiring to prevent fires—and help insurers decide the payout amount.
Negotiation: Sometimes, they discuss with the policyholder to settle disputes over the claim amount, ensuring fairness.
In India, surveyors are licensed by the IRDAI and must be skilled in technical areas like engineering or accounting. They save insurers from overpaying and help policyholders get rightful claims quickly, making the process smooth and trusted.
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