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RSK3701 EXAM PACK 2023
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RSK3701 EXAMPACK 2023
UPDATED
QUESTIONS AND
ELABORATE
ANSWERS
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,RSK3701
EXAM PACK
Revision PACK
Questions. Answers
, MCQ Test Bank
Questions and Answers
Question 1
Brokers …
1 are allowed to collect premiums from the insured.
2 have a legal obligation to handle claims on behalf of their clients.
3 cannot be held legally liable for advice given to clients.
4 may not operate in the reinsurance market.
Brokers are allowed to collect premiums from the insured but have no
legal obligation to handle claims on behalf of their clients. They can be
held legally liable for advice given to clients. Brokers may operate in the
reinsurance market.
Question 2
Production flow charts may assist the risk manager in identifying …
a weaknesses in the organisational structure of an organisation.
b supplier risks.
c process type risks.
d lines of authority.
Choose the correct combination:
1 b,c
2 c,d
3 b,c,d
4 a,b,c,d
Production flow charts may assist the risk manager in identifying supplier
risks and process type risks. Weaknesses in the organisational structure of
an organisation and lines of authority can be identified by studying the
organisational charts of an organisation
, Question 3
Indicate the correct statement:
1 An insurer is better able to prevent losses.
2 Pooling results in smaller deviations from expectations in terms of possible losses.
3 Shoplifting is an uninsurable risk.
4 Reinsurance assures the buyer of insurance that all insurers will charge the same premium for the
same risk.
Pooling results in smaller deviations from expectations in terms of possible losses. An insurer is not
necessarily better able to prevent losses as uncertainty remains. With reference to one risk
confronting one individual, the positions of the insurer and insured are virtually identical. Shoplifting is
an insurable risk in terms of the characteristics of an insurable risk. Shoplifting cannot however be
insured under a theft insurance policy as it does not meet the requirement in terms of the definition of
theft as defined in insurance. This aspect will be dealt with later in the prescribed material.
Reinsurance cannot assure the buyer of insurance that all insurers will charge the same premium for
the same risk. This is not the purpose of reinsurance.
Question 4
You have insured your house for R2 000 000 with ABC Insurer. You transfer your bond to another
bank and take out insurance on the house with DEF Insurer for R1 500 000. You do not cancel your
insurance with ABC Insurance company. The actual value of your house is R2 000 000. A fire breaks
out in your house causing damages of R500 000.
Choose the correct statement:
1 Each insurer will pay R250 000 of the loss.
2 ABC will pay R285 714,29 and DEF R214 285,71 of the claim.
3 ABC will pay R285 714,29 and DEF R160 714,28 of the claim.
4 DEF Insurer will not be liable for any losses as the house is underinsured.
It is possible to insure an asset with more than one insurer. In terms of the insurance principle of
indemnity the insured will however not be allowed to profit from insurance. The principle of indemnity
is enforced by the condition of contribution where more than one policy is in force for a specific asset.
In this case each insurer is liable for a rateable portion of the loss. In this particular case, the house is
insured for R2 000 000 with ABC Insurer and R1 500 000 with DEF Insurer. The actual value of the
house is R2 000 000. A loss of R500 000 is sustained. Although the total amount of insurance
amounts to R3 500 000 between the two insurers, each insurer will only be liable for a portion of the
loss of R500 000. (In case of a total loss, each insurer will still contribute proportionally to indemnify
the insured for the value of the house, being R2 000 000. The insured will not be able to claim the
total value insured from each of the insurers as this will breach the principle of indemnity which
specifies that the insured will be put back in the financial position he/she was before the loss.)
Portion payable by ABC Insurer:
R2 000 000/R3 500 000 x R500 000 = R285 714,29
Portion payable by ABC Insurer:
R1 500 000/R3 500 000 x R500 000 = R214 285,71
Question 5
Indicate which of the following is/are considered as a material fact(s) when taking out a fire policy.
a The location of the premises.
b The type of business carried out at the premises.
c The number of staff operating from the premises.
d Previous claims experience.
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