ISR3701 Assignment 1 Semester % TRUSTED workings, explanations and solutions. For assistance call or us on .
Question Mr. A insured his car, valued at R400 000, with Company X for R150 000 and Company Y for R250 000. Mr. A is involved in an accident and damage to his car amounts to R25 000.His c...
with company x for r150 000 and company y for r250 000 mr a is involved in an accident and damage to his car amounts to r25 000his claim
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ISR3701
ASSIGNMENT 1 SEMESTER 1 2023
, Question 1
Mr. A insured his car, valued at R400 000, with Company X for R150 000 and
Company Y for R250 000. Mr. A is involved in an accident and damage to his
car amounts to R25 000.His claim, however, is repudiated due to some
technical reasons. Company Y, however, decided to make an ex gratia
payment of R15 625 to Mr. A.BASED ON THE
AFOREMENTIONEDSCENARIO, INDICATE THE CORRECT STATEMENT. a.
Ex gratia payments are indemnity payments. b. Company X will be liable to pay
R9 375 to Mr. A. c. Ex gratia payments may affect future claims payments. d.
The principle of contribution does not apply to ex gratia payments. Clear my
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The correct statement is c. Ex gratia payments may affect future claims
payments.
Ex gratia payments are payments made voluntarily by an insurance company
out of goodwill, and are not legally required under the terms of the insurance
policy. As such, they do not fall under the principle of indemnity, which requires
insurance companies to compensate policyholders only for the actual amount
of their loss, up to the limit of the policy.
In this case, Company Y's ex gratia payment of R15 625 does not represent
the full amount of Mr. A's loss, but is a partial payment made as a gesture of
goodwill. However, since it is a payment made by an insurance company, it
could potentially affect future claims payments. This is because insurance
companies may take into account any ex gratia payments made to a
policyholder when calculating premiums or assessing claims in the future.
Regarding the other options, a is incorrect as ex gratia payments are not
indemnity payments, b is incorrect as Company X would not be liable to pay
anything since Mr. A's claim was repudiated, and d is incorrect as the principle
of contribution still applies to ex gratia payments.
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