Exam (elaborations)
RSK3701 EXAM PACK 2023
- Institution
- University Of South Africa (Unisa)
QUESTIONS WITH ANSWERS
[Show more]
Content preview
RSK3701EXAM PACK
2023
QUESTIONS AND
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.
, Choose the correct combination:
1 a,b
2 b,c,d
3 a,b,d
4 a,b,c,d
When taking out a fire policy, material facts to be disclosed will include the location of the premises,
the type of business carried out at the premises and any previous claims experience. Although the
number of staff working at the premises would be useful information, it will not necessarily be material
to assess the risk in terms of a fire.
Question 6
Indicate the correct statement(s).
a The breaching of a warranty in an insurance contract by the insured may result in the repudiation of
a claim by the insurer.
b The first amount payable is reflected in the schedule of a policy document.
c Insurance contracts are based on the premise of caveat emptor
d The reasonable man test is generally applied to test the validity of insurance contacts.
Choose the correct combination:
1 a,b,c
2 b,c,d
3 a,c,d
4 a,b,d
The breaching of a warranty in an insurance contract by the insured may result in the repudiation of a
claim by the insurer, even if the warranty reduces the risk to the insurer (refer to the discussion on
page 30 of the Unisa study guide). The first amount payable is reflected in the schedule of a policy
document. The reasonable man test is generally applied to test the validity of insurance contacts.
Insurance contracts are however based on the premise of uberrimae fidei or utmost faith.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller jpapaya. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R60,00. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
72042 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy summaries for 14 years now