Hailey College of Commerce

Program: B. Com Course: Insurance & Risk Management

Time Allowed: 2 ½ Hours Max Marks: 75

Instructions: Attempt all questions and provide concise and to the point answer.

Q. No. 1 Write a detailed note on any two from the followings:

a. As a Risk Manager, you are supposed to manage financial risks associated with corporate entity (your organization) by
considering the objectives and needs of various stakeholders. Therefore, you are required to report the potential financial risks
faced by your organization (selected for term project) and how it (the selected organization) is managing/coping with these risks
(by highlighting the procedure/design, findings, conclusion and implications of the term project undertaken by you).
b. It is reported that Pakistan is facing very turbulent financial environment due to political instability; pandemic situation; debt-
burden; unfavorable balance of payment and presence of unprecedented financial risks (credit risks; market risks and
financing/liquidity risks etc.). You are required to suggest an action plan (to mitigate the risks) indicating
suggestions/recommendations for the corporate sector as well as for the state policy makers with argument.
c. Risk managers use a number of methods for managing risk. For each of the followings, what method/technique for handling
risk is used? Explain your answer by considering the following situations.
i. The decision not to carry earthquake insurance on firm’s main manufacturing plant.
ii. The installation of an automatic sprinkler system in a hotel.
iii. The decision not to produce a product that might result in product liability lawsuit.
iv. Requiring retailers who sell the firm’s product to sign an agreement releasing the firm from liability if the product
injures someone.

Q. No. 2 Private insurance provides coverage that can be used to meet specific loss situations. For each of the following situations,
identify a private insurance coverage (Type of Insurance) that would provide the desired protection.
a. Ms. Nazi, age 40, is a single parent with two dependent children. She wants to make certain that funds are available for her
children’s education if she dies before her youngest child finishes college.
b. Ms. Zain, age 19, recently obtained her driver’s license. Her parents want to make certain they are protected if Zain negligently
injures another motorist while driving a family car.
c. Mr. Saleem, age 32, is a married person with two dependents. He wants his income to continue if he becomes totally disabled
and unable to work.
d. Mr. Naveed, age 45, recently purchased a house for Rs. 20000,000 that is located in an area where tornadoes frequently occur.
He wants to make certain that funds are available if the house is damaged or destroyed by a tornado.

Q. No. 3 Mr. Jaffar is a book dealer who purchased a building from Aleem. Jaffar obtained a loan from the National Bank of Pakistan
(NBP) to purchase the building, which held a mortgage on the building. Jaffar planned to store his inventory of books in the building. He
also planned to use part of the building for a fast-food restaurant. When Jaffar applied for property insurance on the building, he did not
tell the agent about the fast-food restaurant because premiums would be substantially higher. Eight months after the policy was issued, a
fire occurred in the restaurant that caused substantial damage to the building.
a. Do any of the following parties have an insurable interest in the building at the time of loss? Briefly explain your answer in the
light of Principle of Insurable Interest.
i. Jaffar
ii. Aleem
iii. NBP
b. Could Jaffar’s insurer deny coverage for the fire loss based on a material concealment? Briefly justify your answer in the light
of Principle of Utmost Good Faith.
c. Investigation of the fire revealed that an electrician improperly wired an electrical outlet in the restaurant, which caused the fire.
Briefly explain how the Principle of Subrogation might apply in this case.

Q. No. 4. You are required to list out basic parts of insurance contract. Explain with arguments

Good Luck