a) A small life insurance company has recently repriced its product range. As a result, it is…

a) A small life insurance company has recently repriced its product range. As a result, it is selling significantly higher volumes of new business.

Describe the sources of risk to the company that may result from this. [4 Marks]

b) ( i.) Define the law of large numbers and how it can be applied in determining insurable risk. [2 Marks]

( ii.) What facts will an underwriter consider in premium determination for Motor fleet and commercial motor insurance, Does Motor fleet and commercial motor insurance yield 100% indemnity, Explain what should be done to ensure equity? [6 Marks]

c) You are the Pricing Officer for a general insurance company that writes private motor insurance. You have been contacted by a national cycling club, which is interested in selling bicycle insurance to its members.

(i.)List the two key insured perils that would be covered in a bicycle insurance policy. [2 Marks]

d) (i.) Explain what is meant by moral hazard. [2 Marks]

(ii.) Describe the various moral hazards associated with household buildings and

contents insurance. [2 Marks]

e) Outline FOUR major challenges hindering quality excellence of insurance industry in

Kenya. [4 Marks]

f) One of the classes of business written by APA General Insurance Company is Mortgage Indemnity Guarantee. The annual premium income for this line of business makes up 2% of the total for the insurer.

List the unusual features of mortgage indemnity insurance compared to other insurance

classes. [2 Marks]

g) (i.) What is the main objective of a risk management program to a business entity. (ii) Evaluation and review is the last and a must step for any risk management program, outline why it is prudent to undertake this step. [4 Marks]

(iii.) Explain and give examples of the difference between Speculative Risk and Pure