RSK3701/201 3 Question 2: Correct option 2 Refer to page 68 in the Unisa study guide. Under the special condition of average, a 75% condition of average is applied. In terms of this special condition, the insured will only share in the loss if the insured sum is less than the stated percentage (i.e. 75%) of the value of the asset at the time of the loss. If the sum insured is 75% or more, the insured will be considered fully insured and the whole amount of the loss will be paid by the insurer. If the sum insured is less that 75% of the value of the asset at the time of the loss, average will be applied and the insured will pay a pro rata percentage of the loss. In the case stated in the question, the farmer insured his crop for R100 000. The value of the crop was R150 000 at the time of the loss. A loss of R50 000 was sustained. The sum insured amounts to 66,67% of the value of the crop at the time of the loss. The insurer is thus liable for 66,67% of the value of the loss while the farmer is liable for the remainder of the loss. Calculations: 100 000/150 000 x 100 = 66,67% The insurer will be liable for: 66,67/100 x R50 000 = R33 333,33 The insured will be liable for: 33,33/100 x R50 000 = R16 666,67 Question 3: Correct option 2 Refer to chapter 2 in the prescribed book and pages 25 and 26 in the Unisa study guide.
10 Question 4Self insurance may result in … . a the less effective use of funds for development of the business b lower premiums c less focused risk control programmes d a smaller statistical base for premium calculations Choose the correct combination: 1 a,b,c,d 2 a,b,c 3 b,d 4 b,c,d Question 5In terms of collective insurance … . a only one policy document is issued b claims are handled by the broker c the collective share of each insurer is reflected in the policy document d a company which has a share on a collective policy are not allowed to quote against the lead insurer Choose the correct combination: 1 a,b,c 2 a,b,c,d3 a,c 4 a,c,d Question 6Adverse selection … . 1 are increased by introducing clauses such as a suicide clause 2 can result in higher losses than expected 3 refer to the tendency that people with a lower probability of loss than the average seek insurance 4 are increased by introducing compulsory medical examinations when applying for policies Question 7Indicate the correct statement. 1 In terms of common law the issuing of a policy document is not essential for the conclusion of an insurance contract. 2 Wagering contracts are illegal in terms of common law. 3 Insolvent people have no capacity to enter into contracts. 4 In terms of common law the payment of the first premium is essential for the conclusion of an insurance contract.