Outline four risks against which a shopkeeper may insure and three features of a Re-insurance company. Also, determine the contribution made by two insurance companies to cover a building loss.

Here are the answers to the questions: Question 1: Outline four risks against which a shopkeeper may insure. Fire*: Damage to the shop premises, stock, and equipment due to fire. Theft/Burglary*: Loss of stock, cash, or equipment due to break-ins or robbery. Public Liability*: Claims from customers or third parties for injuries or damages sustained on the shop premises. Loss of Profits*: Financial loss incurred due to business interruption caused by an insured event like fire or flood. Question 2: Outline three features of a Re-insurance company. A reinsurance company insures other insurance companies* against their own risks. It helps primary insurers spread large risks* that they cannot bear alone, allowing them to underwrite more policies. Reinsurance companies typically deal with large-scale risks* and complex financial arrangements, rather than individual policyholders. Question 3: Elephant Enterprises acquired a building valued at Sh. 1,000,000 on 1 January 2007. The building was insured with two insurance Companies, Zebra and Simba for Sh. 600,000 and Sh. 400,000 respectively. In May 2007, fire damaged the building, causing Elephant Enterprises to suffer a loss of 20% of the building value. Determine contribution made by Simba and Zebra to cover the loss. Step 1: Calculate the total insured amount. Total Insured Amount = Insurance by Zebra + Insurance by Simba Total Insured Amount = Sh. 600,000 + Sh. 400,000 Total Insured Amount = Sh. 1,000,000 Step 2: Calculate the actual loss suffered. Building Value = Sh. 1,000,000 Loss Percentage = 20\% Actual Loss = 20\% × Sh. 1,000,000 Actual Loss = (20)/(100) × 1,000,000 Actual Loss = Sh. 200,000 Step 3: Determine the contribution from each insurer using the principle of contribution. The contribution is proportional to the amount each insurer covers. The formula for contribution is: Contribution by Insurer = Sum Insured by InsurerTotal Sum Insured × Actual Loss Step 4: Calculate contribution by Zebra. Contribution by Zebra = Sh. 600,000Sh. 1,000,000 × Sh. 200,000 Contribution by Zebra = 0.6 × Sh. 200,000 Contribution by Zebra = Sh. 120,000 Step 5: Calculate contribution by Simba. Contribution by Simba = Sh. 400,000Sh. 1,000,000 × Sh. 200,000 Contribution by Simba = 0.4 × Sh. 200,000 Contribution by Simba = Sh. 80,000 The contribution made by Zebra is Sh. 120,000 and by Simba is Sh. 80,000. The contribution by Zebra is: Sh. 120,000 The contribution by Simba is: Sh. 80,000 Question 4: KAMAT owned a motor vehicle, valued at Sh 1,000,000. He comprehensively insured the car at Sh 800,000. The motor vehicle was involved in an accident and declared a write off. Calculate the amount KAMAT should get from the insurer. Step 1: Identify the actual value of the vehicle, the sum insured, and the loss. Actual Value of Vehicle = Sh. 1,000,000 Sum Insured = Sh. 800,000 Since the car was declared a write-off, it's a total loss. Actual Loss = Sh. 1,000,000 Step 2: Apply the average clause, as the vehicle was under-insured (Sum Insured < Actual Value). The formula for compensation under the average clause is: Compensation = Sum InsuredActual Value of Property × Actual Loss Step 3: Substitute the values into the formula. Compensation = Sh. 800,000Sh. 1,000,000 × Sh. 1,000,000 Compensation = 0.8 × Sh. 1,000,000 Compensation = Sh. 800,000 The amount KAMAT should get from the insurer is Sh. 800,000. The amount KAMAT should get from the insurer is: Sh. 800,000 Question 5: Outline four differences between insurance and assurance. Insurance covers an uncertain event (e.g., fire, theft) that may or may not happen, while assurance covers an event that is certain to happen* (e.g., death), though the timing is uncertain. Insurance is typically for a short, fixed period (e.g., one year), requiring renewal, whereas assurance is usually for a long term or whole life*. Insurance operates on the principle of indemnity, aiming to restore the insured to their financial position before the loss, while assurance pays a fixed sum* upon the occurrence of the assured event. Insurance policies often have a surrender value only if specified, while assurance policies (especially whole life) typically accumulate a cash/surrender value* over time. Question 6: Amina operates a fleet of Public Service Vehicles (PSVs). Explain five possible risks she can insure her business against. Motor Vehicle Accidents*: Covers damage to her vehicles, third-party property damage, and injuries to passengers or third parties resulting from accidents. Theft of Vehicles*: Protects against financial loss if any of her PSVs are stolen. Fire Damage*: Covers damage to her vehicles due to fire, whether accidental or malicious. Passenger Liability*: Insures against claims from passengers for injuries or death sustained while traveling in her PSVs. Loss of Income/Business Interruption*: Provides compensation for lost earnings if her vehicles are out of service due to an insured event (e.g., accident, theft). Question 7: State three features of an insurable interest. Pecuniary Interest*: The insured must stand to gain financially from the preservation of the subject matter and suffer financially from its loss or damage. Legally Recognised Relationship*: There must be a legal relationship between the insured and the subject matter of insurance. Present Interest*: The insurable interest must exist at the time the insurance is taken out and, in some cases (like general insurance), also at the time of loss. Question 8: a)* Explain the procedure for making an insurance claim. Notification*: The insured must promptly inform the insurer about the loss or damage, usually within a specified timeframe. Submission of Claim Form*: The insured completes and submits a detailed claim form provided by the insurer, outlining the circumstances of the loss. Provision of Evidence*: The insured provides supporting documents such as police reports, medical reports, repair estimates, invoices, and photographs to substantiate the claim. Investigation*: The insurer appoints an assessor or loss adjuster to investigate the claim, verify the facts, and determine the extent of the loss. Settlement*: If the claim is valid, the insurer will calculate the compensation amount and make payment to the insured. b)* A farmer's house valued at Ksh. 1,200,000 was insured against fire for 900,000 under the "with average clause". Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer. Step 1: Identify the actual value of the house, the sum insured, and the actual loss. Actual Value of House = Ksh. 1,200,000 Sum Insured = Ksh. 900,000 Actual Loss = Ksh. 500,000 Step 2: Apply the average clause, as the house was under-insured (Sum Insured < Actual Value). The formula for compensation under the average clause is: Compensation = Sum InsuredActual Value of Property × Actual Loss Step 3: Substitute the values into the formula. Compensation = Ksh. 900,000Ksh. 1,200,000 × Ksh. 500,000 Compensation = (3)/(4) × Ksh. 500,000 Compensation = 0.75 × Ksh. 500,000 Compensation = Ksh. 375,000 The value of compensation due to the farmer is Ksh. 375,000. The value of compensation due to the farmer is: Ksh. 375,000 Question 9: Explain five characteristics of property insurance. Principle of Indemnity*: Property insurance aims to restore the insured to the financial position they were in immediately before the loss, without allowing them to profit from the loss. Insurable Interest*: The insured must have a financial stake in the property, meaning they would suffer a financial loss if the property is damaged or destroyed. Utmost Good Faith (Uberrimae Fidei)*: Both the insured and the insurer must disclose all material facts relevant to the contract. Subrogation*: After paying a claim, the insurer acquires the right to pursue any third party responsible for the loss to recover the amount paid. Contribution*: If the same property is insured with multiple insurers, each insurer contributes proportionally to the loss, ensuring the insured does not receive more than the actual loss. Question 10: Explain the meaning of the following terms: a) Insured: The insured* is the person or entity who is covered by an insurance policy and will receive compensation in the event of a covered loss. b) Insurance: Insurance* is a contract (policy) where an individual or entity receives financial protection or reimbursement against losses from an insurance company in exchange for regular payments (premiums). Question 11: State four differences between life assurance and general insurance. Nature of Event: Life assurance covers an event that is certain to happen (death), while general insurance covers an event that is uncertain* (e.g., fire, accident). Term of Policy: Life assurance policies are typically long-term or whole life, whereas general insurance policies are usually short-term* (e.g., one year) and renewable. Principle of Indemnity: Life assurance does not operate on the principle of indemnity, paying a fixed sum, while general insurance does* operate on indemnity, compensating for actual loss. Surrender Value: Life assurance policies often accumulate a cash or surrender value over time, which can be withdrawn, whereas general insurance policies generally do not* have a surrender value. 3 done, 2 left today. You're making progress.