WAEC SSCE - Insurance - 2018 (Case Study and Essay)

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(a) Who is a loss assessor?

A loss assessor is a professional appointed and paid by the insured to prepare, present and negotiate his claim against the insurer. He acts on behalf of the policyholder to ensure that the loss is properly quantified and that the insured obtains a fair settlement.

(b) Three roles of a loss assessor

1. To investigate and assess the extent and value of the loss or damage suffered by the insured.
2. To prepare and submit the claim, with the necessary documents and proof, to the insurer on behalf of the insured.
3. To negotiate with the insurer or its loss adjuster to secure a fair and adequate settlement for the insured.

(c) Four functions of the Chartered Insurance Institute of Nigeria (CIIN)

1. To train, educate and examine persons seeking to qualify as professionals in the insurance industry.
2. To set and enforce professional and ethical standards of conduct among its members.
3. To award professional qualifications and regulate the admission and discipline of members.
4. To promote the advancement of insurance knowledge and public awareness, and to advise on matters affecting the profession.

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(a) Three roles of the National Insurance Commission (NAICOM)

1. To regulate, supervise and control the insurance business in Nigeria, ensuring companies operate within the law.
2. To register, license and where necessary cancel the registration of insurers, reinsurers, brokers and loss adjusters.
3. To protect the interests of policyholders and the public by ensuring insurers remain solvent and settle genuine claims, and to approve rates, terms and conditions of insurance.

(b) Three methods of providing indemnity

1. Cash payment: The insurer settles the claim by paying the insured a sum of money equal to the amount of the loss, this being the commonest method.
2. Repair: The insurer restores the damaged property to its former condition by arranging and paying for its repair, as is common in motor insurance.
3. Replacement: The insurer provides a new article in place of the one lost or damaged, restoring the insured to his former position, as sometimes done with glass or jewellery.
4. Reinstatement: The insurer rebuilds or reinstates property, for example a building destroyed by fire, to its pre-loss condition.

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(a) Three features of life assurance

1. It is not a contract of indemnity; it pays a fixed, agreed sum on death or maturity because human life cannot be valued in money.
2. The risk insured against (death) is certain to occur, only the time is uncertain, so the contract is bound to give rise to a claim eventually.
3. Insurable interest need only exist at the inception of the policy, and the policy can acquire a surrender value and be used as security for a loan.

(b)(i) Three benefits of life assurance to individuals

1. It provides financial security and support for the family or dependants of the assured on his death.
2. It is a means of saving for retirement and other future needs.
3. The policy can serve as collateral to obtain a loan and can meet obligations such as children's education.

(b)(ii) Three benefits of life assurance to government

1. The premiums pooled by life offices provide long-term funds that government can borrow through bonds to finance development projects.
2. It reduces the burden on government of caring for dependants and the aged, since families are financially protected.
3. The industry generates employment and pays taxes, and mobilises domestic savings that aid national economic growth.

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(a)(i) Subject matter of insurance

The subject matter of insurance is the property, life, interest or event that is actually insured, that is the thing exposed to the risk. Examples are a building in fire insurance, a ship in marine insurance, or the life of a person in life assurance. It is the physical or actual thing covered by the policy.

(a)(ii) Subject matter of contract (of insurance)

The subject matter of the contract is not the property itself but the insurable interest the insured has in that property. It is the legal or financial relationship between the insured and the subject matter of insurance, by virtue of which he benefits from its safety and suffers loss from its damage. It is this interest, not the property, that the law recognises as being insured.

(b) When insurable interest must be proved

1. Burglary insurance: Insurable interest must exist both at the time the policy is taken out (inception) and at the time of loss.
2. Marine insurance: Insurable interest need not exist at the time the policy is effected, but it must exist at the time of loss.
3. Life assurance: Insurable interest must exist only at the time the policy is taken out (inception); it need not exist at the time of the claim.

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(a) Four classes of insurance that could help Garola Kubusa Limited

1. Fire insurance: The company suffers losses from fire and explosion. Fire insurance would indemnify it for damage to its factory, plant, machinery and stock caused by fire, lightning and explosion.
2. Fidelity guarantee insurance: The company loses through pilfering of finished products by employees and embezzlement of funds. Fidelity guarantee cover indemnifies the employer against loss caused by the dishonesty or fraud of named or classes of employees.
3. Goods-in-transit / marine (inland transit) insurance: Raw materials are moved by the company's trailers and hired vehicles from Port Harcourt to Asaba. This cover indemnifies loss of or damage to goods while being transported.
4. Business interruption (consequential loss) insurance: Since severe damage forces the company to shut down for months, this cover replaces the loss of profit and continuing standing charges during the period the business is interrupted following an insured peril such as fire.

Machinery breakdown (engineering) and burglary insurance are also relevant to the damage to plant and the theft of goods.

(b) Should it insure against losses arising from competition?

No, it should not, and it cannot. Losses arising from competition are a speculative (or trading) risk, not a pure risk. Insurance covers only pure risks, where there is a chance of loss or no loss but never gain. Competition may lead either to loss or to profit, it is a normal business hazard the entrepreneur must bear, and it cannot be measured or transferred to an insurer. It is therefore not insurable.

(c) Appropriate cover if it imports raw materials and finished products

The appropriate cover is marine (cargo) insurance. Because the imported raw materials and finished goods will be carried by sea from abroad, a marine cargo policy would indemnify the company against loss of or damage to the goods in transit from perils of the sea and other marine perils, protecting the company from the moment the goods leave the overseas supplier until they reach its warehouse.

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(a) Fidelity guarantee insurance policy

A fidelity guarantee insurance policy is a form of insurance that protects an employer against financial loss caused by the dishonesty, fraud, embezzlement or defalcation of his employees in the course of their employment. It indemnifies the employer for money or property lost through the infidelity of persons placed in a position of trust.

(b) Four types of policies in fidelity guarantee insurance

1. Individual (named) policy: This covers one named employee against whose dishonesty the employer wants protection. It is used where only a particular person, such as a cashier, handles money.
2. Collective (schedule) policy: This covers a group of named employees under one policy, each with a stated amount of guarantee shown against his name in a schedule.
3. Floating (floater) policy: This covers a group of employees for one overall (floating) sum that can apply to any member of the group, without allocating a fixed amount to each person.
4. Positions (blanket) policy: This covers the holders of stated positions or offices rather than named individuals, so that whoever occupies the post at the time of loss is automatically covered.

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(a) Six experts that would require professional indemnity insurance

1. Medical doctors and surgeons.
2. Lawyers (legal practitioners).
3. Accountants and auditors.
4. Architects.
5. Engineers.
6. Insurance brokers.
7. Pharmacists.

(b) Cover provided by each policy

1. (i) Personal liability: This covers an individual against his legal liability for death, bodily injury or damage to the property of other people caused by his own negligence or that of his family in their private, non-business capacity, for example a household accident that injures a visitor.
2. (ii) Public liability: This covers a business or occupier against its legal liability for death, injury or property damage suffered by members of the public arising out of the conduct of the business or the use of its premises, for example a customer injured on business premises.
3. (iii) Professional indemnity: This covers a professional person against legal liability to pay damages to his clients for loss or injury they suffer as a result of his negligence, error or omission in the performance of his professional duties, for example wrong advice by a doctor, lawyer or accountant.