Description

SESSION FEB – MAR’24
PROGRAM MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER IV
COURSE CODE & NAME DBFI403 – LIFE INSURANCE MANAGEMENT
CREDITS 4

Assignment Set – 1st

Questions
1. Discuss the different risks in Insurance with examples for each type.
Ans: Insurance involves managing various types of risks.
Here are the main categories of risks in insurance along with examples for each type:
1. Underwriting Risk
This is the risk that the premiums collected will not be sufficient to cover the claims and
expenses.
Example: An insurance company offers health insurance policies. If it underestimates the
likelihood of a widespread illness or misprices the policies, it may end up paying more in
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2. Describe what settlement option in Life Insurance is.
Ans: In life insurance, a settlement option is a method chosen by the policyholder or
beneficiary for receiving the policy’s death benefit upon the insured’s death. Instead of
receiving a lump sum payment, settlement options allow for the death benefit to be
distributed in various ways.
Here are the common settlement options in life insurance:
1. Lump Sum Payment
The entire death benefit is paid out in one single payment to the beneficiary.
Example: A $500,000 life insurance policy pays the beneficiary $500,000 in a single
3. “The profits generated are distributed as bonuses to the eligible policy owners at the
end of every financial year.”Explain the statement by mentioning the types of bonuses
in Insurance.
Ans: The statement refers to how some insurance policies, particularly participating or withprofits
policies, share the insurer’s profits with policyholders. These profits, generated from
the insurer’s investments, underwriting performance, and overall financial management, are
distributed as bonuses to eligible policy owners.
Here are the main types of bonuses in insurance:
1. Reversionary Bonus
A reversionary bonus is a bonus added to the policy’s sum assured and paid out upon the
maturity of the policy or on the death of the insured. It is typically declared annually and,
Assignment Set – 2nd
Questions
4. Write a short note on Life Insurance Claims and its three major types.
Ans:Life Insurance Claims
Life insurance claims are requests made by beneficiaries or policyholders to receive the
benefits provided under a life insurance policy. These claims arise upon the occurrence of
events specified in the policy, such as the death of the insured or the policy reaching maturity.
The claims process involves verifying the event, submitting necessary documentation, and
ensuring compliance with policy terms. The insurer then processes the claim and disburses
5. Explain the alternatives to traditional reinsurance options. (Known as non-traditional
Reinsurance methods)
Ans: Non-traditional reinsurance methods, also known as alternative risk transfer (ART)
solutions, provide ways for insurers to manage risk beyond conventional reinsurance
contracts. These methods often involve capital markets and other financial instruments,
offering greater flexibility and innovative ways to transfer risk.
Here are some common non-traditional reinsurance methods:
1. Catastrophe Bonds (Cat Bonds) Description: Catastrophe bonds are risk-linked
securities that transfer catastrophe risk from insurers to investors. These bonds pay high
6. What is Liability Insurance? Mention the types and explain in brief.
Ans:Liability Insurance
Liability insurance is a type of insurance that provides protection to individuals and
businesses against the risk of being held legally liable for injuries, damages, or losses to
another party. This insurance covers legal costs and any pay-outs for which the insured would
be responsible if found legally liable. It is crucial for protecting assets and ensuring financial