Description

SESSION JULY-AUG 2024
PROGRAM MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER IV
COURSE CODE &
NAME
DFIN404 INSURANCE AND RISK MANAGEMENT

1. How Did the Reforms in the Indian Insurance Industry Take Place and What Were
Their Impacts?
Ans 1.
The Indian insurance industry has undergone significant reforms over the past decades,
transitioning from a heavily regulated and monopolistic environment to a liberalized and
competitive market. These reforms were implemented in phases, starting with the
nationalization of insurance companies and later liberalization to encourage private sector
participation.
Pre-Reform Phase
Before reforms, the insurance industry in India was dominated by the public sector. Life
insurance was monopolized by the Life Insurance Corporation of India (LIC), established in
1956, while general insurance came under the control of four public sector companies after
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2. Mention the Major Factors Influencing the Key Functioning of Insurance
Organizations
Ans 2.
Insurance organizations operate in a complex environment influenced by various internal and
external factors. These factors determine their ability to design policies, manage risks, and
ensure profitability while meeting regulatory and customer requirements.
1. Regulatory Environment
The regulatory framework, primarily governed by the IRDA in India, is critical to the
functioning of insurance organizations. Regulations dictate product design, pricing, solvency
3. Write an Explanation for the Coverages under a Standard Fire and Special Perils
(SFSP) Policy
Ans 3.
The Standard Fire and Special Perils (SFSP) Policy is a fundamental insurance product that
provides coverage against losses or damages caused by fire and other specified perils. This
policy is widely used by individuals and businesses to safeguard their assets, such as buildings,
machinery, stock, and household contents, against unforeseen events.
1. Coverage Against Fire
The primary coverage under an SFSP policy is for losses caused by fire. Fire must result from
accidental, sudden, or uncontrollable causes. It does not include damages due to intentional
4. Explain the Need for Underwriting in Life Insurance Along with Its Functions
Ans 4.
Underwriting is a critical process in life insurance, serving as the backbone for assessing and
managing risks associated with issuing policies. It ensures that the insurer evaluates and accepts
risks that align with their financial capacity and operational goals. Underwriting is essential to
maintain the financial stability of life insurance companies and protect the interests of
5. Write in Brief on the Principles of Insurance Pricing. Also, Mention the General
Objectives That Must Be Achieved in Pricing General Insurance Products.
Ans 5.
Insurance pricing, also known as actuarial pricing, is the process of determining the premiums
that policyholders must pay to ensure the insurance company can cover its liabilities while
remaining profitable. This process is rooted in several core principles and aligned with
objectives that ensure fairness, profitability, and customer satisfaction.
Principles of Insurance Pricing
Risk Assessment Insurance pricing is based on the principle of risk evaluation. Actuaries and
6. Describe the Three Key Elements in Any Reinsurance Contract. Also Mention the
Benefits of Reinsurance.
Ans 6.
Reinsurance is a critical mechanism in the insurance industry that allows insurers to transfer
part of their risk portfolio to other insurers, known as reinsurers. This process reduces the risk
exposure of the original insurer and ensures financial stability, especially in times of
catastrophic events. A reinsurance contract typically consists of three key elements and
provides several benefits to the insurance industry.
Three Key Elements in Any Reinsurance Contract
Risk Transfer
The primary purpose of reinsurance is the transfer of risk from the ceding insurer (the original