Theory question 107
InsuranceCommerce 2 (answer any five questions)
(a) Who is an actuary?
(b) Differentiate between contribution and group insurance.
(c) Describe three types of risks that may be insured against under marine insurance.
Show the model answer
(a) An actuary is an expert in statistics and mathematics employed by an insurance company to calculate risks, probabilities (e.g. life expectancy) and the premiums to be charged.
(b) Contribution is a principle of insurance: where the same property is insured with more than one insurer, each insurer pays a share of the loss in proportion to the cover it gave, so that the insured does not recover more than the loss. Group insurance is a type of policy: one policy covering a group of people, e.g. all the employees of a firm, usually paid for by the employer at a reduced premium.
(c) Any three, described: hull insurance – damage to or loss of the ship itself and its machinery; cargo insurance – loss of or damage to the goods carried; freight insurance – loss of the freight (carriage charges) if the goods are lost; also ship-owner's liability (collision with another ship) and perils such as sinking, fire, storms, piracy, jettison/general average.
In (b) note that contribution is a principle while group insurance is a kind of policy.