Question 2'a.What is 'contribution' in insurance?b.A fire broke out at Dinosaur Toy Shop causing stock loss of $800,000. Withregards to insurance protection, Dinosaur Toy Shop has arranged fireinsurance policies on stock from two insurance companies.The extracts of the two fire insurance policies are as follows:Highland Insurance Co. Ltd.Subject matter of insurance: both the building and the stockSum insured: $20,000,000Building: $18,500,000.stock: $1,500,000.Lakeside Insurance Co. Ltd.Subject matter of insurance: stockSum insured: HK$6,000,000.It is assumed that the value-at-risk of Dinosaur Toy Shop's stock at the time ofloss was:Case (1) $1,000,000Case (2) $2,000,000Case (3) $7,500,000Case (4) $10,000,000i. In each of the above cases (1) to (4), use the 'independent liability' methodto calculate the contributions to be made by each insurance company.Explain your answers and show all your calculations.ii. What are the contributions to be made by each insurance company if the'sum insured' method is used in (b)(i) above? Explain your answers and showall your calculations.From the standpoint of insurance company, analyze the problem(s) created bythe 'sum insured' approach.

Insurance: Insurance can be defined as the contract between insurer and insured where the insured is…

i. In each of the above cases (1) to (4), use the 'independent liability' method to calculate the contributions to be made by each insurance company. Explain your answers and show all your calculations. ii. What are the contributions to be made by each insurance company if the 'sum insured' method is used in (b)(i) above? Explain your answers and show all your calculations. From the standpoint of insurance company, analyze the problem(s) created by the 'sum insured' approach.

i. In each of the above cases (1) to (4), use the 'independent liability' method to calculate the contributions to be made by each insurance company. Explain your answers and show all your calculations. ii. What are the contributions to be made by each insurance company if the 'sum insured' method is used in (b)(i) above? Explain your answers and show all your calculations. From the standpoint of insurance company, analyze the problem(s) created by the 'sum insured' approach.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions

Section: Chapter Questions

Problem 17DQ

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