Date: $21$ April $2024$

Question $1(21$ marks$)$

a$.$ Briefly define 'indemnity' in the context of insurance. Why 'indemnity' is not universally applicable to all types of insurance.

$7$ marks

b$.$ Foodie Restaurant purchased a freezer $4$ years ago, which has an estimated useful life of $10$ years. For insurance protection, the freezer is specifically insured under a property all risks insurance policy.

Last night, the freezer was totally destroyed by flooded water during the passage of avtyphoon. At the time of loss, the replacement cost of a similar freezer was around $$150,000.$

Assumed that the sum insured under the property all risks insurance Foodie Restaurant bought was adequate to cover the risk.

Further, the property all risks insurance policy is subject to an $$8,000$ water damage deductible clause.

Based on the 'actual cash value' principle, how much of the claim payment will Foodie Restaurant recelve under the property all risks insurance policy?

$4$ marks

c$.$ Prosperity Insurance Group has issued a fire insurance policy to an insured, Paper Mills Limited, at a sum insured of $$4,000,000.$ Last night, a fire broke out at Paper Mills, resulting in the loss of its stocks. However, the value at risk determined by the loss adjustor at the time of accident was more than the sum insured at $$5,000,000.$

Calculate the claims payable to Paper Mills respectively under these three clauses: Pro rata average clause in United Kingdom; $85\%$ American term coinsurance; and $90\%$ Australian term pro rata average in regards of following two separate losses?

$($i$)$ $$3,500,000$

$($ii$)$ $$190,000$

Show all your calculations.

$10$ marks