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Question 5 (13 Marks) a. What is 'average' as applicable to fire insurance? 1 mark b. Old Winery Store has purchased a property all risks insurance coverage for its stock at a sum insured for $9 million. Last Saturday, a fire broke out at Old Winery causing a total loss of its stock. However, the insurance company found that the value at risk at the time of accident was $12 million. Calculate the claims payable to Old Winery respectively under these three methods: Pro rata average clause in UK; 80% American term co-insurance; and 90% Australian term pro rata average in regards of following two separate losses: (i) $9,000,000 (ii) $450,000 Explain your answers and show all your calculations. 9 marks c. From insurers' perspective, how do you justify the pro rata average (or the pro rata average clause in UK)? 3 marks

          Question 5 (13 Marks)
a. What is 'average' as applicable to fire insurance?
1 mark
b. Old Winery Store has purchased a property all risks insurance coverage for
its stock at a sum insured for $9 million. Last Saturday, a fire broke out at
Old Winery causing a total loss of its stock. However, the insurance company
found that the value at risk at the time of accident was $12 million.
Calculate the claims payable to Old Winery respectively under these three
methods: Pro rata average clause in UK; 80% American term
co-insurance; and 90% Australian term pro rata average in regards of
following two separate losses:
(i) $9,000,000
(ii) $450,000
Explain your answers and show all your calculations.
9 marks
c. From insurers' perspective, how do you justify the pro rata average (or the
pro rata average clause in UK)?
3 marks

Question 5 (13 Marks)
a. What is 'average' as applicable to fire insurance?
1 mark
b. Old Winery Store has purchased a property all risks insurance coverage for
its stock at a sum insured for 9 million. Last Saturday, a fire broke out at
Old Winery causing a total loss of its stock. However, the insurance company
found that the value at risk at the time of accident was12 million.
Calculate the claims payable to Old Winery respectively under these three
methods: Pro rata average clause in UK; 80% American term
co-insurance; and 90% Australian term pro rata average in regards of
following two separate losses:
(i) 9,000,000
(ii)450,000
Explain your answers and show all your calculations.
9 marks
c. From insurers' perspective, how do you justify the pro rata average (or the
pro rata average clause in UK)?
3 marks

Added by John D.

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