Observation

Majority of the candidates attempted this question but their performance was poor with many of them scoring low marks in each part of the question.

Some of the responses expected from the candidates were:  

(a) Indemnity period as used in business interruption insurance:
This is the period that an organization would be required to return the business to normalcy following the occurrence of the insured event. It is also the period that are used for the repairs and replacement of damaged property.

(b) The covers provided under business interruption insurance

(i) Compensation for the net profit lost due to the stoppage of the business.

(ii) Payment for fixed charges/overheads that would have been incurred in the course of the business.

(iii) Payment for reasonable expenses to hasten the resumption of the business.

(iv) Payment for the wages of the staff.

(v) Payment for the services of the auditors engaged to prepare the claim.

(vi) Hiring of alternative place of work.

(vii) Hiring of plant and machinery.

(c) Causes of business interruption that are covered by insurance

(i) Fire and special perils: This is the destruction or damage to the premises and equipment used for the business as a result of fire and associated perils.

(ii) Machinery breakdown: This is the stoppage of production as a result of the breakdown of machines used in the operation of the business.

(iii) Computer damage and breakdown risks: This is the stoppage of operations as a result of the breakdown of computer systems.