O-LevelCommerceInsurance7100/22 · Oct/Nov 2017 · Q420 Marks

Andrew Malik works for an accounting firm and travels frequently to meet clients.

(a)(i)Andrew has a credit card. State two circumstances when he might use the credit card when travelling with his job.[2]
(a)(ii)Explain two advantages to Andrew of also having a debit card.[4]
(a)(iii)Identify one way in which Andrew might benefit from using a loyalty card.[1]
(b)(i)Andrew's firm provides insurance to cover its employees. Describe two types of insurance that the employer may provide for Andrew.[4]
(b)(ii)Do you think that bad management can be insured against? Give reasons for your answer.[3]
(c)Andrew's employer is taking out a new fire insurance policy. Discuss whether or not his employer should approach an insurance company directly or use an insurance broker. Give reasons for your answer.[6]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

[1] To pay for hotel bills
[1] To pay for restaurant meals
[1] To pay for snacks
[1] To pay for expenses
[1] To withdraw cash from ATM
[1] To buy gifts/souvenirs
[1] Saves carrying cash
[1] thus reducing the chance of theft
[1] Can obtain cash from ATM / receive mini-statement
[1] with usually no charge
[1] Widely accepted by retailers
[1] Can access his current account
[1] and helps control his spending / budgeting / no interest paid
[1] Cashback on purchases
[1] Gain points
[1] Can obtain special offers / discount vouchers
[1] Used by airlines / hotels for air miles / free flights / room upgrades
[1] Free gifts
[1] Travel insurance
[1] to cover medical bills / lost luggage
[1] Employer's liability insurance
[1] to cover risk of accident to Andrew
[1] Life insurance
[1] to provide a lump sum for his dependants if Andrew dies
[1] Key person
[1] to cover the life of a person important to a business
[1] Health insurance
[1] to provide healthcare to Andrew / his family
[1] Fidelity guarantee insurance
[1] to provide compensation to the firm if Andrew is dishonest
[1] Personal accident insurance
[1] which would be paid out if Andrew became injured as a result of an accident
[1] Motor vehicle insurance comprehensive / third party.
[1] No. Bad management is a non-insurable risk
[1] because a degree of risk cannot be calculated
[1] as there are no past records
[1] Some people may deliberately mismanage a business
[1] in order to make a claim and make a profit
[1] which is against indemnity
[1] The risk should be beyond the control of the insured
[1] as bad management could be avoided by employing better managers / working harder / better decision-making
[1] May obtain lower cost by buying direct.
[1] Subsequent claims may be simpler if relationship with insurance company established.
[1] Insurance companies use call centres with inexperienced staff reading from scripts.
[1] Insurance company may not suggest alternative approaches, but will try to sell a standard policy.
[1] Will usually obtain quotes from several insurance companies, thus ensuring competition and saving time for Andrew's employers.
[1] Should have the expertise to explain the policy and may be able to negotiate lower premiums.
[1] Usually work for a commission that may make the premiums more expensive.
[1] Can be accused of only recommending the companies that will pay the broker the highest commission.
[1] Unless there is a very simple fire risk, then the broker can view the whole market and recommend the most suitable policy.