PRODUCT PROMOTION (12 LESSONS)
Compensation is paid after the death of the assured
Compensation is paid after the expiry of an agreed period
Premiums are paid throughout the life of the assured
Premiums are paid only during an agreed period
Benefits go to the dependents rather than the assured
The assured benefits unless death proceeds the expiry of the agreed period
Aims at financial security of dependants
Aims at financial security of the assured and dependants
- Term insurance- The insured here covers his life against death for a given time period e.g. 1yr, 5yrs etc. If the policyholder dies within this period, his/her dependants are compensated. If the insured does not die within this specified period, there is no compensation. However, a renewal can be taken.
- Education plan/policies - This policy is normally taken by parents for their children’s future educational needs.
The policy gives details of when the payments are due.
- Statutory schemes - The Government offers some types of insurance schemes which are aimed at improving/providing welfare to the members of the scheme such as medical services and retirement benefits.
A member and the employer contribute, at regular intervals, certain amounts of money towards the scheme.
- Widows and children pension scheme (W.C.P.S)
Characteristics of life Assurance
- It is a cover for life until death or for a specified period of time
- It may be a saving plan
- It is normally a long term contract and does not require an annual renewal
- It has a surrender value
- It has a maturity date when the assured is paid the sum assured bonuses and interests.
- A life assurance policy can be assigned to beneficiaries
- The policy can be any amount depending on the assureds’ financial ability to pay premiums
- The policy can be used as security for a loan
1. General insurance (property insurance)
General insurance is usually divided into;
- Fire insurance/department
- Accident insurance/department
- Marine insurance/department
- These provide compensation for partial or total loss to a vehicle if the loss results from an accident.
- The policy could either be third party or comprehensive.
- Third party policies cover all damages caused by the vehicle to people and property other than the owner and his/her vehicle. This includes pedestrians, fare-paying passengers, cows, fences and other vehicles
Comprehensive policy covers damages caused not only to the third party but also to the vehicle itself and injuries suffered by the owner. Comprehensive policies include full third party, fire, theft and malicious damage to the vehicle.
Personal accident policy
- Injury to the person
- Partial or total physical disability as a result of the injury
- Loss of income as a result of death
In case of a partial or total disability as a result of accident, the insured can be paid on regular periods, e.g. monthly as stipulated in the policy.
Compensation for injuries where one loses a part of his/her body can be done on a lump sum basis.
The insured is also paid the value of hospital expenses incurred if hospitalized as a result of an accident.
Cash and / or Goods in Transit policies
E.g. Goods and cash moved from business to the markets, from suppliers to business etc.
Burglary and Theft policies
Burglary policies are enforceable only if the insured has met the specified safety and precautionary measures for protection of the insured items.
- How much money should be maintained in different kinds of safety boxes?
- Positioning of each of the cash boxes is also an important precautionary measure.
Fidelity Guarantee policies
- The losses may be as a result of embezzlement, fraud, arithmetical errors e.t.c
- The policies may cover specified employees or all the employees
Workmen’s compensation (Employer’s Accident liability)
The employer insures his employee against industrial injuries i.e the employer is only liable for the compensation of workers who suffer injuries at work.
This insurance covers injury, damages or losses which the business or its employees cause to the public through accidents.
The insurer pays all claims from the public up to an agreed maximum
This policy covers firms against losses that might result from debtor’s failure to pay their debts.
This type of insurance covers ships and cargo against the risk of damage or destruction at the sea. The main risks sea vessels are exposed to include; fire, theft, collision with others, stormy weather, sinking etc.
Types of Marine Insurance policies
This policy covers the body of the ship against loss or damage that might be caused by sea perils.
Included here are any equipment, furniture or machinery on the ship.
A special type of marine hull is the part policy, which is for a specified period when the ship is loading, unloading or at service.
This type of policy covers the cargo or goods carried by the ship
The policy is taken by the owners of the sea vessels to cover the cargo being transported. It has the following sub-divisions.
- Voyage policy - Here cargo and ship are insured for a specific voyage/journey. The policy terminates automatically once the ship reaches the destination.
- Time policy - Here insurance is taken to cover losses that may occur within a specified period of time, irrespective of the voyage taken
- Fleet policy - This covers a fleet of ships, i.e. several ships belonging to one person, under one policy.
- Floating policy - This policy covers losses that may occur on a particular route, covering all the ships insured along that route for a specified period
- Mixed policy - This policy provides insurance for the ship and cargo on specified voyages and for a particular period of time. No compensation can be made if the ship was on a voyage different from the ones specified even if time has not expired
- Composite policy - This is where several insurance companies have insured one policy of a particular ship especially when the sum insured is too large to be adequately covered by one insurer.
- Construction policy/builders policy - This covers risks that a ship is exposed to while it is either being constructed, tested or being delivered.
- Freight policy - This is an insurance cover taken by the owner of the ship for compensation against failure to pay hiring charges by a hirer of the ship.
- Third parties liability - This is an insurance policy taken by the owner of the ship to cover claims that might arise from damage caused to other people’s property.
Description of marine losses
This occurs where there is complete loss or damage to the ship and cargo insured. Total loss can be constructive or actual.
In Actual total loss, the claims are as a result of the ships and/or cargos complete destruction. It could also occur;
When a ship and its cargo are so damaged that what is salvaged is of no market value to both the insurer and the insured.
When a ship is missing for a considerable period of time enough to assume that it has sunk.
Constructive total loss occurs when the ship and/or cargo are totally damaged but retrieved. It may also occur;
Where a ship and its cargo are damaged but of market value. This could be as a result of decision to abandon the ship and cargo as the probability of total loss appears imminent.
If the cost of preventing total loss may be higher than that of the ship and its cargo when retrieved e.g. many lives may be lost in the process of trying to prevent total loss.
- General average - This is a loss that occurs as a result of some of the cargo being thrown into the sea deliberately to save the ship and the rest of the cargo from sinking. The losses made are shared by the ship owners and the cargo owners proportionately as the effort was in the interest of both.
- Particular average - This occurs where there is a partial but accidental loss to either the ship or the cargo. When this happens each of the affected party is solidly responsible for the loss that has occurred to his property. A claim can, however be made if the loss incurred amounts to more than 3% of the value insured.
In order to claim for compensation as a result of loss by fire, the following conditions must be fulfilled;
- Fire must be accidental
- Fire must be immediate cause of loss
- There must be actual fire.
Consequential loss policy; (profit interruption policy)
It is offered to protect future earnings of an enterprise after fire damage.
- Sprinkler leakage policy - This provides cover against loss or damage caused to goods or premises by accidental leakages from firefighting sprinklers
- Fire and Related perils policy - This covers buildings which include factories, warehouses, shops, offices and their contents. The policy does not cover loss of profit arising from fire damage.
Characteristics of General Insurance
- It’s a contract of indemnity
- It cannot be assigned even to ones relatives
- The insured must have an insurable interest in the property to be insured
- Premiums charged depends on the degree of risk, the higher the premium charged.
- Compensation for loss can only be up to a maximum of the value of the insured property or the sum insured in case of under insurance.
- It has no surrender value
- It’s normally a short term contract which can be renewed periodically, usually after one year.
Factors to be considered when Determining Premiums to be charged
- Health of the person
- Frequency of occurrence of previous losses
- Extent of the previous losses
- Value of the property insured
- Occupation of the insured
- Age of the person or of the property in question
- Location of the insured(address and geographical location)
- Period to be covered by the policy
- Residence of the insured.
Procedure for taking a policy
- Filling a proposal form
- Calculation of the premium to be paid
- Issuing of cover note (Binder)
- Issuing of the policy
Procedure of claiming compensation
- Notification to the insurer - The insurer has to be notified about the occurrence of any incident immediately.
- Filling a claim form - The insurer provides the insured with a claim form which he fills to give details of the risk that has occurred
- Investigation of the claim - The insurer arranges to investigate the cause of the incident and to assess the extent of the loss incurred. The insurer is then able to establish whether the insured is to be compensated and if so, for how much.
- Payment of claim - On receipt of the report of the assessor, the insurer pays the due compensation to the insured. (Payment of the compensation shows that both the insurer and the insured have agreed on the extent of the loss and the payment is the settlement of the claim)
Insurance and Gambling
insurance questions on topic
Describe the procedures that should be followed when taking an insurance policy. (10 marks)
2. 1996 P2
Explain four ways in which the insurance industry promotes the growth of business enterprises. (5 marks)
3. 1997 P2
Explain four ways in which the insurance industry contributes to the development of Kenya’s economy. (10 marks)
4. 1998 P2
Discuss various insurance policies under which an insurance company would not compensate the insured in the event of the loss. (10 marks)
5. 1999 P2
Discuss various insurance policies that the owner of a supermarket may find it useful for the business. (12 marks)
6. 2000 P2
Explain four benefits of the ‘pooling of risks’ to an insurance company. (8 marks)
7. 2001 P2
Explain the factors that may make it necessary for an insurance company re-ensure.
8. 2002 P2
Explain the meaning of the following terms as used in insurance (10 marks)
i) Uberrimae fidei
iii) Third party motor vehicle insurance
9. 2003 P2
Discuss four circumstances under which an insurance contract may be terminated. (8 marks)
10. 2004 P2
Explain five benefits that could be enjoyed by a person who decided to take out an endowment policy. (10 marks)
11. 2006 Q2 P1
Outline four risks against which a shopkeeper may insure. (4 marks)
12. 2007 Q3 P1
Outline three features of a Re – insurance company
13. 2008 Q22 P1
Elephant Enterprises acquired a building valued at sh 1 000 000 on 1 January 2007. The building was insured with two insurance Companies. Zebra and Simba for sh. 600 000 and Sh.400 000 respectively. In May 2007, fire damaged the building, causing Elephant Enterprises to suffer a loss of 20% of the building value. Determine contribution made by Simba and Zebra to cover the loss. (4 marks)
14. 2009 Q25 P1
KAMAT owned a motor vehicle, valued at sh 1,000,000. He comprehensively insured the car at Sh 800,000. The motor vehicle was involved in an accident and declared a write off. Calculate the amount KAMAT should get from the insurer. (4 marks)
15. 2010 Q11 P1
Outline four differences between insurance and assurance. (4 marks)
16. 2012 Q4a P2
(a) Explain five characteristics of property insurance. (10 marks)
warehousing - kcse business studies notes, objectives, syllabus, schemes of work, questions, answers and more
Q & A
WAREHOUSING (6 LESSONS)
By the end of the topic, the learner should be able to:
- explain the meaning and importance of ware housing to business
- discuss the essentials of a warehouse
- identify the various types of warehouse
- explain the advantages and disadvantages of each type of warehouse.
TOPICS / SUB-TOPIC BREAKDOWN
- Meaning and importance of warehousing
- Essentials of a warehouse
- Types of warehouses
- Advantages and disadvantages of each type of warehouse
A warehouse is a building for storing goods and services until the need for them arises. A warehouse is also usually referred to as a go down, silo or depot.
Warehousing is the process and the systems for relieving goods, protecting them against all types of hazards and ensuring their availability to those who need them. Therefore, it involves three main processes:
- Receiving goods into a warehouse;
- Storing them
- Releasing them to the users.
Importance of Warehousing to Business
- It enables a steady flow of goods into the market as the producers store their commodities and regulating their supply as needs arise;
- It stabilizes the prices by reducing the supply of goods when the market is faced with surplus and increasing the supply whenever there is shortage;
- It protects the goods from adverse weather conditions thereby upholding their quality until they are sold;
- It facilitates the bridging of time between when the goods are manufactured and when they are demanded. This is especially so for goods with seasonal demands;
- It acts as a reserve that can meet a sudden unexpected demand, for instance cereals can be stored in a warehouse just in case a draught strikes;
- It enables ample time and opportunity for such practices like blending, branding, packaging, grading and sorting out of goods before they are sold.
- Warehousing ensures that goods are protected from loss through theft or pilferage;
- It enables buyers to inspect the goods before they buy them;
- Warehousing allows time for some goods to ripen or mature before they are sold, for instance ripe bananas or tobacco leaves;
- It encourages specialization in production and distribution. Producers concentrate on producing while distributors store the goods for sale to the consumers;
- By allowing manufacturers to buy raw materials in bulk as they await their needs to arise, warehousing ensures a continuous production schedule;
- It allows importance ample time to look for a market.
Essentials of a warehouse
- Proper buildings suitable to house various types of goods;
- They should be conveniently located to enhance accessibility by the users;
- Proximity to a good transport network system to ensure smooth movement of goods in and out;
- The warehouse should be equipped with appropriate protection equipment to keep the goods safe from water, sunshine, human animals, excess heat and such factors;
- It should be spacious enough to enable both storage of goods and movement of goods and personnel;
- It should be equipped with proper facilities for handling goods like forklifts and an necessary working materials and tools to facilitate operation;
- It should be equipped with adequate facilities to care for goods for instance coldroom facilitates for perishable goods;
- It should be manned by well trained staff for efficient delivery of services;
- The warehouse should be equipped with an efficient communication network.
- A warehouse should conform to the law of the land.
- It should have proper recording system to monitor movement of goods.
Types of Warehouses
I. Warehouse Types Based on Ownership
These warehouses are owned by individuals for storing goods. They include:
- Wholesalers warehouse – they enable the wholesalers to buy goods from the producers in bulk and prepare them so that they will be ready whenever the retailers need them;
- Producer’s warehouses – they store producer’s goods before the goods are released to the market. They are most conveniently located near the producers or their clients.
- Retailers – they are commonly owned by some large scale retailers like the chain store and supermarkets to suit the purchase of goods in large quantities and sell them gradually.
Advantages of private warehouses
- They enable the manufacturers more control over the manufacturing operations. They enable for instance coordination between the manufacturing process and delivery to the market
- They are usually flexible enough to adapt to the different requirements for different goods by offering special facilities not accessible in public warehouses;
- The owner can custom make the warehouse to suite any need;
- The owner does not incur the cost of hiring space unlike in public warehouse;
- Decision making is independent and therefore quick since the owner does not have to consult;
- The owner is not ted down by procedures of receiving and issuing the goods unlike in public warehouses;
Disadvantages of public warehouses
- When there is low volumes the resources may become underutilized;
- High initial cost of production;
- The owners may suffer some problems associated worth small scale firms like lack of enough funds to employ adequately qualified personnel.
The term public implies that these warehouses can be used any member of the public to store his/her goods whereby the owners of the premises lend parts or the entire warehouse to any individual. To enhance versatility and suitability, the owners site the warehouses strategically near ports. This is because they are most commonly used by importers or exporters.
Many public warehouses offer some additional services like packaging, clerical services, market reports, preparing export samples and insuring the goods. Ownership of the goods in the warehouse is usually proved and transferred from one owner to another through a document known as a warehouse warrant. This enables the owner of the goods to sell goods in the warehouse without having to physically transfer them from one place to another.
Advantages of Public Warehouse
- Public warehouses enable various small scale owners of goods to come together and sell their commodities together thus enjoying the economies of scale;
- The owner does not have to construct his/her own warehouse;
- Very convenient to traders since the goods can be sold while still in the warehouse;
- Goods are insured against some risk like damage by fire and theft;
- Traders can rent space to store their goods;
- The warehouse can offer additional services;
- The trader can access short term loans with the goods in the warehouse as collateral.
- The goods in the warehouse can be used as a collateral for a loan;
Disadvantages of Public warehouse
- Hiring space can eventually be more costly than constructing premises in the long run;
- Space allocation is not a guarantee, it depends on availability;
- The hirer may lose customer contact since they purchase directly from the premises;
- The presence of other suppliers in the warehouse brings in some competition;
- The presence of several hirers may lead to a complication and prolonged documentation and receipting process;
- Inconveniences emanate from the distant location of the warehouse from the hirer’s presence;
ii. Warehouse Types Based on Goods Stored
They store imported goods prior to payment of the duties. The warehouse owner’s offers cash guarantee to assure that the goods will not be released before clearing the duties. Goods under transit to another country may not attract duties, including those that are packaged outside the warehouse. The goods may be sold inside the warehouse and the new owner undertakes the payment of the taxes. Once cleared, the owner is issued with a warrant of release.
Features of Bonded Warehouses
- Goods can be sold while inside the warehouse;
- Goods are released only upon production of the warrant of release;
- Storage charges are made on all the goods under storage;
- Goods can be bonded till custom duty is paid;
- Goods can be inspected or prepared for sale while still in the warehouse;
- Goods can be re-exported while in the warehouse.
Advantages of using Bonded Warehouses to the importer
- Relieves the importer the burden of securing the goods;
- Some goods lose weight while in the warehouse an advantage to those whose amount of tax depends on the weight;
- It offers an opportunity to prepare the goods for sale;
- Some goods improve in quality while in the warehouse due to maturation duration;
- The importer transfers the burden of paying the duty onto a buyer who buys the goods while still in the warehouse;
- The importer can look for the market of the goods even before paying the tax.
Disadvantages of using Bonded Warehouses
- The importer pays rent for the space of goods;
- In case the importer fails to pay the duty, the custom authorities may be auction the goods;
- Withdrawing goods from the warehouse in bits ends up with a higher total tax than a one off fee.
Goods in these types of warehouses are not under the control of the custom authorities. The goods do not have any pending tax. These include locally manufactured goods or imported goods whose duty has been cleared.
Advantages of Free Warehouse
- Cheaper than bonded warehouse since no duties charges;
- Goods do not risk auctioning since there are no taxes charged;
- The warehouses are usually conveniently located for the goods’ owners;
- Release of goods cannot be not delayed by complicated protocols of having to produce signed release warrants
Disadvantages of Free Warehouse
- Inspection of goods is relaxed and therefore it is susceptible to habour illegal goods;
- The storing activity does not earn the government any revenue since no tax is paid;
- Hoarding of goods can occur in these uninspected warehouses.
Current Trends and Emerging Issues in Warehouses
- Computerised monitoring systems are tracking the goods inside and outside the warehouses;
- Conveyor belts and other mechanisms are replacing manual movement of goods in the warehouses;
- Newer designs with improved storage capacities are coming up;
- Better storage facilities like the use of racks is being employed in the warehouses;
warehousing kcse questions and answers
Outline four features of a bonded warehouse (4 marks)
2. 1995 P2
Explain five ways in which warehousing facilitates trade.
3. 1996 P1
Highlight four ways in which a warehouse is useful to a trader. (4 marks)
4. 1997 P1
List three advantages of warehousing to a manufacturer. (3 marks)
5. 1997 P2
Lobo Traders intends to consult a warehouse. Explain five measures that
Lobo would take to ensure smooth functioning of the warehouse
6. 1998 P1
Outline four benefits that consumers get from a warehousing (4 marks)
7. 1999 P1
Outline four factors that a trader would consider in locating a warehouse. (4 marks)
8. 2000 P1
State four benefits that a government gets from a bonded warehouse. (4 marks)
9. 2000 P2
In what ways does warehousing facilitate trade in a country?
10. 2001 P1
State four features of a bonded warehouse (5 marks)
11. 2002 P1
State four advantages of public warehouse to retailers. (4 marks)
12. 2003 P1
The table below contains descriptions relating to some types of warehouse. In the space provided, write the type of warehouse to which each description refers.
In which four ways are consumers likely to suffer in a situation where there is no warehousing?
14. 2007 Q13 P1
Outline four benefits to a business that uses its own warehouse. (4 marks)
15. 2007 Q6a P2
a) Explain five features that you would consider in establishing a warehouse for imported goods. (10 marks)
16. 2008 Q3 P1
State four ways in which a warehouse is of importance to a manufacturer. (4 marks)
17. 2010 Q3 P1
Name the types of warehouses associated with each of the statements given below: (4 marks)
Outline four conditions under conditions under which a warehouse may be considered to operating efficiently. (4 marks)
Business Studies Notes Form 1 - 4
BUSINESS STUDIES FORM 3 NOTES
BUSINESS STUDIES NOTES
CHAIN OF DISTRIBUTION
Demand And Supply
DOCUMENTS USED IN HOME TRADE
ECONOMIC DEVELOPMENT AND PLANNING
FORM 1 LEVEL
FORM 3 BUSINESS STUDIES NOTES
Forms Of Business Units
Free On Board (FOB)
Free On Rail (FOR)
Intro To BS
Means Of Payments
MONEY & BANKING
On Nearest Offer (ONO)
SATISFACTION OF HUMAN WANTS
Terms Of Payments
THE LEDGER AND THE CASHBOOK
THEORY OF THE FIRM
Atika School Team