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1. What do you mean by the term “Insurance”? How does it differ from
“Gambling”?
Insurance is a cooperative device of distributing losses, falling on an individual or his family
over a large number of persons, each bearing a nominal expenditure and feeling secure against
heavy loss.
Insurance has been defined to be that in which a sum of money as a premium is paid in
consideration of the insurer’s incurring the risk of paying a large sum upon a given contingency.

• Insurance is not gambling. The insurance serves indirectly to increase the productivity of
the community by eliminating worry and increase initiative. The uncertainty is changed
into certainty by insuring property and life because the insurer promise to pay a definite
sum at damage or death.
• Insurance is just opposite of gambling.
• In gambling, by bidding the person expose himself to risk of losing.
• In insurance the insured is always opposed to risk and will suffer loss if he is not insured.
• In fact if he does not get his property or life insured he is gambling on his life or property.

2. Explain fully principle of indemnity and doctrine of subrogation in insurance

contract.
A contract of insurance is a contract of 'indemnity'. It means that the insured, in case of loss
against which the policy has been issued, shall be paid the actual amount of loss not exceeding
the amount of the policy, i.e. he shall be fully indemnified. The object of every contract of
insurance is to place the insured in the same financial position, as nearly as possible, after the
loss, as if the loss has not taken place at all.
The doctrine of subrogation is a corollary to the principle of indemnity and applies only to fire
and marine insurances. According to it, when an insured has received full indemnity in respect of
his loss, all rights and remedies which he has against third person, will pass on to the insurer and
will be exercised for his benefit until he(The insurer) recoups the amount he has paid under the
policy.

3. Discuss the classification of risks with examples.

The change of any financial loss of an asset is called risk.
Classification of Risks:
• Financial vs. non-financial risks.
• Pure and speculative risks
• Fundamental and particular risks.

1.Financial vs. non-financial risks.

Financial risks:
These are the risks where the outcome of an event can be measured in monetary terms. The loss
can be assessed and a proper monetary value can be given to those losses.
Examples are-
Material damage to property arising out of a event. Damage to motor cycle.
• Theft of property which may be motor car, machineries, cash and item of household.
• Loss of profit of a business due to fire damaging the material property.
• Personal injuries due to industrial, road or other accidents.
• Death of a bread winner in a family leading to corresponding financial hardship.
• These losses can be replaced, reinstated or repaired or even a corresponding financial
support can be brought about.
Non financial risks:
These are the risks which outcomes can not be measured in monetary terms.
• Examples can be-
 • Choice of car , its brand or color.
• Selection of a restaurant menu.
• Choice of bride.
• Career selection etc.

2.Pure and speculative risks

Pure risks are those risks where the outcome shall result into loss only or at best a break
even situation.
The result is always unfavorable or may be the same situation has remained without giving
birth to a profit.
Examples-
• Cyclone damage possibility to the factory building.
• Fire damage possibility to stock
• Theft possibility to removable items
• Pure risks are insurable.
Speculative risks are those risks where there is the possibility of gain and profit. At least the
intention is to make a profit and no loss.
Examples
• The question of withdrawal quota system
• The question of credit sale.
• These risks are usually not insurable.

3.Fundamental vs. Particular risks

Fundamental risk are the risks which arise from causes that are beyond the control of an
individual group of individuals.
• Examples are-
• Flood, cyclone etc.
• Earthquake, Tsunami
 • Draught etc.
• Fundamental risks were not supposed to be insurable because of magnitude and these are
the responsibility of the state.
Particular risks may be identified as causes arising from personal behavior and effects not being
of that magnitude. These are mostly man created because of their negligence, error in judgment,
carelessness, disregard for law or respect.
Examples are-
• Fire, explosion, machinery breakdown.
• Collapse of bridge, burglary, motor accident etc.

4. Describe the types of life insurance policies.

Life insurance contract may be defined as the contract, whereby the insurer in consideration of a
premium undertakes to pay a certain sum of money either on the death of the insured or on the
expiry of fixed period.
On the basis of duration of policy
1.Whole life policy (cash-value life insurance) : Whole life policies are issued for life. It
means that the policy amount will be paid at the death of the life assured. The life assured
cannot get the policy amount during his life time; only his dependents will get the
advantages of this policy.
• Single premium whole life policy
• Continuous premium whole life policy
• Limited payment whole life policy
• Convertible whole life policy

2.Term policy: Term insurance is for a short period of years ranging from two months to
seven years. Sum assured is payable only in the event of the death of the life assured occurring
during the period, but the assurance comes to an end, should the life assured survive.
• Temporary term policy
• Renewable term policy
• Convertible term policy
 3.Endowment policy: An endowment policy pays the face amount of insurance if the
insured dies within a specified period; if the insured survives to the end of the endowment period,
the face amount is paid to the policy owner at that time. At the present time, endowment insurance
is relatively unimportant in terms of total life insurance in force.
• Ordinary endowment policy
• Pure endowment policy
• Joint life endowment policy
• Fixed term endowment policy
• Educational annuity policy

On the basis of methods of premium payment

• Single premium policy
• Level premium policy
On the basis of Participation of profit
• With profit
• Without profit
On the basis of number of lives covered
• Single life policy
• Multiple life policy
On the basis of methods of claims payment
• Lump-sum policy
• Installment or annuity policy

5.What is “Mortality Table”? Write down some features of mortality table. How does
a mortality table constructed ?
Mortality table is an instrument for anticipation future mortality rates on the basis of mortality
records.
Mortality table is such data which records the past mortality and is put in such form as can be
used in estimating the course of future data.
Features of mortality table:
• Observation of the persons of particular age group
 • Starting from particular age point
• Take into account of nearest time in counting age
• Calculation of yearly rates per thousand
• Manifestation of both the mortality and survival rate
• Statistical base of forecasting

How does a mortality table constructed

1. Data Collection: The construction of a mortality table begins with the collection of
relevant data, typically from a large sample or census of the population under study. This
data includes information such as age, gender, and the number of deaths that occur within
specific age ranges over a given period.
2. Calculation of Survival Probabilities: Using the collected data, survival probabilities are
calculated for each age group. These probabilities represent the likelihood that a person at
a given age will survive to the next age interval.
3. Estimation of Age-Specific Death Rates: Age-specific death rates are then estimated
based on the number of deaths within each age group and the corresponding population
size. These death rates indicate the likelihood of death for individuals within each age
range.
4. Smoothing and Interpolation: Often, statistical techniques are employed to smooth the
mortality rates and ensure that the table represents a coherent pattern of mortality across
different ages. Interpolation may also be used to estimate mortality rates for ages where
data is sparse.
5. Adjustments and Extensions: Mortality tables can be adjusted to account for factors such
as gender, occupation, or socio-economic status, which may influence mortality rates.
Additionally, extensions to the basic mortality table may include projections of future
mortality rates based on assumptions about future trends and improvements in healthcare.
6. Validation and Updating: Once constructed, mortality tables are validated to ensure their
accuracy and reliability. They are continually updated to reflect changes in population
dynamics, healthcare advancements, and other relevant factors.

6.Differentiate among universal Life insurance, industrial life insurance and

group life insurance.
 Universal Life insurance
• Universal life insurance can be defined as a flexible premium policy that provides
protection under a contract that unbundles the protection and savings components.
• The policyowner determines the amount and frequency of the premium payments, which
can be monthly, quarterly, semiannually, annually, or a single payment.
• The premiums, less any explicit expense charges, are credited to a cash-value account from
which monthly mortality charges are deducted and to which monthly interest is credited
based on current rates that may change over time. In addition, universal life policies
typically have a monthly deduction for administrative expenses.
Limitations
• Misleading rates of return
• Incomplete disclosure
• Decline in interest rates
• Right to increase mortality charge
• Lack of firm commitment to pay premiums
Industrial life insurance:
• Sometime called debit insurance, is a class of life insurance that is issued in small amounts,
and the premiums are payable weekly or monthly.
• In the past, the premiums were collected at the insured’s home by an agent of the company.
In recent years, industrial life insurance has also been called home service life insurance,
reflecting the fact that individual policies are serviced by agents who call at the policy
owner's home to collect the premiums.
• The amount of life insurance per policy generally ranges from $5000 to $25,000
Group life insurance:
Group life insurance is a type of insurance that provides life insurance on a group of people in a
single master contract.
• Physical examinations are not required, and certificates of insurance are issued as evidence
of insurance.
• Group life insurance is important in terms of total life insurance in force. Most group life
contracts provide term insurance coverage.
• In 2000, group life insurance accounted for 40% of all life insurance in force in the United
States.
 • It is an important employee benefit provided by employers.

7.What marine perils are considered in case of marine insurance? Describe

different types of marine insurance.
Marine perils means consequent on, or incidental to, the navigation of the sea, that is to say, perils
of the seas, fire, war perils (enemies), pirates, rovers, thieves, captures, seizures, restraints, and
detainment of princes and peoples, jettison, barratry, and other perils, either of the like kind or
which may be designed by the policy.
• Natural perils
• Un-natural perils or moral hazards
• Pirates
• Thieves-rovers
• Enemies
• War ship
• Capture or seizure
• Betrayal
• Jettison
• Fire and explosion
• Strike, riots
Different types of marine insurance :
• Hull Insurance: Insurance of vessel and its equipments are included under hull insurance.
• Cargo Insurance: The cargo may be of any description, for example, wares, merchandise,
property, goods and so on.
• Freight Insurance: Freight is to be payable for the carriage or if the vessel is chartered,
the money to be paid for the use of vessel.
• Liability Insurance: The marine insurance policy may include liability hazards such as
collision or running down. Insurance can also be taken for the expenses involved in non-
compliance of rules and regulations without any intention to deceive.

8.Define fire insurance. Describe the characteristics of a valid contract of fire

insurance.
Fire insurance is an insurance policy covering financial losses caused by damage to property by
fires.
A fire insurance is a contract under which the insurer in return for a consideration (premium)
agrees to indemnify the insured for the financial loss which the latter may suffer due to destruction
of or damage to property or goods, caused by fire, during a specific period.

Characteristics of a valid contract of fire insurance

• A contract of indemnity: Loss can only be recovered up to the sum which was insured.
• Contract of utmost good faith: Insurer must disclose all the necessary facts correctly and
fully, otherwise voidable.
• Year to Year contract: A Fire Insurance is issued only for 1 year
• Principles of Subrogation: Right for an insurer to pursue and Contribution a third party
that caused an insurance loss to the insured. If insured with more than one insurer, each
insurer has to meet the loss only rateably.
• Loss Through Fire It covers only the loss caused proximately by FIRE.
• Surrender Value: Does not carry any Surrender Value or Paid-up Value. If surrendered
voluntarily, it does generate any value. After bearing loss only it can be claimed.
• Insurable Interest: The assured must have INSURABLE INTERST in the subject. i.e.
The owner of the property, up to it’s value.
• CAUSA PROXIMA: In FIRE INSURANCE, If the proximate cause of loss or damage is
fire, then loss is recoverable. The Loss or damage must be related to the subject matter of
the policy.

9.“Life insurance is insurance against dying too soon and endowment insurance
is insurance against living too long” - explain.

1. Life Insurance: Life insurance is designed to provide financial protection for your loved
ones in the event of your untimely death. When you purchase a life insurance policy, you
pay premiums to the insurance company, and in return, they agree to pay out a death benefit
to your beneficiaries upon your death. This death benefit can help your family cover
expenses such as funeral costs, mortgage payments, outstanding debts, and ongoing living
expenses. Essentially, life insurance serves as a safety net, ensuring that your dependents
 are financially secure if you pass away unexpectedly. In this sense, life insurance protects
against "dying too soon."
2. Endowment Insurance: Endowment insurance, on the other hand, is a type of life
insurance policy that offers both a death benefit and a savings or investment component.
Unlike traditional life insurance, endowment policies provide a payout not only in the event
of death but also if the policyholder survives the policy term. If the policyholder outlives
the term, they receive the accumulated savings or investment amount, known as the
endowment value. Endowment insurance is essentially a way to save for the future while
also providing life insurance coverage. It protects against "living too long" by ensuring that
there is a financial cushion or lump sum available for the policyholder at a predetermined
point in the future, regardless of whether they pass away or not.

10. What do you mean by marine insurance? What are the different subject
matters of marine insurance? Describe the procedures for making claim in
marine insurance.

Marine insurance has been defined as a contract between insurer and insured where the insurer
undertakes to indemnify the insured in a manner and to the interest thereby agreed, against marine
losses incident to marine adventure.
Different subject matters of marine insurance:
• Hull Insurance: Insurance of vessel and its equipments are included under hull insurance.
• Cargo Insurance: The cargo may be of any description, for example, wares, merchandise,
property, goods and so on.
• Freight Insurance: Freight is to be payable for the carriage or if the vessel is chartered,
the money to be paid for the use of vessel.
• Liability Insurance: The marine insurance policy may include liability hazards such as
collision or running down. Insurance can also be taken for the expenses involved in non-
compliance of rules and regulations without any intention to deceive.
Procedures for making claim in marine insurance:
• To give the notice
• To assist in enquiry
• To submit the documents relates with claim
o Insurance policy
 o The surveyor's report
o Bill of lading
o Invoice
o Copy of protest
• Notice of abandonment
• Letter of subrogation

11.Discuss various fire insurance policies.

VALUED POLICY :
• It is usually taken where it is not easy to ascertain the value of the property.
• In this policy the indemnity is a fixed amount agreed upon at the time of signing the
contract.
• The insured is benefited when the market value of the property declines , but suffer loss
when the market value appreciates.
• The valued insurance policy is usually offered for such items like jewellery, furs, or
paintings, which value is difficult to estimate once they are damaged or destroyed by fire.
FLOATING POLICY:
• It is taken to cover loss on goods, which are lying in different places and the stock of which
is almost continuously fluctuating.
• It is taken out for those goods which are frequently changing in a warehouse.
• Floating policies are suitable to those traders or products whose raw-materials or
merchandise are lying at different localities or godowns.
• For example:-Some of the goods of other trader are kept in one godown, and few kept in
another godown, some kept in the railway godown or some at the sea port open.
DECLARATION POLICY
• This policy is taken in respect of stock of inventory of the policyholder.
• Since the level of stock which are subject to frequent fluctuations in value the businessman
takes a policy for a maximum amount considered to be at risk and the premium is paid
accordingly.
 • On a fixed date of every month the policyholder declares the amount of stock covered
under the policy to the insurance company.
ADJUSTABLE Policy
• It is issued for existing stock.
• In this policy, premium rate shall be adjusted according to increase or decrease in the value
of stock, this change will be notified to the insurer by the insured.
• In case of loss by fire, the amount notified by the insured at the maturity of the policy is
taken as final and indemnified up to that limit.
• It is a contract limited to merchandise or stock in trade other than farming stock.
SPECIFIC POLICY
• A specific policy is a type of policy in which the property is insured for a specific sum
irrespective of its value.
• If there is loss, the stated amount will have to be paid to the policyholder.
• The actual value of the subject matter is not considered in this respect.
• For example: If a property is insured for Rs. 10000 though its actual value is Rs. 20000. In
the event of loss to property, not more than Rs. 10000 can be recovered.
AVERAGE POLICY
• Where a property is insured for a sum which is less than its value, the policy contain a
clause that the insurer shall not be liable to pay the full loss but only that proportion of the
loss which the amount insured for, bears to the full value of the property.
12. Define Group Insurance Policy and Accident Insurance policy.
A Group Insurance Policy is a type of insurance coverage that provides protection to a group of
individuals, typically employees of a company or members of an organization, under a single
master contract. It's usually offered by employers or organizations to provide benefits such as life
insurance, health insurance, disability insurance, and sometimes other coverages like dental or
vision insurance. Group insurance policies often offer more favorable terms and premiums
compared to individual policies due to the risk being spread across a larger pool of insured
individuals.

Accident Insurance Policy, is a type of insurance coverage that provides financial protection in
the event of accidental injury or death. Unlike health insurance, which typically covers illness
and medical conditions, accident insurance specifically covers injuries sustained from accidents,
such as slips and falls, car accidents, or injuries resulting from recreational activities. Accident
insurance policies may provide benefits such as reimbursement for medical expenses, income
replacement in case of disability resulting from the accident, and lump-sum payments in the event
of accidental death or dismemberment.

13.What do you understand by the central bank? Explain how Bangladesh Bank
control credit in Bangladesh?
A central bank is a bank which constitutes the apex of the monetary and banking structure of its
country and which performs, best it can in the national economic interest.
Methods of Credit Control
1.Quantitative Methods:
1.Bank Rate
Bank rate refers to the official minimum lending rate of interest of the central bank. It is the rate
at which the central bank advances loans to the commercial banks by rediscounting the approved
first class bills of exchange of the banks. Hence, bank rate is also called as the discount rate. by
manipulating the bank rate it is possible to effect changes in the supply of credit in the economy.
During a period of inflation, to arrest the rise in the price level, the central bank raises the bank
rate. When the bank rate is raised, all other interest rates in the economy also go up. As a result,
the commercial bank also raise their lending rates. The consequence is an increase in the cost of
credit. This discourages borrowing and hence investment activity is curbed in the economy. This
will bring about a reduction in the supply of credit and money in the economy and therefore in
the level of prices. On the other hand, during a period of deflation, the central bank will lower the
bank rate in order to encourage business activity in the economy. When the bank rate is lowered,
all other interest rates in the economy also come down. The banks increase the supply of credit
by reducing their lending rates. A reduction in the bank rate stimulates investment and the fall in
the price level is arrested.
2.Open Market Operations
Open market operations refer to the purchase and sale of securities by the central bank. In its
broader sense, the term includes the purchase and sale of both government and private securities.
The theory underlying the operation of open market operations is that by the purchase and sale of
securities, the central bank is in a position to increase or decrease the cash reserves of the
commercial banks and therefore increase or decrease the supply of credit in the economy. The
modus operandi of open market operations can now be explained. During a period of inflation,
the central bank seeks to reduce the supply of credit in the economy. Hence, it sells the securities
to the banks, public and others. As a result of the sale of securities by the central bank, there will
be a transfer of cash from the buyers to the central bank. This will reduce the cash reserves of the
commercial banks. The public has to withdraw money from their accounts in the banks to pay for
the securities purchased from the central bank. And the commercial banks themselves will have
to transfer some amount to the central bank for having purchased the securities. All this shrinks
the volume of cash in the vaults of the banks. As a result the banks will be unable to expand the
supply of credit. When the supply of credit is reduced by the banking system, the consequences
on the economy will be obvious. Investment activity is discouraged ultimately leading to a fall in
the price level.
3.Variable Cash Reserve Ratio
Variable Reserve Ratio refers to the percentage of the deposits of the commercial banks to be
maintained with the central bank, being subject to variations by the central bank. In other
words,altering the reserve requirements of the commercial banks is called variable reserve ratio.It
is interesting to examine the working of variable reserve ratio as a technique of quantitative credit
control. During a period of inflation, the central bank raises the reserve ratio in order to reduce
the supply of credit in the economy and therefore to reduce the price level. When the reserve
requirements of the banks are raised, the excess reserves of the banks shrink and hence the size
of their credit multiplier decreases. It should be noted that the size of credit multiplier is inversely
related to the reserve ratio prescribed by the central bank. An increase in the reserve ratio,
therefore, discourages the commercial banks from expanding the supply of credit. On the contrary
during a period of deflation, the central bank lowers the reserve requirements of the banks in
order to inject more purchasing power into the economy. When the reserve ratio is lowered, the
excess reserves with the banks increase and hence the size of credit multiplier increases. This will
have an encouraging effect on the ability of the banks to create credit. Thus, the central bank
seeks to combat deflation in the economy.
Selective or Qualitative Methods
1.Margin Requirements:
Banks are required by law to keep a safety margin against securities on which they lend. The
central bank may direct banks to raise or reduce the margin.
2.Regulation of Consumer Credit:
3.Rationing of Credit: Rationing of credit, as a tool of selective credit control, originated in
England in the closing years of the 18th century. Rationing of credit implies two things. First, it
means that the central bank fixes a limit upon its rediscounting facilities for any particular bank.
Second, it means that the central bank fixes the quota of every affiliated bank for financial
accommodation from the central bank.
4.Control through Directives: In the post-war period, most central banks have been vested with
the direct power of controlling bank advances either by statute or by mutual consent between the
central bank and commercial banks.
5.Moral Suation: This is a form of control through directive. In a period of depression, the central
bank may persuade commercial banks to expand their loans and advances, to accept inferior types
of securities which they may not normally accept, f ix lower margins and in general provide
favourable conditions to stimulate bank credit and investment.
6. Direct Action: Direct action or control is one of the extensively used methods of selective
control, by almost all banks at sometime or the other. In a broad sense, it includes the other
methods of selective credit controls. But more specifically, direct action refers to controls and
directions which the central bank may enforce on all banks or any bank in particular concerning
lending and investment.
7. Publicity: Under this method, the central bank gives wide publicity regarding the probable
credit control policy it may resort to by publishing facts and figures about the various economic
and monetary condition of the economy. The central bank brings out this publicity in its bulletins,
periodicals, reports etc.

14.What is camels rating system? What factors are considered in this system?
The CAMELS rating system is a supervisory tool used by financial regulators to assess the overall
health and performance of financial institutions, particularly banks and credit unions.
Capital Adequacy
Capital adequacy assesses an institution’s compliance with regulations on the minimum capital
reserve amount. Regulators establish the rating by assessing the financial institution’s capital
position currently and over several years.
Future capital position is predicted based on the institution’s plans for the future, such as whether
they are planning to give out dividends or acquire another company. The CAMELS examiner
would also look at trend analysis, the composition of capital, and liquidity of the capital.

Assets
This category assesses the quality of a bank’s assets. Asset quality is important, as the value of
assets can decrease rapidly if they are high risk. For example, loans are a type of asset that can
become impaired if money is lent to a high-risk individual.
The examiner looks at the bank’s investment policies and loan practices, along with credit risks
such as interest rate risk and liquidity risk. The quality and trends of major assets are considered.
If a financial institution has a trend of major assets losing value due to credit risk, then they would
receive a lower rating.

Management Capability
Management capability measures the ability of an institution’s management team to identify and
then react to financial stress. The category depends on the quality of a bank’s business strategy,
financial performance, and internal controls. In the business strategy and financial performance
area, the CAMELS examiner looks at the institution’s plans for the next few years. It includes the
capital accumulation rate, growth rate, and identification of the major risks.
For internal controls, the exam tests the institution’s ability to track and identify potential risks.
Areas within internal controls include information systems, audit programs, and recordkeeping.
Information systems ensure the integrity of computer systems to protect customer’s personal
information. Audit programs check if the company’s policies are being followed. Lastly, record
keeping should follow sound accounting principles and include documentation for ease of audits.

Earnings
Earnings help to evaluate an institution’s long term viability. A bank needs an appropriate return
to be able to grow its operations and maintain its competitiveness. The examiner specifically
looks at the stability of earnings, return on assets (ROA), net interest margin (NIM), and future
earning prospects under harsh economic conditions. While assessing earnings, the core earnings
are the most important. The core earnings are the long term and stable earnings of an institution
that is affected by the expense of one-time items.

Liquidity
For banks, liquidity is especially important, as the lack of liquid capital can lead to a bank run.
This category of CAMELS examines the interest rate risk and liquidity risk. Interest rates affect
the earnings from a bank’s capital markets business segment. If the exposure to interest rate risk
is large, then the institution’s investment and loan portfolio value will be volatile. Liquidity risk
is defined as the risk of not being able to meet present or future cash flow needs without affecting
day-to-day operations.
15.What is fiscal policy? Acting as clearing house is a general function of any
central bank but how it is done?
Fiscal policy refers to the use of government spending and tax policies to influence economic
conditions, especially macroeconomic conditions. These include aggregate demand for goods and
services, employment, inflation, and economic growth.
The process of clearing house:
• Each member bank of the clearing house prepares a bank-wise list of cheque and drafts
received from its customers and drawn on different banks.
• Representative of East Bank visits the clearing house with the cheques And their list in the
morning and delivers the cheques and drafts to the representatives of the respective banks.
Similarly, he also receives the same things from others.
• The representative returned to their respective banks to meet again in the afternoon.
• The representative of each Bank computes the final balance payable Or receivable his
banks from other banks after taking into account the various amounts of receipts and
payments.
• The final settlement is effected by the supervisor of the clearinghouse by debiting or
crediting the account of the respective banks.

16.Financial innovation has reduced individuals’ need to carry cash. Explain how.

Financial innovation has reduced individuals' need to carry cash through various technological
advancements and services. One example is the development of digital payment methods such as
mobile wallets, online banking, and peer-to-peer payment apps.
With these digital payment options, individuals can easily make transactions using their
smartphones or computers, eliminating the need to carry physical cash. Additionally, the
introduction of contactless payment technology, like tap-to-pay cards and mobile payment
devices, allows for quick and convenient transactions without the need for cash.
The rise of e-commerce platforms has also contributed to reducing the reliance on cash. Online
shopping has become increasingly popular, providing individuals with the ability to make
purchases and payments electronically, eliminating the need for physical cash.

17.‘E-Banking as web-based Banking’- Justify the statement. Briefly explain the

major automated payment techniques used in Bangladesh payment system?
E-Banking refers to the use of electronic technology to provide banking services and products.
This can include a variety of platforms such as ATMs, mobile banking, telephone banking, and
online banking.
Web-based banking, or online banking, specifically involves accessing banking services through
the internet using a web browser. It is one of the most popular forms of E-Banking due to its
convenience and ease of use.
Major automated payment techniques used in Bangladesh payment system:
1. Mobile Financial Services (MFS):
• bKash: One of the most widely used MFS in Bangladesh, bKash allows users to
transfer money, pay bills, and purchase goods and services using their mobile
phones.
• Rocket: A service by Dutch-Bangla Bank, Rocket offers similar functionalities to
bKash, including money transfers, utility bill payments, and mobile recharge.
• Nagad: A newer entrant by the Bangladesh Post Office, Nagad provides digital
financial services like money transfer, bill payment, and merchant payment.
2. Internet Banking:
• Most major banks in Bangladesh offer internet banking services that allow
customers to perform a variety of transactions online, such as fund transfers, bill
payments, and account management.
• Examples include the internet banking services of BRAC Bank, City Bank
(Citytouch), and Eastern Bank Limited (EBL Skybanking).
3. Automated Teller Machines (ATMs):
• ATMs are widely used across Bangladesh for cash withdrawals, fund transfers, and
bill payments. The network is extensive, with significant contributions from banks
like Dutch-Bangla Bank (DBBL Nexus), Islami Bank Bangladesh Limited (IBBL),
and Standard Chartered Bank.
4. Point of Sale (POS) Systems:
• POS systems are used by merchants to accept payments from customers using debit
or credit cards. This system is widely adopted in retail stores, restaurants, and service
centers.
• Banks such as BRAC Bank, Eastern Bank Limited, and City Bank provide POS
solutions to merchants.
5. Automated Clearing House (ACH):
 • The Bangladesh Automated Clearing House (BACH) facilitates the electronic
clearing and settlement of interbank payments. It includes the Electronic Funds
Transfer (EFT) and the Bangladesh Electronic Cheque Processing (BECP) systems.
• This system is crucial for payroll processing, vendor payments, and other large-
volume transactions.
6. Credit and Debit Cards:
• Credit and debit cards issued by various banks and financial institutions are
extensively used for both online and offline transactions. Visa, MasterCard, and
Amex are common in the Bangladeshi market.
• These cards support automated payments for recurring bills, subscriptions, and
online purchases.

18.Describe the major online services provided by the banks in Bangladesh.

1. Internet Banking
• Account Management: Customers can view their account balances, transaction history,
and download statements.
• Fund Transfers: Both intra-bank and inter-bank fund transfers can be initiated online.
This includes transfers between accounts within the same bank and to accounts in other
banks.
• Bill Payments: Customers can pay utility bills (electricity, gas, water), credit card bills,
and other service provider bills.
• Loan Services: Online application for loans, viewing loan statements, and making loan
repayments.
• Fixed Deposit Management: Opening and managing fixed deposit accounts online.
2. Mobile Banking
• Mobile Apps: Banks like BRAC Bank (BRAC Bank Astha), Eastern Bank Limited (EBL
Skybanking), and City Bank (Citytouch) offer comprehensive mobile banking apps.
• Real-Time Notifications: Customers receive instant notifications for transactions,
ensuring they are always informed about their account activities.
• Mobile Recharge: Top-up services for mobile phone credit are available.
 • Merchant Payments: Payments to merchants and service providers through mobile
banking apps.
3. Automated Teller Machines (ATMs)
• Cash Withdrawals: 24/7 cash withdrawal services from ATMs across the country.
• Balance Inquiry: Customers can check their account balance via ATMs.
• Fund Transfer: Some ATMs offer inter-account fund transfer services.
• Bill Payments: Payment of utility bills and other services through ATM.
4. SMS Banking
• Balance Inquiry: Quick balance check via SMS.
• Mini Statements: Receive a summary of recent transactions through SMS.
• Alerts and Notifications: Transaction alerts, low balance alerts, and other notifications
via SMS.
• Fund Transfers: Limited fund transfer services through SMS commands.
5. Point of Sale (POS) Services
• Card Payments: Accepting payments via debit, credit, and prepaid cards at retail outlets.
• EMI Facilities: Offering Equated Monthly Installments (EMI) options for large purchases.
• Loyalty Programs: Integration with loyalty programs and reward points.
6. Online Loan Applications
• Application Submission: Customers can apply for various types of loans online, including
personal loans, home loans, and car loans.
• Document Upload: Securely upload necessary documents required for loan processing.
• Loan Status Tracking: Track the status of loan applications online.
7. E-Commerce Payment Gateways
• Payment Processing: Integration with online merchants to process payments for e-
commerce transactions.
• Secure Transactions: Utilizing secure payment gateways to protect customer information
during online transactions.
8. QR Code Payments
 • Scan and Pay: Using mobile banking apps to scan QR codes for payments at retail outlets
and service providers.
• Interoperability: Interoperable QR codes that can be scanned by multiple banking apps.
9. Online Account Opening
• Digital KYC: Know Your Customer (KYC) process conducted online, allowing new
customers to open accounts without visiting a branch.
• E-Signature: Electronic signature capabilities for account opening documents.

19. What is uncertainty? Distinguish among loss, peril and hazard with example.
uncertainty refers to the unpredictability of events that could result in a financial loss.

Loss, peril, and hazard are terms commonly used in the field of risk management and insurance.
While they are related concepts, they each refer to different aspects of risk:
1. Loss: Loss refers to the reduction or disappearance of value of an asset or resource due to
a particular event or circumstance. It represents the actual harm or damage suffered as a
result of a risk materializing. Loss can be tangible, such as physical damage to property or
financial loss, or intangible, such as loss of reputation or goodwill.
Example: A homeowner experiences a loss when their house is damaged by a fire, resulting in
the need for costly repairs. In this case, the loss is the monetary value of the damage incurred by
the fire.
2. Peril: Peril refers to the cause of a loss or the event that gives rise to the risk of loss. It
represents the specific danger or threat that can lead to harm, damage, or loss. Perils can
be natural, such as floods, earthquakes, or storms, or they can be human-made, such as
theft, vandalism, or accidents.
Example: In the context of homeowners insurance, the peril of fire poses a risk to the insured
property. If a fire occurs and damages the house, fire is the peril that led to the loss suffered by
the homeowner.
3. Hazard: Hazard refers to any factor or condition that increases the likelihood of a peril
occurring or the severity of the resulting loss. Hazards can be physical, moral, or morale-
related. Physical hazards are tangible conditions that increase the risk, while moral hazards
arise from the behavior or actions of individuals that increase the risk. Morale hazards arise
from an attitude of indifference or carelessness toward the risk.
Example: Leaving flammable materials near a heat source in a home creates a physical hazard
that increases the risk of fire. Similarly, a person who deliberately starts a fire to collect insurance
money creates a moral hazard. A homeowner who fails to install smoke detectors or neglects to
maintain fire extinguishers may demonstrate a morale hazard.

20.Explain how risk is diversified through insurance? Give a relevant example.

Risk diversification through insurance involves spreading the potential financial losses associated
with various risks across a large number of policyholders. Insurance companies collect premiums
from policyholders and pool these funds to cover the losses of those who experience insured
events. This pooling of risks allows individuals or businesses to protect themselves against the
financial consequences of unforeseen events without bearing the full burden of the losses alone.
Here's how risk is diversified through insurance with an example:
Example: Automobile Insurance
Imagine a scenario where several individuals own automobiles and face the risk of accidents
causing damage to their vehicles. Each individual faces the potential financial burden of repairing
or replacing their car in case of an accident. However, by purchasing automobile insurance, they
can diversify this risk.
• Pooling of Premiums: Each individual pays a premium to the insurance company in
exchange for coverage. These premiums are pooled together to create a fund that the
insurance company can use to pay for claims.
• Spread of Risk: The insurance company assesses the risk associated with insuring multiple
vehicles and drivers. While some drivers may never have accidents, others may experience
accidents and file claims. By spreading the risk across a large pool of policyholders, the
insurance company can handle the financial impact of claims without any single
policyholder bearing the full burden.
• Risk Sharing: When an insured individual experiences an accident, they file a claim with
the insurance company. The insurance company then uses the premiums collected from all
policyholders to cover the cost of the claim, including repairs to the damaged vehicle or
compensation for total loss.
21. Describe different types of marine policies.
 • Voyage Policies: The policy is issued to cover a particular voyage from one port to
another and from one place to another. The policy mentions the port of departure and
the port of destinations, between which the risk are generally underwritten.
• Time Policies: Under this policy, the subject-matter is insured for a definite period of
time, e.g, from 6 am of 1st January 2010 to 6 am of 1st January, 2011.
• Mixed Policies: The elements of voyage policy and of time policy are combined in this
policy.
• Valued Policies: Under this policy the value of loss to be compensated is fixed and
remain constant throughout the risk except where there is fraud and excessive over
valuation.
• Named Policies: Under this policy, the name of the ship and the amount of insured
cargo are mentioned.
• Block Policies: This policy insures incidental inland risks, too, along with the marine
perils.
• Single Vessel and Fleet Policies: A ship or a fleet of ships is insured in a single policy.
When one policy is assured, it is called single vessel policy and when a fleet of ship is
insured in single policy, it is called fleet insurance policy.

22.“Insurance should be considered as a last resort.”-justify the statement.

The statement "Insurance should be considered as a last resort" suggests that while insurance can
provide valuable protection against financial losses, it should not be the primary or only strategy
for managing risks. This viewpoint is justified for several reasons:
1. Cost Considerations: Insurance premiums can be expensive, especially for
comprehensive coverage or high-risk scenarios. Depending solely on insurance to mitigate
risks can result in significant ongoing expenses. Therefore, it's often more cost-effective to
first explore other risk management strategies that may reduce the likelihood or severity of
losses without relying solely on insurance.
2. Risk Reduction: Instead of simply transferring risk to an insurance company, individuals
and businesses can often take proactive measures to reduce the likelihood of adverse events
occurring. This can include implementing safety protocols, investing in preventive
maintenance, or adopting risk mitigation strategies tailored to specific circumstances. By
addressing risks at their source, it's possible to minimize the need for insurance coverage
or reduce premiums.
3. Self-Insurance: For certain types of risks or for financially stable individuals or
businesses, self-insurance may be a viable alternative to traditional insurance. Self-
insurance involves setting aside funds to cover potential losses instead of purchasing
 insurance policies. While self-insurance requires careful financial planning and risk
assessment, it can offer greater control over coverage, potentially lower costs over time,
and avoidance of insurance premiums.
4. Coverage Limitations: Insurance policies often come with limitations, exclusions, and
deductibles that may leave policyholders exposed to certain types of risks or expenses.
Depending solely on insurance without fully understanding the scope of coverage can lead
to unpleasant surprises when claims are denied or payouts are insufficient to cover losses
adequately.
5. Encouragement of Risky Behavior: Relying too heavily on insurance can sometimes lead
to moral hazard, where individuals or businesses take greater risks or act less responsibly
because they believe insurance will cover any resulting losses. This can undermine efforts
to promote safety, prudence, and responsible risk management practices.