Question

Assignment Question(s):​​​​​​(Marks5)

Q1. Review the information about types of insurance and identify that in each of the following cases, which type of insurance will be applicable for insured: (1 Mark)

a. Insurance that covers movable property. An example of such kind of property could be a tourist's personal property.

b. Insurance that covers the loss that arises due to sickness and by visiting to a doctor.

c. Insurance covers the risk of insured arises because of an accident when he was driving his car and got damage in the vehicle.

d. Insurance that covers damage of the house property of policyholder.

e. Due to short circuit, building owned by insured got a fire and got loss of significant items.

Answer:

Q3. What are the differences between statutory and GAAP accounting and explain pillars of the statutory accounting principles? (2 Marks)

Answer:

Answer 1

SOLUTION 1

A) Personal property insurance which may include electronics, furniture etc.

B) Health Insurance

C) Personal Accident Insurance

D) Home Insurance

E) Fire Insurance

SOLUTION 3

Because of how unique insurance companies are, statutory accounting principles are the procedures used in the industry. According to the National Association of Insurance Commissioners, all insurance companies must follow SAP. Unlike traditional businesses, an insurance company’s annual statement indicates its value as if it were in liquidation rather than continuing in business.

Generally accepted accounting principles (GAAP) is the method that the majority of businesses use. The main difference with statutory accounting is that GAAP assumes that the company is going to stay in business rather than liquidate.

There are different set of rules for the prepration of financial statements and these rules are issued as discussion drafts, and public comments are solicited, before they are codified in the NAIC Accounting Practices and Procedures Manual.