1. Fundamental principles of insurance Flashcards
List 3 reasons risk management is important
Reduces potential for loss
Gives shareholders confidence in business operation
Provides a disciplined approach to quantifying risk
Define risk management
The identification, analysis, and economic control of those risks which can threaten the assets or earning capacity of an enterprise
What are the two aspects of risk control?
Physical controls - installing sprinklers and alarm systems
Financial controls - making sure that contracts are well-worded
What are the two components of risk?
Uncertainty
Level of risk (frequency and severity)
Define peril
That which gives rise to a loss (ie fire or flood)
Define hazard
That which influences the operation or effect of the peril (physical or moral)
What are speculative risks?
Risks where there is possibility of gain as well as loss
What are pure risks?
Risks where there is only the possibility of loss (or break even)
What are fundamental risks?
Risks that occur on such a scale as to be uninsurable (famine or recession)
What are particular risks?
Localised or personal risks in their cause and effect
What features does an insurable risk have?
Fortuitous
Insurable interest
Not against public policy
Not a one off
What are some reasons for buying insurance?
Attitude to the risk
Price they will pay for peace of mind
Extent of choice about insuring the risk
What are 3 primary functions of insurance?
Spreading the risk
Providing certainty
Tranferring risk
What are 6 secondary functions of insurance?
Not setting large sums of money aside
Confident business operation
Protected jobs
Losses reduced in size and number
Insurers are largely investors of funds
Invisible exports
What are 4 compulsory insurances in the UK?
Employer liability
Motor
Public liability (riding establishments)
Liability (dangerous wild animals and / or dangerous dogs)
