A. General Insurance Princicples Flashcards
What is Law of Large Numbers?
The Larger the number of people with a similar exposure to loss, the predictable actual losses will be.
What are the 3 elements of Insurable Interest?
- Financial (a monetary interest)
- Blood (a relative)
- Business (a business partner).
In P&C, insurable interest must exist at the time of the loss.
What is Risk?
Uncertainty or chance of a loss occurring.
Pure Risk
Results in loss or no change
Speculative risk
Either loss or no change
Hazards
Conditions that increase the probability of an insured loss occurred.
What are the three types of Hazards?
Physical - Hazards arising from material, structural, or operational features of the risk.
Moral - Hazards from lying
Morale - unconcerned about loss
Peril
Cause of loss
What are the 4 types of Perils?
Life insurance - Premature Loss
Health insurance - insures against the loss of income.
Property insurnace - Loss Physical property.
Casualty Insurance - Known as liability
Loss
Reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril.
Indemnity
-Referred to as reimbursement
-Can only collect to the extent of the loss.
Subrogation
-Legal right to seek damages from third parties
- Subrogation prevents the insured from collecting on the loss twice.
Accident vs Occurrence Accident
Accident - Sudden, unplanned, and unexpected event
Occurence - Losses from continuous or repeated exposure
Named Peril Vs. Special (Open) Peril
Peril - Specific loss
Named Peril - Breadth of coverage provided under an insurance policy for specific loss
Open Peril - Breadth of coverage provided under an insurance policy against any risk of loss not specifically excluded.
Negligence
Failure to use the care that a reasonable, prudent person would have.
