Chapter 1 Flashcards

1
Q

Risk Management

A

The means of attempting to deal with the risks we face

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2
Q

Definitions of risk (4)

A
  1. Possibility of something unfortunate happening. 2. doubt concerning somethings outcome. 3. unpredictability. 4. possibility of loss.
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3
Q

Risk Transfer Mechanism

A

The acceptance of an unknown future potential risk by an insurer for an agreed premium.

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4
Q

Risk-Seeking

A

More inclined to take on risk

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5
Q

Risk-Adverse

A

Less inclined to take on risk

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6
Q

3 reasons why risk management is important

A
  1. Reduces potential for loss. 2. Gives shareholders confidence. 3. Able to quantify risk for future benefit
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7
Q

Risk appetite

A

How risk-seeking or risk-adverse someone is

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8
Q

Level or risk is determined by…

A

…Frequency & Severity

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9
Q

Elements of Risk Control (3)

A

control, reduce and/or eliminate risk

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10
Q

Aspects to controlling risk (2 & e.g. for each)

A

Physical (sprinkler/alarm) - Financial (contracts are well worder)

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11
Q

the concept of uncertainty

A

Implies doubt about the future, as a result of incomplete knowledge

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12
Q

Frequency

A

How oftne it will happen

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13
Q

Severity

A

How serious it will be if it happens

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14
Q

Peril

A

That which gives rise to a loss

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15
Q

Hazard

A

That which influences the effect of the peril

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16
Q

Physical Hazard

A

Physical characteristics of the risk that includes measurable dimensions of the risk

17
Q

Moral Hazard

A

The attitudes and behaviour of people involved

18
Q

Examples of Moral Hazards (3)

A

Carelessness (A truck driver’s lack of care), Dishonesty, Social Attitudes (e.g. person who regards insurance fraud as acceptable

19
Q

Insurable categories of risk (3)

A

Financial, Pure, Particular

20
Q

Uninsurable categories of risk (3)

A

Non-Financial, Speculative, Fundamental

21
Q

Financial risk

A

Financially measurable

22
Q

Non-Financial risk (e.g.)

A

Sentimental value of something

23
Q

Speculative Risk

A

A possibility of gain but not of loss

24
Q

Pure Risk

A

Possibility of loss but not to gain

25
Q

Fundamental risk (e.e.g)

A

Famine, Nuclear blast

26
Q

Particular risk (+e.g.)

A

Localised in effect - car collision or factory fire

27
Q

A Fortuitous Event

A

Accidental, or unexpected and not inevitable

28
Q

Insurable Interest

A

Legally recognised financial relationship between the insured and the object or liability being insured

29
Q

Homogenous Exposures

A

the risks are similar to those seen before

30
Q

Primary functions of risk (3)

A
  1. Spreading the risk 2. Providing degree of certainty/peace of mind 3. Transferring risk
31
Q

Employers’ Liability Act 1969

A

Compulsory for employers in GB to effect employers’ liability insurance

32
Q

Road Traffic Act 1988

A

Compulsory to have motor insurance (third party is granted automatically)

33
Q
A