Chapter 1

Question 1

When is a collective policy issued?

Answer 1

When a risk is co insured

Question 2

The time to delay between the receipt of premiums and the occurrence of claims creates…

Answer 2

Premium reserve

Question 3

What does a money policy provide cover for?

Answer 3

all risks of loss, destruction or damage

Question 4

What is the primary function of insurance?

Answer 4

To act as a risk transfer mechanism

Question 5

For companies that are quoted on the stock market what is it a legal requirement to do?

Answer 5

Identify all significant risks to what the business is exposed.

Question 6

Particular risk

Answer 6

This is when we have more control to prevent it, however it may still occur.

For example: Fire, theft or accidents

Question 7

Speculative risk

Answer 7

When you could potentially gain from the event occurring as opposed to losing

Question 8

Fortuitous risk

Answer 8

This is an occurrence of a risk that cannot be predicted

Question 9

What is a first loss policy

Answer 9

This is when an insured doesn’t think that the full value of the property is at risk. They may request the policy has a sum insured that is less than the actual value

Question 10

Pure risk

Answer 10

If you were to have an insured event occur and the outcome of the event left you in a loss it would be a pure risk

Question 11

Financial risk

Answer 11

Able to pinpoint a worth that you will lose financially as a result of a risk occurring

Question 12

Non-financial risk

Answer 12

A risk for which an insurer is unable to identify an idea of financial loss as result of the risk occurring

Question 13

Within public policy

Answer 13

This is to take out insurance that condones with the following of public policies/laws

Question 14

Against public policy

Answer 14

To take out insurance for an event which goes against public policies/laws

For example: Insurance against getting a speeding ticket)

Question 15

Insurable interest

Answer 15

When a person can prove that you would suffer financially as a result of a risk occurring you are able to prove you have insurable interest

Question 16

What is a risk?

Answer 16

• The possibility of a loss
• The possibility of an unfortunate occurrence
• The chance of a gain
• Unpredictability

Question 17

Homogenous exposure

Answer 17

Looks at past statistics so premiums can be set

Question 18

Frequency

Answer 18

Refers to the number of claims that an insurer expects to see

Question 19

Severity

Answer 19

Refers to the cost of claims

Question 20

Physical hazard

Answer 20

Relates to the physical characteristics of the risk.

• Security protection in a shop
• Construction of a property
• Age of proposer

Question 21

Moral hazard

Answer 21

Relates to the attitudes and behaviour.

• Carelessness
• Behaviour
• Social attitudes

Question 22

Peril

Answer 22

That which gives rise to a loss

Question 23

Hazard

Answer 23

That which influences the change of loss/peril occurring

Question 24

Risk

Answer 24

That which COULD cause the loss

Uncertainty and unpredictability

Question 25

Risk management

Answer 25

Identify, analyse and control

Question 26

What is ‘Pooling of risks’

Answer 26

This is the principle whereby the losses of the few are paid by the premiums of the many who, facing the same risks, suffer no loss

Question 27

Main types of insurance

Answer 27

Property, pecuniary, motor, liability, marine and aviation insurance