Chapter 1 Flashcards
When is a collective policy issued?
When a risk is co insured
The time to delay between the receipt of premiums and the occurrence of claims creates…
Premium reserve
What does a money policy provide cover for?
all risks of loss, destruction or damage
What is the primary function of insurance?
To act as a risk transfer mechanism
For companies that are quoted on the stock market what is it a legal requirement to do?
Identify all significant risks to what the business is exposed.
Particular risk
This is when we have more control to prevent it, however it may still occur.
For example: Fire, theft or accidents
Speculative risk
When you could potentially gain from the event occurring as opposed to losing
Fortuitous risk
This is an occurrence of a risk that cannot be predicted
What is a first loss policy
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
Pure risk
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
Financial risk
Able to pinpoint a worth that you will lose financially as a result of a risk occurring
Non-financial risk
A risk for which an insurer is unable to identify an idea of financial loss as result of the risk occurring
Within public policy
This is to take out insurance that condones with the following of public policies/laws
Against public policy
To take out insurance for an event which goes against public policies/laws
For example: Insurance against getting a speeding ticket)
Insurable interest
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
What is a risk?
- The possibility of a loss
- The possibility of an unfortunate occurrence
- The chance of a gain
- Unpredictability
Homogenous exposure
Looks at past statistics so premiums can be set
Frequency
Refers to the number of claims that an insurer expects to see
Severity
Refers to the cost of claims
Physical hazard
Relates to the physical characteristics of the risk.
- Security protection in a shop
- Construction of a property
- Age of proposer
Moral hazard
Relates to the attitudes and behaviour.
- Carelessness
- Behaviour
- Social attitudes
Peril
That which gives rise to a loss
Hazard
That which influences the change of loss/peril occurring
Risk
That which COULD cause the loss
Uncertainty and unpredictability
Risk management
Identify, analyse and control
What is ‘Pooling of risks’
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
Main types of insurance
Property, pecuniary, motor, liability, marine and aviation insurance
