Chapter 2 - Insurance And Risk Flashcards
Adverse Selection
The tendency of persons with a higher chance of loss to seek insurance at standard rates, which if not controlled by underwriting, results in higher-than-expected loss levels.
Casualty Insurance
A broad field of insurance that covers whatever is not covered by fire, marine, and life insurance; casualty lines include auto, liability, burglary and theft, workers compensation, and health insurance.
Commercial Lines
Property and Casualty coverage for business firms, non-profit organizations, and government agencies.
Expense Loading
The cost of doing business that’s added to the pure premium.
What expenses are commonly covered by Expense Loading? (5)
Commissions General administrative State Premium Taxes Acquisition expenses Contingency and Profit allowance
Fidelity Bonds
Cover loss caused by dishonest or fraudulent acts of employees.
Fortuitous Loss
A loss that is unforeseen and unexpected by the insured and occurs as a result of chance.
Indemnification
The insured is restored to their approximate financial position prior to the loss occurring.
Inland Marine Insurance
Coverage for goods being shipped on land, including commercial and personal property.
What are the commercial products covered by inland marine insurance?
Imports
Exports
Domestic shipments
Instrumentalities of transportation
Insurance
The pooling of fortuitous losses by transferring risks to insurers.
The three agreements of insurance companies are:
From Insurance definition
Indemnify insured for loss
Provide pecuniary benefits
Render services connected with the risk insured against
Law of Large Numbers
The greater the number of exposures, the more closely the actual results approach the probable results (using an infinite number of exposures)
Liability Insurance
Coverage of the insured’s legal liability arising out of property damage or bodily injury to others.
Life Insurance
Insurance to pay death benefits to designated beneficiaries when the insured dies.
