Chapter 2 Keywords Flashcards
Broadly Defined as selection against the company. It includes the tendency of people with higher risks to seek or continue insurance to a greater exten than those with oittle or less risk. _______ __________ also includes the tendency of policy owners to take advantage of favorable options in insurance contracts.
adverse selection
Any factor, condition, or situation that creates an increased possibility that a _____ (a cause of a loss) will actually occur.
Hazard
are similar objects of insurance that are exposed to the same group of perils.
Homoegeneous Exposure Units
attempt to return the insured to their original financial position
Indemnity contract
fundamental principle of insurance that the larger the number of individual risk combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period.
Law of Large Numbers
The unintentional decrease in the value of an asset due to a peril.
Loss
The risk of a possible loss
Loss Exposure
A hazard brought on by the effect of personal reputation, character, associates personal living habits, financial responsibility, and environment, as distinguished from physical health, upon an individual’s general insurability.
Moral Hazard
A hazard arising from indifference to loss because of the existence of insurance, often associated with having a careless attitude.
Morale Hazard
The immediate, specific even causing loss and giving rise to risk
Peril
Hazards that are physical or tangible conditions existing in a manner that makes a loss more likely to occur
Physical Hazard
____ ____ is a type of risk that involes the chance of loss only; there is no opportunity for gain; it is insurable.
Pure risk
the acceptance by one or more insurers, called re insurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.
Reinsurance:
the uncertainty regarding loss, the probability of a loss occurring for an insured or prospect
Risk
___ ______ occurs when individuals evade risk entirely. it is the act of not doing somthing that could possibly cause a loss or the inactivity of particiapation in an even that may poteentially cause a loss situation.
Risk avoidance
The process of analyzing exposures tha create risk and designing programs to handle them is called?
Risk Management
_____ ______ and ___ _____ spread reais by sharing the possibility of loss over a large number of people. it transfers risk from an individual to a group.
Risk Pooling/Loos Sharing
Takes place when the chances of aloss are lessened, or the severity of apotential loss is minimized.
Risk Reduction
The act of analyzing the loss exposure presented by a risk and termining that the potential loss is acceptable. Often associated with self-insurance
Risk Retention
the act of shifting the responsibility of risk to another in the form of an insurance contract.
Risk Transfer
a type of risk that involves the chance of both loss and gain; it is not insurable
Speculative Risk
