Chapter 2 Summary Flashcards
Accident, health, property, and casualty insurance contracts are all contracts of
A principle of actuarial scien that states that the higher the numbe of risks insured in the same risk pool; the more predictable losses become.
Law of Large Numbers
A ____ is something that can cause a financial loss.
Peril
A _____ is something that can cause a financial loss
Peril
_______ or ______ ______ individually list perils that they cover
Specified or Named Perils
these insurance policies do not name the perils they cover but instead begine by saying they cover all direct causes of loss.
Special or Open Peril
an unintentional decrease in the value of an assest due to a peril is known as?
Loss
results when a person or property is damaged, destroyed, or killed by a peril, without any intervening cause.
Direct Loss
An indirect loss is also known as ?
Consequential Loss
any event that causes a loss
Occurence
A condition or situation that creates or increases a chance of loss.
Hazard
Types of Hazards Include?
Physical Hazard, Moral Hazard, Morale Hazrd
Physical or tangible conditions existing in a manner that makes a loss more likely to occur
Physical Hazards
Make the loss more likely to occur due to the dishonest or villainous character of the insured.
Moral Hazards
is created based as a result of the presonal or subjective thought process of the insured.
Morale hazard
___ is defined as the potential for loss
Risk
There are two type of risks
Pure Risk & Speculative Risk
Considered to have an average potential for loss
Standard Risks
Considered to be a poor risk for the insurance company and have a higher potential for loss.
Substandard risks
Also known as loss sharing, spreads risk by sharing the possibility of loss over alarge number of people
Risk Pooling
Insurers must minimized _____ ______, which is defined as the tendency for poorer than average risk to seek out insurance.
Adverse Selection
Sound and competent underwriting may reduce the chance of ______ _______
Adverse Selection
The process of analyzing exposures that create risk and designing programs to handle them is called?
Risk Management
Treatment of risk includes implementing the following strategies
Risk Avoidance,Reduction,Retention,Transfer, Sharing
Risk can be avoided by?
Elimating a hazard
Risk can be reduced by?
Minimizing the severity of a potential loss.
Risk can be retained through
Self-Insurance
Risk can be transferred or passed from one party to another through an
Insurance Contract
Risk Can be ______ by multiple parties.
Shared
the spreading of risk from one insurer to one or more other insures.
Reinsurance
Involves taking actions to eliminate damage or loss.
Loss Prevention
