Chapter 3 Hazard Risk Flashcards
Define frequency
Frequency is one of the measures of traditionally used for hazard risk exposure and identifies the number of losses
Define severity
Severities one of the measures that traditionally is used for hazard risk exposure is and identifies the size of losses
Define avoidance
Avoidance is a technique that involves ceasing or never undertaking an activity so that the possibility of future gains or losses occurring from that activity is eliminated
Define separation
Separation is a risk control technique that isolates loss exposures from one another to minimize the adverse effect of a single losa
Define duplication
Duplication is a risk control technique that uses back ups Spares or copies of critical property information or capabilities and keeps them in reverse
Define diversification
Diversification arrest control technique that spreads loss exposures over numerous projects product markets or regions
Define insurance
Risk management techniques for transfers the potential financial consequences of certain specified loss exposures from the insured to the insurer
Describe the three major categories of hazard risk
Every loss exposure has three elements and I thought exposed to loss. Cause of loss also called peril. Financial consequence of that loss. These three elements can be described for each of these four basic types of loss exposures property loss exposures liability loss exposures and personnel loss exposures and net income loss exposures because hazard risk is pure risk risk analysis focus solely on exposure to los this type of risk is generally insurable
Contrast net income losses associated with property and liability losses
Property loss can tangible or intangible property. liability loss exposure is any condition or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party. And net income loss exposure is a condition that presents the possibility of loss caused by a reduction in net income. These losses are considered to be indirect losses. Net income losses with respect to property typically are something that property insurance policies cover. Whereas some liability losses are exposures that are normally focussed on by risk management. However both cases there is a financial consequence to the net income loss.
Identify the two measures that are traditionally used for hazard risk exposure
Hazard risk exposure is are measured by frequency and severity
Define loss exposure
Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs.
Define hazard
Hazard is a condition that increases the frequency or severity of a loss
Define moral hazard
Moral hazard is a condition that increases the likelihood that a person will intentionally cause or exaggerate a loss
Define morale hazard
Morale hazard is a condition of carelessness or indifference that increases the frequency or severity of loss
Define physical hazard
Physical hazard is a tangible characteristic of property, person, or operations that tends to increase the frequency or severity of lost
Define legal hazard
Legal hazard is a condition of the legal environment that increases the lost frequency or severity
What is property loss exposure
Property loss exposure is a condition that presents the possibility that a person or an organization will sustain a loss resulting from the damage including destruction, taking, or loss of use or property in which the person or organization has a financial interest
What is tangible property
Tangible property is property that has a physical form
What is real property (realty)
Tangible property consisting of land all structures permanently attached to the land and whatever is growing on the land
Personal property is
All tangible or intangible property that is not real property
Intangible property is
Property that has no physical form
What is liability loss exposure
Any condition or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party
What is personnel loss exposure
A condition that presents the possibility of loss caused by a person’s death disability retirement or resignation that deprives an organization of the person special skill or knowledge that the organization cannot readily replace
Personal loss exposure is
Any condition or situation that presents the possibility of a financial loss to an individual or family by such cause of death sickness injury or unemployment
What is net income loss exposure
A condition that presents the possibility of loss caused by a reduction in income
What is property casualty insurance
One of the two main sectors of the insurance industry, encompassing numerous types of insurance, most of which cover the financial consequences of damage to one’s own property or legal liability to others
Property is
The real estate, buildings, objects or articles, intangible assets, or rights with exchangeable value of which someone may claim legal ownership
Liability is
A legal responsibility for the consequences of an act or omission
Line of business is
A general classification of insurance, such as commercial property, commercial general liability, commercial crime, or commercial auto
Commercial property insurance is
Insurance that covers commercial buildings and their contents against various types of property loss
Monoline policy is
Policy that covers only one line of business
Package policy is
Policy that covers two or more lines of business
Direct physical loss is
A loss that is physical (not just financial) and results immediately from the occurrence
Named peril
A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing named perils
All risk policy is
And insurance policy that covers any risk of physical loss and less the policy specifically excludes it
Bailees customer policy
Is a policy that covers damage to customers good well in the possession of the insured regardless of whether the insured is legally liable for the damage
Replacement cost is
The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation
Actual cash is
A method in valuing property that is calculated as the cost to replace or repair property minus depreciation, the fair market value, or valuation determined by the broad evidence rule
Insurance to value provision is
A provision and property insurance policies that encourages insurance to purchase an amount of insurance that is equal to you, or close to, the value of the covered property
Coinsurance clause is
A clause that requires the insured to carry insurance equal to at least specified percentage of the property’s insured value
Business income insurance
Insurance that covers the reduction in an organization’s income when operations are interrupted by damage to property caused by a covered peril
Dependent property exposure is
The possibility of an current business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales
Principal is
The party to a surety bond who is obligation or performance The surety guarantees
Surety is
The party [usually an insurer] to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or la
Obligee is
The party to a surety bond that receives the sureties guarantee that the principal will for fill an obligation or perform as promised
What is breach of contract
The failure, without legal excuse, to for fill a contractual promise
What is tort
A wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right
What is insuring agreement
A statement in an insurance policy that the insurer will, under describe circumstances, make a loss payment or provide a service
What is occurrence
An accident, including continuous or repeated exposure to substantially the same general harmful conditions
What is indemnify
Restore a party who has sustained a loss to the same financial position at the party held before the loss occurred
What is claims made coverage form
A coverage form that provides the coverage for bodily injury or property damage that is claim during the policy period
Occurrence coverage form is
A coverage form that covers bodily injury or property damage occurring during the policy period
Entity coverage
Coverage extension of directors and officers liability policies for claims made directly against a corporation [the entity] for wrongful acts covered by the policy
What is claims made coverage trigger
The event that triggers the coverage under a claims made coverage form; the first making of a claim against any insured during either of the policy Or an extended reporting.
Fiduciary liability insurance is
Insurance that covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duty’s involving the discretionary judgement
What is perils of the sea
Accident causes of loss better peculiar to the sea and other bodies of water
