Chapter One Flashcards
Risks and different types of insurance
What are some examples of compulsory insurance?
Compulsory insurance includes motor insurance and employers liability insurance, both are mandated by law.
What is the concept of risk in the insurance business?
Risk refers to the possibility of loss or damage and encompasses various uncertainties that can affect individuals and businesses.
Why do individuals and businesses primarily purchase insurance?
Insurance is purchased to transfer risk, spread risk and provide a degree of certainty.
What is the purpose of poling risk in insurance?
Pooling risk allows insurers to collect premiums from many insureds to cover the losses of a few, thereby spreading financial risk.
What role does the claims handling process play in insurance?
The claims handling process is crucial as it determines how efficiently and fair claims are processed, impacting customer satisfaction.
How does the law of large numbers benefit insurers?
The law of large numbers allows insurers to protect loses more accurately by analysing data from a large pool of similar risks.
What are the components of risk management?
Identifying, analysing and controlling risks.
What is meant by ‘insurable interest’?
Insurable interest refers to the financial relationship between the insured and the subject matter of the insurance, ensuring that the insured stands to suffer a loss.
What distinguishes insurable risks from non-insurable risks?
Insurable risks are typically financial, pure and particular while non-insurable risks may be non-financial, speculative or fundamental.
What is the difference between peril and hazard?
Peril is the event that causes loss such as fire, while hazard refers to conditions the increase the likelihood or severity of that loss.
What are some risks associated with owning a building?
The building could be damaged by fire or flood, someone working in or visiting the building might get injured or someone’s property might get damaged either by parts of the building or whilst being stored in the building.
