Core Principles of Insurance Flashcards
How would you describe the principle of insurance?
A concept of risk and risk transfer
Describe Risk Management
Attempting to deal with the risks we face.
Define PERIL
A specific cause of damage or injury such as fire, theft etc from things that are insured.
Define Risk-Seeking
People who are willing to carry out risk.
Define Risk-Adverse
Minimising risks people are exposed to.
Who are AIRMIC and what do they do?
(Association of Insurance + risk managers in industry and commerce) - Set standards in areas of risk management.
Describe Commercial Risk Management
Have a more analytic view when deciding what to insure. (‘How much will it cost if it goes wrong?)
What are the 3 key steps to Commercial Risk Management? Explain them
- Risk Identification (discovering threats that already exist to predict future ones)
- Risk Analysis (Examining past data)
- Risk Control (if a risk looks likely, action is put in place to control and reduce it)
Who are the FPA and what do they do?
(Fire Protection Association) - Provide rules that set standards of construction and control loss.
Who are MIAFTR and what do they do?
(Motor Insurance + Anti Fraud + Theft Register) - They record data of vehicles that become total losses.
Who are CUE?
(Claims + Underwriting Exchange)
How is Risk measured by insurers?
Measured in terms of frequency (how often a risk occurs) and Severity (how costly it would be if it did happen)
Explain PERIL + HAZRAD in relation to cause of losses.
Peril: Gives rise to a loss.
Hazard: Influences the operation or effect of the peril.
Describe a Physical Hazard.
Physical characteristics of the risk. (eg security protection at a shop, CCTV)
Describe a Moral Hazard.
Arises from attitude and behaviour of people and employees. (eg good management)
