General Insurance- Page 1-19 Flashcards
What are the five ways we manage risk
Avoidance, reduction, retention, sharing, and transfer
Which method of managing risk is the basis for insurance
Sharing risk
Which method of managing risk his is placing it on an insurer?
Transferring risk
What are the types of risk
Speculative and pure
What type of risk does insurance deal with?
Pure (a lose-lose)
Elements in insurable risks
Loss must be predictable, must be definite, must be due to chance, canNOT be catastrophic
The law of large numbers
The larger the number of similar risks, the more accurate the prediction of loss will be over a period of time
Stock insurance company
owned by stock holders. Dividends are paid to stockholders. Policyholders do not pay dividends
Mutual Insurance Company
Owned by policyholders. Policyholders participate in dividends
Fraternal benefit society
A fraternal organization promotes social and charitable activities and services, and is also licensed as an insurer
Lloyd’s of London
Not an insurer- Association of individuals and companies that underwrite insurance
Self providers
Medical service providers (like Blue Cross Blue Shield)
Sources of underwriting
attending physician statements, medical questionaires, avocation questionaires, MIB (medican information bureau), inspection reports, agent’s report, medical examinations and lab tests, including HIV and AIDS
MIB
A medical reporting agency, similar to the credit reporting agencies. An applicant may not be declined for life insurance just because of a medical record on file. The underwriter may request an attending physician’s statement be needed/medical questionnaire.
Insurance is….
The spreading of financial risk over a large group of people in order to minimize the potential economic loss to any one individual.
