General Terms

Question 1

1) Uncertainty arising from the possible occurrence of given events 2) The insured or the property to which an insurance policy relates

Answer 1

Risk

Question 2

The insurance company that undertakes to indemnify for losses and perform other insurance-related operations.

Answer 2

Insurer

Question 3

The state of being subject to loss because of some hazard or contingency. Also used as a measure of the rating units or the premium base of risk.

Answer 3

Exposure

Question 4

1) The basis of a claim for damages under the terms of a policy. 2) Loss of assets resulting from a pure risk. Broadly categorized, the types of losses of concern to risk managers include personal loss, prop loss, time element loss and legal liability loss.

Answer 4

Loss

Question 5

Conditions that increase the probability of loss. Examples include poor housekeeping in a factory and inadequate lighting in a crime-prone area.

Answer 5

Hazard

Question 6

The tendencies or traits of an individual that increase the chance of a loss.

Answer 6

Moral Hazards

Question 7

Individual tendencies that arise from a state of mind, attitude or indifference to loss. Not locking a car or driving recklessly.

Answer 7

Morale Hazard

Question 8

Characteristics that increase the chance of loss. They exist due to the presence of some physical condition ir or surrounding the property.

Answer 8

Physical Hazard

Question 9

Cause of loss - Fire, windstorm, collision, flood, theft

Answer 9

Peril

Question 10

Immediate result of an event. Dmg from house fire.

Answer 10

Direct Loss

Question 11

Remote ramification that results in a loss from a covered peril. i.e.: ALE for a house fire

Answer 11

Indirect Loss

Question 12

An occurrence that may or may not become a claim. Some claims-made coverages allow for reporting events.

Answer 12

Event

Question 13

Ways to manage RISK

Answer 13

avoid, control, share, retain and transfer

Question 14

A risk management technique whereby risk is prevented in its entirety by not engaging in activities that present risk. Ex: construction firm may decide not take on environmental remediation projects to avoid the risks associated with this type of work.

Answer 14

Avoid

Question 15

“Risk distribution”. The premiums and losses of each member of a group of policyholders are allocated within the group based on predetermined formulas. Risk is considered to be shares if there is no policyholder-specific correlation between premiums paid into a captive and losses paid from the captive’s reserve pool.

Answer 15

Risk Sharing

Question 16

“Do nothing option”. Rather than avoid, person/business may use it’s own funds to pay for any losses that occur.

Answer 16

Risk Retention

Question 17

When an individual/business transfers the risk of loss to another party, ie: buying insurance

Answer 17

Risk Transfer

Question 18

To make compensation to an entity, person or insured for incurred injury, loss or damage.

Answer 18

Indemnify

Question 19

Restoration to the victim of a loss up to the amount of the loss.

Answer 19

Indemnity

Question 20

As the number of independent events increases, the likelihood that actual results will be close to the expected results also increases

Answer 20

Law of large numbers

Question 21

Risk that involved only the chance of a loss. Gain is not possible.

Answer 21

Pure Risk

Question 22

Risk that can result in loss or gain. ie: stock market. Uninsurable

Answer 22

Speculative Risk

Question 23

Numerical measure for likelihood that particular event will occur. Generally measured 0 to 1. A probability near 0 indicates an unlikely outcome. 1, almost certain to occur.

Answer 23

Probability

Question 24

The loss record of an insured or of a class of coverage 2) Classified stats of events connected with insurance, actual or estimated

Answer 24

Experience

Question 25

Estimated loss frequency multiplied by estimated loss severity, summed for all exposures. This measure os refers to a best estimate of the total losses of a particular type. ie: workers comp or gen liab. of an organization that is expected during a given time period.

Answer 25

Expected Loss

Question 26

Individual, often holding a professional designation. ie: Casualty Actuarial Society (FCAS), who computes stats relating to insurance, estimating loss reserves and developing premium rates.

Answer 26

Actuary

Question 27

Process of determining whether to accept risk and if so, what amount of insurance the company will write on the acceptable risk and at what rate.

Answer 27

Underwriting

Question 28

Imbalance in an exposure group created when persons who perceive a high probability of loss themselves seek to buy insurance to a much greater degree than those who perceive low probability of loss.

Answer 28

Adverse Selection