Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CII > IF1.1 (Risk & Insurance) > Flashcards

IF1.1 (Risk & Insurance) Flashcards

1
Q

Define Risk Averse

A

prefer to minimise the risks they’re exposes to

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define Risk Seeking

A

willing to carry certain risks themselves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define Risk

A

The possibility of an unpredictable happening and the related uncertainty of the outcome of the situation. Can be be a possibility of loss or a chance of gain.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Insurance acts as a _ _ _

A

Risk transfer mechanism

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Name the 3 stages of risk management

A
  1. Identification
  2. Analysis
  3. Control
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Describe risk identification (risk management) and give an example

A

discovering current and potential risk e.g. risk of robbery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Describe risk analysis (risk management) and give an example

A

Using past data to assess the level of risk (e.g. spotting trends, how severe are risks etc)
e.g., young driver may be higher risk as data shows they’re more likely to get into an accident due to lack of experience.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Describe risk control (risk management) and give an example

A

Reduce or eliminate risk where possible e.g. put window locks & making people aware of the risks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is Association of Insurance and Risk Managers in Industry and Commerce (AIRMIC)?

A

organisation sets standards in areas of risk management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Why is Commercial risk management important?

A
  • reduces the potential loss by identifying and managing hazards
  • gives shareholders a greater degree of confidence in a companies ability to manage its risks
  • provides a disciplined approach to quantifying risks.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are the three aspects to consider for controlling a risk?

A
  1. Physical control measures
  2. Financial Control Measures
  3. Developing a Good risk culture
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

example of a physical control measure

A

putting specific locks on doors to reduce the theft risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

example of a financial control measure

A

Taking out insurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is developing a good risk culture

A

Improving risk awareness and managing risk. Achieved by educating employees or clients on how to avoid and reduce risks.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Internal controls: Detective

A

detect errors or irregularities that may have occured

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Internal Controls: Corrective

A

correct errors or irregularities that have been detected

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Internal Controls: Preventative

A

Keep errors or irregularities from occuring.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What does the loss prevention council (LPC) do?

A

develop risk management solutions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What does the Motor Insurance Anti-Fraud and Theft Register (MIAFTR) do?

A

records all details of vehicles and motorcycles that become total losses. If the claimant or claimant address matches existing data the insurers are advises so they can check for fraud.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What does the Fire Protection Association (FPA) do?

A
  • research new materials and methods of construction to see how to behave in a fire.
  • provide rules that set standards for construction.
  • reporting on new industrial processes and machinery.
  • provides rules for the construction, installation and operation of fire extinguishing appliances.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What does Thatcham Research Centre do?

A

tests vehicle safety and security systems.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Whats does ABI stand for

A

Association of British Insurers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are the three components of risk

A
  1. uncertainty
  2. level of risk
  3. peril & hazard
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the level of risk assessed by?

A

frequency & severity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Example of high frequency low severity risk

A

motor risks e.g. cracked windscreens

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Examples of low frequency high severity risks

A

Aircraft accidents & Marine Accidents e.g. oil spillages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Risk appetite

A

how much risk a company is willing to accept on factors relating to frequency and severity.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Define peril

A

the cause of a loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Define Hazard

A

something that influences the operation of the peril

(can be positive or negative)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

example of a peril

A

fire

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

example of a hazard

A

Smoking in the house, having a thatched roof,…

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Define physical hazard

A

the physical characteristics of the risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

example of a physical hazard

A

(positive) security protection installed
(negative) Low standard of construction

34
Q

Define moral hazard

A

a moral hazard arises from the attitude and behaviour of people.

35
Q

example of a moral hazard.

A

(positive) drivers who take a lot of care while driving. A factory that provides a lot of safety training.
(negative) a person who has previously made fraudulent claims.

36
Q

Why are hazards important for an underwriter?

A

they need to understand what influences the liklihood of a peril when writing the contract.

37
Q

How do insurers ‘fix’ moral hazards?

A

there are conditions which must be met in a claim. e.g. have evidence of a forcible entry (checks if the person has lied about locking their doors)

38
Q

Categories of risk

A
  1. financial/non-financial
  2. Pure/speculative
  3. particular/fundamental
39
Q

Financial Risks =>
Non Financial Risks =>

A

Financial Risks => Insurable
Non Financial Risks => Not Insurable

40
Q

Example of a financial risk

A

A car, it has a simple market value

41
Q

Example of a non-financial risk

A

Anything with sentimental value (the market value can be insured but nothing over that)

42
Q

Define Idemnity

A

security or protection which cannot be benefitted from (e.g. against a loss or a break-even situation)

43
Q

Define a Pure Risk

A

A risk that involves a possible loss or breaking even.

44
Q

Define a speculative risk

A

a risk that involves a possible loss, gain or breaking-even.

45
Q

Pure risk =>
Speculative risk =>

A

Pure risk => Insurable
Speculative risk => Not-insurable

46
Q

Define Particular risk

A

risks that are localised or personal in their cause and effect.

47
Q

Define Fundamental risk

A

risks from a cause outside of the control of any one individual or group of individuals and their effects are usually widespread

48
Q

examples of fundamental risks

A

war, economic reccession, earthquakes & famine

49
Q

Fundamental risks may have particular consequences…

A

for individuals which can be insured.

50
Q

Particular risk =>
Fundamental risk =>

A

Particular risk => insurable
Fundamental risk => not insurable

51
Q

3 features for a risk to be insurable

A

financial, pure, particular

52
Q

Criteria for a risk to be insurable (4)

A
  1. fortuitous
  2. insurable interest
  3. no conflict with public policy
    (4.) homogenous exposures
53
Q

Define fortuitous

A

an unforeseen event.

54
Q

an example of not being foruitous…

A

buying insurance after an accident occurs to then claim it on the insurance.

55
Q

Define Insurable Interest

A

legally recognised financial relationship between the insured and the object or liability that is being insured.

56
Q

Describe ‘not against public policy’ (insurable risks)

A

contracts must not be against public policy or go agaisnt what society considers to be the right or moral thing to do.

57
Q

Example of being against public policy

A

something which is against the law. e.g. speeding.

58
Q

define homogenous exposure

A

Given a sufficient number of exposures to similar risks the insurer can forecast the expected frequency and likely extent of losses.

58
Q

Reasons people buy insurance

A
  • peace of mind
  • legal requirement
  • contractual obligation
59
Q

What are the benefits of insurance

A
  • improved cash flow (money doesn’t have to be kept in reserve)
  • easier expansion of business
  • Loss control (policyholders suffer less business interruption, reduced frequency and severity of losses due to conditions)
  • Policyholders premiums are invested.
  • Social Benefits (encouraging business activity and keeping people in employment)
60
Q

Discriminating factors are used to…

A

calculate how much risk an individual represents

61
Q

The losses of the few are…

A

met by the contributions of the many

62
Q

Define Pool

A

the collection of premium funds that will be used to pay for the claims.

63
Q

The law of large numbers enables…

A

the insurer to predict the final cost of claims.

64
Q

Why is it important to predict the final cost of claims?

A

So that insurers can charge a fair premium (to cover all claims costs, operational costs and provide some kind of profit)

65
Q

define Equitable premiums

A

a fair contribution so ensure there is enough money in the pool & to cover operational costs.

66
Q

What does the EU Gender directive mean?

A

insurers can no longer use gender as a premium calculation

67
Q

2 definitions of co-insurance

A
  1. multiple insurers insure parts of the same thing
  2. when the insured agrees to pay a percentage of each claim on the policy
68
Q

Define dual insurance

A

where there are 2 or more policies covering the same risk (usually by accident)

69
Q

Define self insurance

A

where the company or individual has decided against transferring the risk via insurance in favour of funding it themselves.

70
Q

Define re-insurance

A

When insurers come together to form a pool and agree to jointly underwrite particular risks. Usually designed to cover catastrophic risks such as terrorism or earthquakes.

71
Q

What is the lead office (co-insurance)

A

The first named insurer in the policy and normally the one who carries the largest share of the risk.

72
Q

2 types of excess

A

compulsory (chosen by the insurer)`
voluntary (chosen by the insured to bring the premium down)

73
Q

Define duductible

A

large fixed sum like an excess (in large commercial insurances)

74
Q

Define Attitude to risk

A

how much risk an individual is willing to take e.g. risk adverse or risk seeking.

75
Q

Define law of large numbers

A

A theory that determines that predictions become more accurate as the base of data used increases in size.

76
Q

preventative control measures vs physical control measures

A

physical - making sure you have one
preventative - make sure your doing something

77
Q

risk retention

A

The amount of risk a company or individual is willing to keep themselves i.e. not insure

78
Q

What is the purpose of IPT?`

A

to raise revenue for the government

79
Q

Is the premium likely to be effected when purchasing directly from an insurer?

A

yes (less costs for commissions, or sometimes more costs for marketing)

CII (28 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions