Lecture 18 Flashcards
1
Q
efficiencies of risk management
A
- opportunities to pool
- effect on loss control incentives
- effect on taxes
2
Q
prevention
A
reduce frequency: use when you have high frequency / probability
3
Q
reduction
A
reduce severity: good when higher size potential losses
4
Q
avoidance
A
- stay away: no benefit; no loss (prob of loss =0)
- implement when both frequency/severity are high together its a big outcome
5
Q
underwriter gets…
A
salary
6
Q
agent/broker gets…
A
commission
7
Q
premium loadings
A
costs in excess of E(loss + adjustment expenses) before considering investments
8
Q
when is it not worthwhile to pay excess?
A
- value of insurer services less than the cost of those services (retention is better)
- for low severity events
- for high frequency
- when estimation risk is high, i.e. relative variability still high after pooling
