Module 2 Flashcards
A technique in employee that will mitigate the impact of adverse selection if participants were allowed to enroll as individuals
Group Insurance Technique
When individuals with higher-than-average risks join a group or may comprise a larger percentage of a group than anticipated because they will need and use the benefit
Adverse Selection
This is reduced by characteristics of group techniques (group eligibility, a steady flow of lives, a minimum # of persons minimum portion participating, eligibility requirements, max benefit limits, etc)
Risk of Adverse Selection
Uncertainty of the actual number and value of claims a benefits plan with incur
Risk
The cause of a loss, such as a fire or car accident
Peril
A condition or action that increases the probability that a peril will occur
Hazard
Behavior such as failure to replace the machine guards on manufacturing equipment is this type of hazard
Physical Hazard
A person who shops multiple doctors to get more opioids prescribed is this type of hazard
Moral Hazard
The act of not flossing one’s teeth regularly after getting dental insurance is this type of hazard
Morale Hazard
The type of risk with only 2 alternatives: financial loss or no financial loss
Pure Risks
The type of risk that can have 3 outcomes: loss, no loss, or gain
Speculative Risks
A risk handling technique where the risk is not assumed
Avoidance
A risk handling technique that involves an action or mechanism to reduce the probability or severity of a loss
Control
A risk handing technique where risk is assumed and paid for by the person suffering the loss
Retention
A risk handling technique where one shifts the potential for financial harm to another party
Transfer
A risk handling technique where the potential for financial loss is shifted to an insurer
Insurance
A mechanism where the employee or employer pays money into a fund to cover any incurrence of loss
Insurance
Process in insurance that works to make the victim of a loss whole again
Indemnificiation
Administrative overhead costs such as office costs, commission, taxes, licensing taxes, and load adjustments
Loading
The greater the number of exposures, the more closely the actual results will approach the probable results
Law of Large Numbers
With a large number of homogenous units, losses can be verified and measured. Losses should not be catastrophic.
Insurable Risk
The risk-handling alternative that is mutually exclusive from other riskhandling techniques
Avoidance
When an organization retains the risks related to providing employee benefits as opposed to an insurance company taking on the risks
Self Funding/Self Insurance Approach
