Risk and Loss Flashcards
What are the insurance related risk management elements?
- Risk
- Loss
- Exposure
- Peril
- Hazard
Risk
Defined
The chance of loss
Pure risk
Possibilty of loss
Speculative risk
Posibility of loss or gain
Uninsruable
Loss
Unplanned reduction in economic value
Loss exposure
Being subject to a possible loss
Peil
The direct cause of a loss
Death, disability, sickness
Hazard
A condition that increases the chance of loss due to a peril
or increases the severity of a loss
Moral hazard
Character weaknesses, habits, and risky activities that increase the possibility of loss
A conscious willingness to defraud insurers
Morale hazard
State of mind or attitudes that create an indifference to loss
Disregarding one’s health
Physical hazards
Physical conditions that increase the chance of loss
Engaging in dangerous activities
Risk management techniques
- Avoid
- Reduce
- Retain
- Share
- Transfer
Risk avoidance
Taking steps to avoid a risk
Risk reduction
Actions designed to reduce exposure to risk
Risk retention
Accepting the risk
Deductables are partial risk retention devices
Risk sharing
Transfering risk to another entity or person
Underwriting
The process to deterimine if the risk proposed for insurance should be accepted or rejected
Law of large numbers
A method of predicting future losses with great accuracy
Adverse selection
Those who need insurance the most buying insurance
