Unit 1 Flashcards
What are the 5 methods for handling risk
STARR - Sharing, Transfer, Avoidance, Retention, Reduction
If a fire causes damage to a building the fire is a…
Peril
Wearing a seat belt is what method of managing risk?
Reduction
Tiffany leaves her car unlocked when she goes shopping. Which type of hazard is this?
Morale. The others are Physical, and Moral.
What is the law of large numbers?
The principle that makes insurance possible. The larger the group, the more accurately losses can be predicted.
What are the 6 elements of insurable risk?
CANHAM - Calculable, Affordable, Non-catastrophic, Homogeneous, Accidental, Measurable.
What is adverse selection?
the tendency for higher risk individuals to get and keep insurance more than individuals who represent an average level of risk.
What is underwriting?
the process that is used by insurance companies to determine who will receive a policy.
What is reinsurance
insurance for insurance.
What are the key characteristics of a stock insurer?
they are public or private corp owned by stockholders. the profits may be distributed as dividends. the policies are non-participating.
What are the key characteristics of a mutual insurer?
Do not have stockholders, are owned by policyholders, policies are participating, meaning that nontaxable dividends are paid to policyholders.
What are characteristics of a fraternal?
they are nonprofit societies, issue policies as certificates, and members are called certificate holders. a distinctive feature is that certificate holders may be assessed additional charges if premiums aren’t sufficient to pay claims for a given period.
what are reciprocal insurers?
they are unincorporated groups that agree to insure each other’s losses under a contract. members are known as subscribers. claims are handled by an attorney-in-fact, controled and overseen by advisory committee.
What is a risk retention group?
an insurer formed for the sole purpose of providing liability insurance to its policyholders. an RRG is owned by the insureds. policyholders must all be members of the same type of business. they are regulated by the state where they’re headquarted.
What are Lloyd’s associations?
they are not insurance companies, rhather they provide a hub for the exhange of information among member underwriters who actually transact the business of iinsurance. members are individually liable for the contracts of insurance into which they enter.
