Unit 2 Fundamentals of Comm Ins Flashcards
Risk
2-3
The chance or possibility of loss or misfortune or the object of insurance.
What are some common business risks?
- Property Damage
- Slander
- Product Liab
- E&O
- Prof Liab
- Accidents
- Injury to Customers or EEs
Risk Management
2-5
A systematic approach to identify, analyze, and address potential exposures to financial loss.
Methods to Manage Risk
2-9
- Avoid
- Reduce
- Transfer
- Retain
Avoid Risk (2-10)
Avoid or not incurring risk in the first place
Reduce Risk
2-10
Minimize risk by attempting to reduce the frequency or severity of the losses to which the business is exposed.
Focus on:
- Identifying Exposures
- Correcting Deficiencies
- Modifying Behaviors or Processes
- Preventing Future Exposures
Transfer Risk
2-11
Transfer or shifting risk to another party, such as to an Ins Co or to a non-ins vehicle, such as through a contract, agreement, or lease.
Retain Risk
2-12
Retain all or part of the risk through:
- Self Insurance
- Deductible
- Retention
- Risk Retention Group
Self-Insurance
2-12
A form of risk mgmnt that retains rather than xfers risk to an Ins Co and that typically sets aside funds for unexpected losses.
Deductible
2-12
The portion of a loss that the insured must bear and that may apply to the indemnity paymnt, defense costs, or both. The insurer only pays if the loss exceeds the deductible amount.
Retention
2-12
A designated amount an insured pays before an insurer has any obligation to indemnify for a covered loss and that applies when the insured is typically responsible for handling claims.
Risk Retention Group
2-12
An Ins Co that is owned and controlled by a group engaged in similar or related businesses for the purpose of insuring the liab exposures of its members.
Indemnity
2-16
A principle that requires an Ins Co to protect and compensate an injured party for the financial consequences of a covered loss that does not result in a profit or loss for the insured.
Self-Insured Retention (SIR)
2-18
A specific sum or % of loss that is the insured’s responsibility and that is not covered under the ins policy. The insurer is not liable for any of the loss until after the insured pays the retained amount.
Actuary
2-22
Establishes prices and premiums for ins products using statistical models and tools. They are involved in all areas of ins. Also, estimate what actual losses and associated costs may be. They use past history or experience, industry statistics, and data from many other sources in their rate calculations.
