C11 - Principles & Practice Questions with Verified Answers

C11 - Principles & Practice Questions with Verified Answers What are the 3 general types of risk? People are risk! Personal, Property, Liability What does "insurance" mean? When something gets crumpled, Indemnify! Indemnification, Risk, Money, Perils, Loss, Exposure How does insurance provide security? It WIIPs risks ***********! Worries, Inconvenience, Indemnification, Premiums What do risk managers do? They eat kIMChi! Identify, Measure, Control How does the insurance industry contribute to loss prevention? It DiPs to RId us of RiSk of Fire by Fighting and Reducing it and GeLs governments on Buildings and Autos then even lowers Crime! Decreased Premiums, Reduced Inconvenience, Reduced Suffering, Fire, Fire Houses, Recommendations, Government Lobby, Building Standards, Automobile Industry, Crime As an adjuster, what do you think people need to know to understand the benefits of insurance? It provides SECurity and exCITes Job creation and Loss Prevention! Security, Easy payments, Credit, Capital, Investment, Taxes, Jobs, Loss Prevention Define "Rate." 1. -ppu/yr of insurance 2. -either as a percentage or monetary value Define "Premium." 1. -total cost of an insurance policy 2. -calculated as "rate" X "amount insured" Define "Law of large numbers." 1.-principle that certainty of probability increases with an increase of statistical data 2. It's used to determine premiums 3. and also know as the law of averages. Define "Theory of probability." 1. -theory that historical data can be used to determine future probability 2. It's expressed as a ratio of actual/possible occurrences. What is chance and its relationship to insurance? With it, we can FuND the CaP! Fraction, Numerator, Denominator, Chance definition, Probability What are the three main factors to ratemaking? CRuST! Conditions Relative, Size, Time Period Describe "Ratemaking" as a process. Come THe & Gather a FAST 2 PPs for the fIREPOT Rate! 1. Classify risk by Type and Hazards 2. Gather statistics to determine Frequency & Average by considering Size and Time Period. 3. 2PPs - determine pure Premium 4. determine total Premium by loading with Inflation, Repair Costs, Expenses, Profit, Overhead, Trends 5. determine Rate Describe "Underwriting" as a process. RESTARRT the AMPErE CoCoAS! 1. Receive the request. 2. Examine and Select the risks by considering the Applicant, Moral hazard, Physical hazard, risk Exposure, amount of Exposure. 3. possibly ask for Technical support to rate and/or recommend. 4. Assess the risk to either improve safety or adjust premium. 5. Reject the risk due to Class, Certainty of loss, Applicant, Sub-standards. 6. ReTain a certain amount of the risk. What does OSFI stand for? Office of the Superintendent of Financial Institutions Concerning insurance companies, what is the mandate of the OSFI? RuFFEIE P! Regulate Federally chartered insurance companies Regulate Foreign insurance companies Ensure Inadequately funded insurance companies are not established Ensure Existing companies remain