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Exam (elaborations)

Principles of Risk Management and Insurance Midterm (1) 2025

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Principles of Risk Management and Insurance Midterm (1) 2025 Risk Uncertainty concerning the occurrence of a loss Risk (Insurance) Used to identify the property of life that is being considered for insurance Risk (Economics and Finance) Used in situations where the probabilities of possible outcomes are known; uncertainty is used in situations where such probabilities cannot be estimated

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Principles Of Risk Management And Insurance
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Institution
Principles of Risk Management and Insurance
Course
Principles of Risk Management and Insurance

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Uploaded on
January 16, 2025
Number of pages
30
Written in
2024/2025
Type
Exam (elaborations)
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Subjects

  • principles of risk management and insurance midter
  • risk uncertainty concerning the occurrence of a lo
  • risk insurance used to identify the property of
  • risk economics and finance used in situations wh

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Principles of Risk Management and
Insurance Midterm (1) 2025

Riska-aANSWERaUncertaintyaconcerningatheaoccurrenceaofaaaloss



Riska(Insurance)a-
aANSWERaUsedatoaidentifyatheapropertyaofalifeathataisabeingaconsideredaforainsurance




Riska(EconomicsaandaFinance)a-
aANSWERaUsedainasituationsawhereatheaprobabilitiesaofapossibleaoutcomesaareaknown;auncertaintyaisa
usedainasituationsawhereasuchaprobabilitiesacannotabeaestimated



LossaExposurea-
aANSWERaAnyasituationaoracircumstanceainawhichaaalossaisapossible,aregardlessaofawhetheraaalossaocc
urs

EX:aLifeainsurance;aaayoungaindividualacouldadieaprematurely



ObjectiveaRiska-
aANSWERaThearelativeavariationaofaactualalossafromaexpectedalossa(canabeacalculatedabyasomeameasu
reaofadispersion,asuchaasastandardadeviation)



Subjectivea(Perceived)aRiska-
aANSWERaUncertaintyabasedaonaaaperson'samentalaconditionaorastateaofaminda---
aPerceptionaofawhetheraoranotaaariskaisalikelyatoaoccur


EX:aDealaoraNoaDeal



ChanceaofaLossa(Frequency)a-aANSWERaTheaprobabilityathataanaeventawillaoccur

,ObjectiveaProbabilitya-aANSWERaThealong-
runarelativeafrequencyaofaanaeventabasedaonatheaassumptionsaofaanainfiniteanumberaofaobservationsa
andaofanoachangeainatheaunderlyingaconditions



SubjectiveaProbabilitya-
aANSWERaTheaindividual'sapersonalaestimateaofatheachanceaofalossa(theaprobabilityathataanaeventawill
aoccur)




ChanceaofaLossavs.aObjectiveaRiska-aANSWERa-
aChanceaofaLoss:aProbabilityathataanaeventathatacausesaaalossawillaoccur


-aObjectiveaRisk:aThearelativeavariationaofaactualalossafromaexpectedaloss

-aTheachanceaofalossamayabeaidenticalaforatwoagroups,abutaobjectiveariskamayabeaquiteadifferent



Perila-aANSWERaTheacauseaofathealoss

EX:aPropertyadamageabecauseaofafire,awindstorm,aoralightening;aor,adamageatoayouracarabecauseaofaa
acollisionawithaanotheravehicle




Hazarda-aANSWERaAaconditionathataincreasesatheachanceaofaloss



TypesaofaHazardsa-aANSWERa1.aPhysicalaHazard

2.aMoralaHazard

3.aAttitudinala(Morale)aHazard

4.aLegalaHazard



PhysicalaHazarda-aANSWERaAaphysicalaconditionathataincreasesatheafrequencyaoraseverityaofaaaloss

EX:aIceaonatheasidewalk

, MoralaHazarda-
aANSWERaDishonestyaoracharacteradefectsainaanaindividualathataincreasesatheafrequencyaoraseverityao
faaaloss

EX:aFrauda--
aYourahouseaburnsadownaandawhenatheyaaskayouawhatayoualostainatheafire,ayoualieaandamakeaitaseem
alikeayouahadaaalotaofavaluableaitemsathatagotadestroyed




Attitudinala(Morale)aHazarda-
aANSWERaCarelessnessaoraindifferenceatoaaaloss,awhichaincreasesatheafrequencyaoraseverityaofaaaloss


EX:aTheafactathatayouahaveainsuranceamayacauseayouatoabeamorearecklessabecauseayouahaveainsuranc
easoayouadriveafaster



LegalaHazarda-
aANSWERaCharacteristicsaofathealegalasystemaoraregulatoryaenvironmentathataincreasesatheafrequency
aoraseverityaofaaaloss


EX:aThealegalasystemafavorsaoneapartyaoratheaothera--
aJury'sainaCaliforniaarewardapeopleamoreamoneyathanainaIowaaoraMissouri




ClassificationaofaRiska-aANSWERa-aPureavs.aSpeculativeaRisk

-aDiversifiableavs.aNondiversifiableaRisk

-aEnterpriseaRisk



PureaRiska-aANSWERaAasituationainawhichathereaareaonlyatheapossibilitiesaofaaalossaoranoalossa

EX:aEarthquake;aFirea--
aYouainsureayourahomeainacaseaitaburnsadown,abutayouareallyadon'tawantayourahouseatoaburnadown




SpeculativeaRiska-
aANSWERaAasituationainawhichaeitheraprofitaoralossaisapossiblea(theyadon'taexistaunlessayouaenterainto
athem)


EX:aGambling
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