C16 Business of Insurance
Comprehensive Questions
(Frequently Tested) and Complete
Solutions Graded A+
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5 Ways Insurance companies spread risk - Answer: -Share risk
with other insurance companies (for very large risk, several
insurers subscribe to percentage of risk)
-Reinsure the risk
,-deductible
-spread risk over diverse geographical region (soften risk of
localized disasters)
-form risk pools (syndicates of insurance and reinsurance
companies, organized to underwrite particular risk)
Two principles of insurance - Answer: 1. Premiums of the many
are used to pay the losses of the few
(risk transferred to insurer, deductible, company shares and
spreads risk, geographic spread of risk, forming risk pools)
Premium shall be commensurate with the risk
(Capital meets probabilities of loss, premiums must be adequate
to pay future claims, fierce competition, adverse selection, long
and short tail lines, time gaps in pricing)
Short tail and Long tail compared - Answer: Tail refers to the
amount of time between the incident and the determination of
claim
-Short tail-lines are those where the injury or other harm
becomes known quickly (relatively short period of time between
event and resolution)
-Long tail-lines feature claims separated from the circumstances
that caused it by 10, 15, 20 yrs or more
,-to price risks time gaps must be considered for long-tail lines
-to pay claims from many years ago
-to pay for claims in the future with today's premium
Negative consumer perceptions of industry and how to improve -
Answer: -prices go up/down as capacity tightening
-left customers with poor opinion
-media portrays negative image (politicatians promise to do
something about rates)
-insurers want to educate insurance people about how insurance
industry works
-can provide more information on questions like (good risk vs bad,
how is a risk priced, why rates go up, why a profitable industry
benefits everyone0
-feel if a claim not made, premium should be returned/reduced
-present services in postitive light
-insurance protection intangible
-
10 ways insurance affects society and economy - Answer: -banks
willing to issue mortgages on buildings that are insured
, -developers willing to advance funds to building contractors on
projects guaranteed by surety bonds
-retailers more willing to accept commercial risks with liability
insurance
-professionals more willing to provide services when insured
against risk of malpractice
-manufacturers more willing to accept risks associated with
shipping goods (when insured)
-members of society more willing to use automobiles
-peace of mind
-provides employment
-contributes to economy
-investments help finance governments
-claim payments boost local economies and create jobs
Goal of reinsurance - Answer: -gives peace of mind to insurers
-confidence instilled that financial ruin will not occur is a major
unplanned event were to occur
Four basic functions of Insurance - Answer: Financing - offers a
unique method of financing to insurance companies, frees up
Comprehensive Questions
(Frequently Tested) and Complete
Solutions Graded A+
Professional Academic Assistance Services
Services Offered
• Proctored Exam Assistance
• Online Class Management (Full Course Support)
• Exam Preparation & Study Materials
• Assignments and Coursework Support
• Essay and Research Paper Writing
• Discussion Posts & Responses
• Editing and Proofreading
• Confidential Academic Consultation
Contact Information
Email:
WhatsApp link: https://wa.me/254704846336
Fast Response | Confidential | Reliable Academic Support
Helping Students Achieve Academic Excellence
5 Ways Insurance companies spread risk - Answer: -Share risk
with other insurance companies (for very large risk, several
insurers subscribe to percentage of risk)
-Reinsure the risk
,-deductible
-spread risk over diverse geographical region (soften risk of
localized disasters)
-form risk pools (syndicates of insurance and reinsurance
companies, organized to underwrite particular risk)
Two principles of insurance - Answer: 1. Premiums of the many
are used to pay the losses of the few
(risk transferred to insurer, deductible, company shares and
spreads risk, geographic spread of risk, forming risk pools)
Premium shall be commensurate with the risk
(Capital meets probabilities of loss, premiums must be adequate
to pay future claims, fierce competition, adverse selection, long
and short tail lines, time gaps in pricing)
Short tail and Long tail compared - Answer: Tail refers to the
amount of time between the incident and the determination of
claim
-Short tail-lines are those where the injury or other harm
becomes known quickly (relatively short period of time between
event and resolution)
-Long tail-lines feature claims separated from the circumstances
that caused it by 10, 15, 20 yrs or more
,-to price risks time gaps must be considered for long-tail lines
-to pay claims from many years ago
-to pay for claims in the future with today's premium
Negative consumer perceptions of industry and how to improve -
Answer: -prices go up/down as capacity tightening
-left customers with poor opinion
-media portrays negative image (politicatians promise to do
something about rates)
-insurers want to educate insurance people about how insurance
industry works
-can provide more information on questions like (good risk vs bad,
how is a risk priced, why rates go up, why a profitable industry
benefits everyone0
-feel if a claim not made, premium should be returned/reduced
-present services in postitive light
-insurance protection intangible
-
10 ways insurance affects society and economy - Answer: -banks
willing to issue mortgages on buildings that are insured
, -developers willing to advance funds to building contractors on
projects guaranteed by surety bonds
-retailers more willing to accept commercial risks with liability
insurance
-professionals more willing to provide services when insured
against risk of malpractice
-manufacturers more willing to accept risks associated with
shipping goods (when insured)
-members of society more willing to use automobiles
-peace of mind
-provides employment
-contributes to economy
-investments help finance governments
-claim payments boost local economies and create jobs
Goal of reinsurance - Answer: -gives peace of mind to insurers
-confidence instilled that financial ruin will not occur is a major
unplanned event were to occur
Four basic functions of Insurance - Answer: Financing - offers a
unique method of financing to insurance companies, frees up
