Life & Health Insurance Exam Latest Update Graded A+

Life & Health Insurance Exam Latest Update Graded A+ Insurance transfer of risk Speculative risk has a possibility of both loss and gain Pure risk only has a possibility of loss (no gain) Exposure risks for which an insurance company would be liable expressed in units Peril cause of a loss Hazard an increase in the chance of loss Moral hazard arise from people's character (faking a loss) Morale hazard state of mind or careless attitude (accidentally leaving door unlocked) Methods of handling risk STARR Share, transfer, avoid, retain, reduce The law of large numbers the larger the group, the more accurately losses can be predicted Elements of insurable risk CANHAM Calculable, affordable, non-catastrophic, homogenous, accidental, measurable Adverse selection tendency for higher-risk individuals to get and keep insurance Reinsurance an insurance company (ceding) pays another insurance company (reinsurer) to assume some risk in the event of a catastrophic loss Facultative reinsurance reinsurer evaluates each risk before allowing the transfer Treaty reinsurance reinsurer accepts all risk of a certain type from the ceding company Stock insurer insurance company owned by shareholders who chose the board of directors taxable dividends can be paid from profits issues non-participating (non-par) policies Mutual insurer no shareholders, rather policyowners who chose the board of directors nontaxable dividends can be paid from profits (return of excess premium) issues participating (par) policies Fraternal benefit societies provides insurance and other social benefits to members members own certificates