C11 principles and practice of insurance chapters 1 & 2 Exam | Questions & 100% Correct Answers (Verified) | Latest Update | Grade A+
Risk : Uncertainty about an outcome, event might occur and it might not be favorable, the possibility of loss Differentiate between risk and chance : chance can have a good outcome whereas risk is always negative Peril : Event that gives rise to a loss. Beyond anyone's control. Examples are fire, theft, storm, explosion, acident, flood and vandalism Hazard : Factor that influences outcome of a loss. Hazards can increase likelihood of a peril occurring or make results more serious. Poorly maintained heating and cooling systems, damaged extensions cords, slippery floors, frayed carpets, flammable debris. 2 | P a g e Risk Management : Minimization at a minimum cost of the detrimental effects of risk by identifying, measuring and controlling the risk Risk Managers : Responsible for determining what risks exist and what to do about them How is risk measured? : by determining the likelihood of each peril occurring (loss frequency) and the severity of the resulting loss or damage Methods of controlling risk : Reduce the risk by preventive effort, assume or retain them, or transfer them Three ways of assuming or retaining risk : Ignore the risk, self insure, transfer the risk Definition of insurance : Method of sharing the losses of a few who suffer them among the many members of the group who do no
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