RMIN 4000, chapter 2 (UGA)
Insurance - answer the pooling of fortuitous losses by transfer of such risks to insurers,
who agree to indemnify insureds for such losses, to provide other pecuniary benefits on
their occurrence, or to render services connected with the risk.
Fortuitous - answer random, accidental losses
indemnification - answer the insured is restored to the condition prior to the loss
(restored to approximate financial condition)
pooling of losses - answer spreading losses of a few over an entire group (pool);
reduces risk based on the law of large numbers
risk transfer - answer pure risk transfer from the insured to the insurer, who is typically
in a better financial position to cover the loss
expected loss - answer multiply each loss by its expected probability and add them
together to find the average
standard deviation - answerused to measure the risk of a loss; calculated by taking the
square root of the sum of each loss subtracted from the expected loss (square that) and
multiplied by its probability of occurrence
expected loss for the pool - answerwhen a pool is created there then become several
possible outcomes in which all, none or some of the members experience the loss; you
have to multiply the probabilities to get the new probability then multiply the by the total
loss that would be occur to find the loss for the pool. divide by the number of members
in the pool to get E[L] for each individual in the pool.
standard deviation for the pool - answersame as before but with the new probabilities
and expected loss for the pool
adverse selection - answerThe tendency of persons with ahigher-than-average chance
of loss to seek insurance atstandard (average) rates, which if not controlled
byunderwriting, results in higher-than-expected loss levels
underwriting - answerselecting and classifying insurance applicants
private insurance - answerlife, health, property, and liability insurance
Insurance - answer the pooling of fortuitous losses by transfer of such risks to insurers,
who agree to indemnify insureds for such losses, to provide other pecuniary benefits on
their occurrence, or to render services connected with the risk.
Fortuitous - answer random, accidental losses
indemnification - answer the insured is restored to the condition prior to the loss
(restored to approximate financial condition)
pooling of losses - answer spreading losses of a few over an entire group (pool);
reduces risk based on the law of large numbers
risk transfer - answer pure risk transfer from the insured to the insurer, who is typically
in a better financial position to cover the loss
expected loss - answer multiply each loss by its expected probability and add them
together to find the average
standard deviation - answerused to measure the risk of a loss; calculated by taking the
square root of the sum of each loss subtracted from the expected loss (square that) and
multiplied by its probability of occurrence
expected loss for the pool - answerwhen a pool is created there then become several
possible outcomes in which all, none or some of the members experience the loss; you
have to multiply the probabilities to get the new probability then multiply the by the total
loss that would be occur to find the loss for the pool. divide by the number of members
in the pool to get E[L] for each individual in the pool.
standard deviation for the pool - answersame as before but with the new probabilities
and expected loss for the pool
adverse selection - answerThe tendency of persons with ahigher-than-average chance
of loss to seek insurance atstandard (average) rates, which if not controlled
byunderwriting, results in higher-than-expected loss levels
underwriting - answerselecting and classifying insurance applicants
private insurance - answerlife, health, property, and liability insurance
