Risk Management and Insurance | 92 Questions and Answers(A+ Solution guide)

How is Risk Measured - Objectively. Subjectively. Chance of Loss - Probability that an event will occur. Probability - Objective. Subjective. Objective Probability - Long-run relative frequency of an event based on the assumption of an infinite number of observations and of no change in the underlying conditions. Subjective Probability - Individual's personal estimate of the chance of loss. Chance of Loss Distinguished from Risk - Probability that an event will occur versus relative variation of actual loss from expected loss. Peril - Cause of loss. Physical Hazards - Physical conditions that create or increase the chance of loss. Moral - Characteristics of a person that increase the chance of loss - arson, fraud. Morale - Careless attitude because of the presence of insurance that leads to an increase in the chance of loss. Legal Hazards - Legal system or regulatory environment that increase the frequency or severity of losses. Ways to Control Hazards - Underwriting. Contract Provisions. Deductibles