NC adjusters exam Part I Correct 100%
law of large numbers - ANSWER the larger the sample size the more accurate the
predictions
speculative risk - ANSWER
what insurance protects against - ANSWER the uncertainty (risk) of when a financial
loss may occur
pure risk - ANSWER chance of loss only
not all of these risks are insurable
insurable risk - ANSWER risk that an insurance company is willing to accept
characteristics of an insurable risk - ANSWER low probability of loss occurring
less than catastrophic results
the loss must be measurable
the loss must be significant
the loss must be accidental and unintended
probability - ANSWER measures the chance of an event occurring
measure of uncertainty
spread of risk (geographic dispersion) - ANSWER decreases loss probability
involves spreading the companies policies (exposures) over a broad geographical area
used to avoid large losses in the event of a catastrophic event
ex. building a sprinkler system in the home to reduce the chances of a fire loss
peril - ANSWER the actual cause of a loss
examples of perils - ANSWER fire
hail
wind
theft
hazards - ANSWER increase the probability of a peril occuring
purpose of insurance - ANSWER restore the insured to the original financial position
that was enjoyed before a loss but WITHOUT gain
indemnity - ANSWER to make whole again
law of large numbers - ANSWER the larger the sample size the more accurate the
predictions
speculative risk - ANSWER
what insurance protects against - ANSWER the uncertainty (risk) of when a financial
loss may occur
pure risk - ANSWER chance of loss only
not all of these risks are insurable
insurable risk - ANSWER risk that an insurance company is willing to accept
characteristics of an insurable risk - ANSWER low probability of loss occurring
less than catastrophic results
the loss must be measurable
the loss must be significant
the loss must be accidental and unintended
probability - ANSWER measures the chance of an event occurring
measure of uncertainty
spread of risk (geographic dispersion) - ANSWER decreases loss probability
involves spreading the companies policies (exposures) over a broad geographical area
used to avoid large losses in the event of a catastrophic event
ex. building a sprinkler system in the home to reduce the chances of a fire loss
peril - ANSWER the actual cause of a loss
examples of perils - ANSWER fire
hail
wind
theft
hazards - ANSWER increase the probability of a peril occuring
purpose of insurance - ANSWER restore the insured to the original financial position
that was enjoyed before a loss but WITHOUT gain
indemnity - ANSWER to make whole again
