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0

What is meant when we say that insurance is a "risk transfer" mechanism?

The risk that the insured runs is transferred to the insurer for a known cost (the premium)

1

What are the main stages in the risk management process?

The main stages of risk management process are:

Risk identification
Risk analysis
Risk control

2

What are the two main elements that are involved in the measurement of risk?

Frequency (how often claims occur)

Severity (what they cost when they do occur)

3

What is the definition of peril?

A peril gives rise to a loss

4

What is the definition of a hazard?

A hazard is what influences the operation of the peril either by making a loss more likely to occur or by increasing the potential size of the loss

5

What is the difference between physical hazard and moral hazard?

Physical hazard relates to the actual measurable dimensions of a risk

Moral hazard is related to the attitudes and behaviour of the people closely related to the risk.

6

How does the common pool operate in insurance?

Contributions are collected from all those in the pool and valid claims paid out to the few who suffer a loss

7

What are the characteristics of co-insurance?

Co-insurance refers to risk sharing, either between insurers or between the insurer and the insured.