Forms of insurance Flashcards

1
Q

What does the form of insurance affect?

A

The contract used

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2
Q

What is the form of insurance

A

Deals with the relationship of damage and compensation

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3
Q

What is the formula for intensity of insurance

A

Compensations/Loss

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4
Q

i<1

A

Under coverage

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5
Q

i=1

A

Full insurance

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6
Q

i>1

A

Over insurance - usually reduced to i=1

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7
Q

What are the 2 main groups of insurance?

A

Sum insured and damage insured

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8
Q

Sum insured

A

The insurer and the prospective policyholder agree on a sum insured if the loss event occurs regardless of the extent

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9
Q

Principal of abstract coverage

A

Full amount is paid out if event occurs, there is not in between value - eg. life insurance

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10
Q

Damage insurance

A

Indemnity is paid out with respect to the amount of damage that happened

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11
Q

Principal of concrete coverage

A

There is a definite value attached to the loss

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12
Q

Subforms of Damage insurance

A

Unlimited damage insurance
First loss insurance
Full value insurance

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13
Q

Unlimited damage insurance

A

Covers all losses

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14
Q

Intensity in unlimited damage insurance

A

i=1

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15
Q

Describe the indemnity function for unlimited damage insurance

A

Straight-line where loss and compensation are always equal

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16
Q

Example of unlimited damage insurance

A

Glass insurance, vehicle insurance in some countries

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17
Q

First loss insurance

A

The insurer covers all losses up to a limit (sum insured) anything over this will not be paid out

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18
Q

Describe indemnity function for first loss insurance

A

c=l until s(sum insured) is reached

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19
Q

Describe the intensity function of first loss insurance

A

i=1 until s where it falls down (half u shaped)

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20
Q

Full value insurance

A

The insurer covers all losses in the proportions of the sum insured to the value insured

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21
Q

Value insured

A

This is the value of the object has in reality

22
Q

What happens if the value insured is wrong

A

If there is under insurance then there (s

23
Q

What does the indemnity function look like in the event of the value indicated being smaller

A

Tilted down stoping at the sum insured

24
Q

What is the intensity in full value insurance

A

s/v

25
Q

Partial value insurenace

A

When you assume a certain proportion of the loss

26
Q

What are the three variables in partial value insurance

A

The value indicated, value insured, sum insured

27
Q

Value indicated (partial value insurance)

A

The value of the item in the contract

28
Q

What does the insurer cover in partial value insurance

A

value indicated/value insured to the sum insured

29
Q

What happens with a lower sum insured

A

Insured retains more of the risk

30
Q

Sum insured (partial value insurance)

A

A fraction of the value indicated

31
Q

Formula for compensation in partial value insurance

A

C=L*vind /Vins

32
Q

What is the intensity of the value indicated is correct and lower than is correct

A

1, if incorrect then the intensity drops. Intensity always reduces as the loss passes the sum insured

33
Q

Full insurance refers to what

A

Intensity

34
Q

Full value insurance refers to

A

A subform of damage insurance

35
Q

Deductible

A

An amount of damage/loss the insurer does not compensate for

36
Q

Invoulentery deductibles

A

unintentional under insurnace

37
Q

Voulentery dedeuctibles

A

Agreed upon before

38
Q

What are the functions of deductibles

A
  • Prevent morale hazard moral hazard
  • Avoids the admin costs of small claims
  • Allows the insured to save on premiums
39
Q

Morale hazard

A

Carlesness

40
Q

Moral hazard

A

Intention loss/fraud

41
Q

What are the 3 types of deductibles

A

Absolute, relative, past a point

42
Q

Absolute deductible

A

A deductible is a fixed amount at the start

43
Q

What is the intensity function of an absolute deductible like?

A

pushed out from the start point

44
Q

What is the intensity function of an absolute deductible like?

A

half n shape that approaches but never touches 1

45
Q

Where are absolute deductibles seen

A

Car insurance, house insurance …

46
Q

Relative deductible

A

The insurer deducts a percentage

47
Q

Indemnity function of a relative/co-insurance deductible

A

pivots down

48
Q

When are relative deductibles used

A

Hospital expenses, storm insurance…

49
Q

Past a point deductibles

A

Pays out in full if the damage reaches a certain level

50
Q

When are past a point deductibles used?

A

Marine cargo insurance