C1

Question 1

Define risk

Answer 1

Possibility that something unfortunate may occur that may result in a loss

Question 2

What is insurance

Answer 2

The transfer of risk through the payment of a premium

Question 3

What is the common pool

Answer 3

Collected premiums of many. Each insured makes a proportionate contribution to the size of risk they bring on. This allows insurers to pay the claim to those who experience a loss

Question 4

Where do insurers get income from x2

Answer 4

Premiums and investments

Question 5

What are the two types of attitudes to risk

Answer 5

Risk seeking and risk adverse

Question 6

3 stages of risk management

Answer 6

Identification
Analysis
Control

Question 7

What are the two types of controls in risk management

Answer 7

Physical (alarms) and financial (insurance)

Question 8

What are the components of risk

Answer 8

Uncertainty
Frequency and severity(high/low plane crash)
Peril and hazard

Question 9

Define peril

Answer 9

That which gives rise to a loss (fire)

Question 10

Define hazard

Answer 10

Determines how a peril develops (sprinklers) can be good or bad

Question 11

What are the two types of hazards

Answer 11

Moral and physical (location)

Question 12

Define a moral hazard in insurance

Answer 12

The characteristics behaviour or attitude of the insured

Question 13

What are the categories of risk and define them

Answer 13

Financial - of financial value
Non financial - no value/sentimental
Pure - loss and no gains
Speculative- potential for a loss or gain
Particular- localised in effect
Fundamental - vast in effect (war)

Question 14

What types of risks are insurable

Answer 14

Financial
Pure
Particular

Question 15

What makes a risk insurable

Answer 15

Fortuitous - unforeseen
Insurable interest - legally recognised financial relationship
Public policy - lawful
Homogeneous event - pooling of risk/ occurs multiple times

Question 16

What is the law of large numbers

Answer 16

Predicted data close to expected as risk trends can be collected from there being more data. Allows for more accurate pricing

Question 17

Primary functions of insurance

Answer 17

Spread of risk between insures
Provide a degree of certainty
Transfer of risk

Question 18

Secondary functions of insurance

Answer 18

-Companies don’t need to set aside alot of safety funds
-companies have confidence to expand business
-jobs are protected
-losses are reduced as risk management increases
-firms invest more in the economy so it grows
-increases invisible exports

Question 19

What does compulsory insurance ensure

Answer 19

Compensation
Address National concerns
Maintains reputation of certain professions
Ensures funds are available for compensation

Question 20

Employers liability insurance

Answer 20

Minimum £5m of indemnity
Employers liability tracing office
Must show proof of this insurance

Question 21

Motor insurance

Answer 21

Road traffic act 1988
Third party injury or death and third party property damage

Question 22

Public liability insurance

Answer 22

Riding establishment act 1979
Dangerous wild animals and/or dangerous dogs

Question 23

Professional indemnity insurance

Answer 23

For solicitors and others e.g accountants and insurance intermediaries authorised by the FCA. For falling below the standards expected (negligence)

Question 24

How can AI assist underwriting

Answer 24

Help with risk and pricing
Reduce human error
Create individualised policies
Automate underwriting processes
Analyse data
Support décision making

Question 25

How is AI being used in the Lloyds market

Answer 25

To offer an automatic following line based on the same terms as the lead on the risk

Question 26

How is AI used in claims

Answer 26

Automation and efficiency for - data entry -Document verification -Fraud detection -claims assessment Mobile apps can speed up the notifications of claims Analysing previous claims history, policy info and external data like weather Detection of of suspicious claims for human review

Question 27

How can AI help the insured

Answer 27

Flag losses and potential losses Chat it’s to assist claims process Image and damage analysis through photo and estimate repair costs Personalise claims experiences

Question 28

FCA and PRA AI principles

Answer 28

Saftey and security Transparency and explainability Fairness Accountability and governance Contestability and regress

Question 29

What does ESG stand for and what does it mean

Answer 29

Environmental, Social and Governance and is a framework used by companies to evaluate and integrate sustainability and responsible business practice into their operations

Question 30

FCA ESG strategy

Answer 30

-Promotion of global standards for sustainability reporting -Improved transparency of performance on diversity and inclusion matters -integration of ESG into financial market decision making

Question 31

AIRMIC

Answer 31

Association of Insurance and risk managers in industry and commerce

Question 32

FPA

Answer 32

Fire protection Association - share info to insures about building materials hazards etc -gets better historic data and improve policies

Question 33

BRE

Answer 33

Buildings research establishment - aids in loss prevention by sharing info with insurers

Question 34

Equitable premium

Answer 34

Premium is proportionate to the risk added to the pool

Question 35

What is risk management

Answer 35

Risk management involves identifying, analysing, and controlling risks that could threaten an organisation's assets or earning capacity.

Question 36

What is the pooling of risk

Answer 36

Pooling of risk refers to collecting premiums from many insureds to cover the losses of a few. This concept is fundamental to the operation of insurance and relies on the law of large numbers.

Question 37

What role does the claims handling process play in insurance?

Answer 37

The claims handling process is crucial as it determines how efficiently and fairly claims are processed, impacting customer satisfaction.