Chapter 1 Flashcards
1
Q
What is the definition of risk?
A
- The possibility of an unfortunate outcome
- Unpredictability
- The possibility of loss
- The chance of gain
2
Q
What is the term to describe an individual who is keen to remove risk where possible?
- Risk unhappy
- Risk-adverse
- Risk-seeking
- Risk confident
A
Risk-adverse
3
Q
A factory installing sprinklers into its premises is an example of which activity?
- Risk transfer
- Risk modelling
- Risk control
- Risk analysis
A
Risk control
4
Q
A fireworks factory is inspected by insurers and found out to have excellent safety protocols and good training for the staff. What are the protocols and training examples of?
- Good moral hazard
- Poor moral hazard
- Good physical hazard
- Poor physical hazard
A
Good moral hazard
5
Q
When pooling risk, insurers use the law of large numbers to make reliable:
- Claims payment predictions
- Investment return predictions
- New business predictions
- Premium income predictions
A
Claims payment predictions
6
Q
What are 3 other meanings for the term ‘risk’?
A
- Peril
- Liability
- Underwriting risk (Thing insured & the range of contingencies or scope of cover required)
7
Q
The time delay between the recipient of premiums and the occurrence of claims creates
- A investment reserve
- A premium reserve
- A claims reserve
- A capital reserve
A
A premium reserve
