Chapter 2 Flashcards
(9 cards)
Which features must be present for a risk to be insurable ?
The event insured must be fortuitous
There must be insurable interest
There must homogeneous exposures
Insuring the risk must not be against public policy
What is insurable interest ?
The legally recognised relationship between the insured and the financial loss which the insured suffers on the happening of an insured event
How does public policy affect the availability of insurance?
Insurers will not cover risks which conflict with what society believes is the right and proper thing to do
Which types of risk cannot be insured?
Non financial risks
Speculative risks
Fundamental risks
Identify the 3 main components of risk
Uncertainty
Level of risk
Peril and hazard
Define peril
A peril which gives rise to a loss
Define Hazard
A hazard is that which influences the operation of the peril
What is the primary function of insurance?
The primary function of insurance is to act as a risk transfer mechanism
Explain the basic concept of self insurance
Self insurance means that the individual/company carries the risk itself rather than using insurance as a risk transfer mechanism
