Chapter One Flashcards
(30 cards)
What does the analysis of historical patterns and trends of risks allow an insurer to do?
Forecast expected future losses
What is the approximate minimum level of professional indemnity insurance intermediaries are required to have for a single claim, under the FCA rules?
£1 million
What action would a policyholder take if they are seeking to reduce loss and control risk in their furniture factory?
Install a sprinkler system
What type of insurance policy is personal accident and sickness insurance known as?
Benefit policy
To be insurable, a risk must be:
A fortuitous event
The ‘law of large numbers’ is an important concept for an insurer because it enables the insurer to:
Accurately predict the likely levels of claims
If an insurer requires a survey of a risk prior to accepting it, this would be an example of risk:
Identification
A policyholder would like to insurer their business against falling profits that might result from compensation. This would NOT be insurable because it would be regarded as:
Speculative risk
The payment of a premium for an insurance policy;
Transfers the risk to the insurer
What is the name of the database that is used to trace previous insurers where there is a claim with employers’ liability insurance?
The employers’ liability tracing office
What does the insurance principle of ‘equitable premiums’ mean?
The premium reflects the degree of risk
Carelessness and dishonesty are examples of:
Moral hazard
What is the main purpose of compulsory insurance?
To provide funds for compensation
The London Market writes a considerable amount of insurance overseas. This is a(n):
Invisible export
What does ‘fortuitous event’ refer to?
An accidental or unexpected event
What type of insurance would be compulsory for a firm based in York, which has five employees and manages a portfolio of commercial offices?
Employers’ liability insurance
Under the concept of ‘pooling of risks’, the premium charged by an insurer should:
Reflect the risk being presented
The concept of physical hazard is best described as:
The physical characteristics of the risk
What would someone be called who is wary about taking risks?
Risk adverse
A windscreen claim on a motor policy is an example of a:
High frequency and low severity risk
If the driver of a car pays little regard to keeping to the speed limit, this is an example of:
Moral hazard
what are risks that are localised in their cause and effect known as?
Particular risks
Why do insurers primarily monitor the frequency and severity of their risk pools?
To help with future planning and to smooth out peaks and troughs
Risk is normally assessed in terms of:
Frequency and severity
