General Insurance Flashcards
(44 cards)
A contract that transfers risk from one party to another.
Insurance.
The uncertainty that a loss will occur.
Risk.
Chance of loss or gain.
Speculative risk.
Only chance of loss.
Pure risk.
Reduction in value of an asset.
Loss.
Risks an insurance company is liable for and the amount the insurer must pay out.
Exposure.
The cause of a loss.
Peril.
Anything that increases the risk that a loss will occur.
Hazard.
What type of hazard? Wet floor.
Physical hazard.
What type of hazard? Dishonesty.
Moral hazard.
What type of hazard? Attitude or state of mind.
Morale hazard.
Two or more individuals agree to share a portion of a loss.
Sharing.
Risk moves from insured to insurer.
Transfer.
Elimination of anything risky or dangerous by avoiding it.
Avoidance.
Paying for a loss out of your own assets.
Retention.
Reducing the likelihood of loss.
Reduction.
A principle that makes insurance companies profitable. The larger the number, the less uncertainty there will be about the risk.
Law of large numbers.
What makes an insurable risk?
CANHAM: A risk must be Calculable, Affordable, Non-catastrophic, Homogenous, Accidental, and Measurable.
The tendency of higher-risk individuals to get and keep insurance more often and for longer than an average individual.
Adverse selection.
Insurance for an insurance company.
Reinsurance.
Coverage purchased by a primary insurer to cover a single risk—or a block of risks—held in the primary insurer’s book of business.
Facultative reinsurance.
Reinsurer agrees to cover all risks, even though the reinsurer hasn’t performed individual underwriting for each policy.
Treaty reinsurance.
An insurance company owned by its stockholders/shareholders. A board of directors oversees it. Any profit is paid as a dividend to the stockholders. Non-participating policy.
A stock company.
An insurance company without stockholders. Owned by policyowners/policyholders. Dividends are paid to the policyholders. Participating policy.
A mutual company.
