Midterm 1 Flashcards
(31 cards)
Risk
uncertainty concerning the occurrence of loss
Peril
The cause of loss
Hazard
The condition that causes or increases the chance of loss
Types of hazard
physical - property
moral - dishonest
morale - careless
Risk management
The identification or evaluation of risks followed by use of resources to reduce risks
Insurance
An arrangement where a company or government agency guarantees compensation for specified risk
pure risk
involves loss or no loss
speculative risk
involves loss or gain
loss frequency
how often losses occur
loss severity
the financial value of loss
fundamental risk
risk affecting a society or large group
particular risk
risk affecting a particular person
underwriting cycle
booms and recessions of insurance business. Used in property and casualty not life insurance
combined ratio
sum of losses and expenses divided by earned premium
enterprise risk management
methods and processes to minimize and manage risk
adverse risk selection
methods and processes where buyers and sellers have different information
personal risk
anything that exposes you to the risk of losing something of value
blackout period
a duration of time when access to something usually available if prohibited
dependency period
the time following the readjustment period when children are growing in age and expenses rise
maximum possible loss
worst possible loss that could occur
probable maximum loss (PML)
worst possible loss you can have
law of large number
as sample size grows mean gets closer to entire population
Statutory Accounting Principles
used to prepare financial statements of insurance companies
loss adjustment expense
cost insurance companies incurs to investigate a claim
