Exam (elaborations)
Maryland Property Casualty Insurance Practice Questions and correct Answers.
- Course
- Institution
Maryland Property Casualty Insurance Practice Questions and correct Answers.
[Show more]
Seller
Follow
superacademic
Reviews received
Content preview
Maryland Property & CasualtyInsurance Practice Questions and
correct Answers
Insurance Transfers -
the risk of loss from an individual or business entity to an insurance company, which
in turn spreads the costs of unexpected losses to many individuals
Risk -
the uncertainty or chance of a loss occurring
Pure Risk -
refers to situations that can only result in a loss or no change. No opportunity for
financial gain. Only type of risk insurance companies are willing to to accept.
Exposure -
a unit of measure used to determine rates charged for insurance coverage. (E.g.
age of insured, medical history, occupation, gender..etc)
Homogeneous exposure -
larger number of units having similar exposure to loss. sharing risk among members
of that group.
Hazard -
conditions or situations that increase the probability of an insured loss occurring.
Classified as physical, moral, and morale
Physical Hazard -
those arising from the material, structural, or operational features of the risk, apart
from the persons owning or managing it
Moral Hazard -
those applicants that may lie on an application for insurance, or in the past have
submitted fraudulent claims against the insurer
Morale Hazard -
an increase in the hazard presented by a risk, arising from the insured's indifference
to loss because of the existence of insurance. (E.g "I'm not going to bother fixing this
if it brakes. My insurance will pay to replace it.")
Perils -
the causes of loss insured against in a policy.
Loss -
, defined as the reduction, decrease, or disappearance of value of the person or
property insured in a policy, caused by a named peril. Insurance provides a means
to transfer this.
Avoidance -
eliminating exposure to a loss (E.g. To avoid the risk of a plane crash, one chooses
to never fly.)
Retention
(3 Reasons) -
the planned assumption of risk by an insured through the use of deductibles, co-
payments, or self insurance.
1) to reduce expenses and improve cash flow
2)to increase control of claim reserving and claim settlements
3)Fund for losses that cannot be insured
Sharing -
method of dealing with risk for a group of individual persons or businesses with
similar exposure to share the losses incurred within that group
Reduction -
includes actions such as installing smoke detectors, having annual physicals, or
making changes to lifestyle in a means to lessen probability of loss
Transfer -
most effective way of handling risk. Loss is borne by another party. Does not
eliminate the risk but relieves the insured of financial losses brought on by these
risks
6 Elements of Insurable Risks -
1)must be due to chance
2)must be definite and measurable
3)must be predictable
4)cannot be catastrophic
5)loss exposure to be insured must be large
6)must not be mandatory
Adverse Selection -
the insuring of risks that are more prone to losses than the average risk. Companies
strive to protect themselves from this and are given the option to to refuse or restrict
coverage, or charge a higher rate
Law of Large Numbers -
principle stating that the larger the number of similar exposure units considered, the
more closely the losses reported will equal the underlying probability of loss.
Statistical basis for which prediction of loss is calculated into rates
Reinsurance -
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller superacademic. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $13.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79789 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now