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INSR 310 exam 1 Ferguson || with 100% Error-free Answers.
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  • INSR 310

what is risk? correct answers any uncertainty regarding financial loss three risk classifications: correct answers 1- pure vs. speculative 2- static vs. dynamic 3- objective vs. subjective risk is NOT correct answers probability pure risk correct answers loss/no loss only speculative ...

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  • October 27, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
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  • INSR 310
  • INSR 310

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INSR 310 exam 1 Ferguson || with 100% Error-free
Answers.
what is risk? correct answers any uncertainty regarding financial loss

three risk classifications: correct answers 1- pure vs. speculative
2- static vs. dynamic
3- objective vs. subjective

risk is NOT correct answers probability

pure risk correct answers loss/no loss only

speculative risk correct answers loss/no loss/ gain

static risk correct answers unchanging over time

dynamic risk correct answers changing (especially w/ technology)

objective risk correct answers statistical variation from expectation

subjective risk correct answers individual perception/ psychology

three primary burdens of risk correct answers 1- actual costs of losses
2- opportunity costs
3- mental anguish

actual costs of losses correct answers - to individuals and society
- current and future premiums
- loss control and compliance costs

opportunity costs correct answers - scarce resources ( time and money)
- risk/return trade-offs

mental anguish correct answers - a "good night's sleep"
- general aggravation
- behavior modification/ motivation

exposure correct answers thing of value at risk

max probable loss correct answers "MPL" most likely loss to occur

max possible loss correct answers "MPL" worst case scenario loss

peril correct answers anything that can cause a loss to exposure

, frequency hazard correct answers number of losses

severity hazard correct answers costs of each loss

moral correct answers conscious desire for loss occurrence (scam, arson)

morale correct answers subconscious/facilitation of loss

basic tools of risk management correct answers 1- avoid
2- retain
3- transfer
4- control

two ways to retain risk management correct answers 1- passively
2- actively

two ways to transfer risk management correct answers 1- through insurance
2- non-insurance techniques (setting up a corporation)

three ways to control risk management correct answers 1- prevention
2- reduction
3- diversification

hedging/arbitrage correct answers less unique tool of risk management

how does insurance handle risk? correct answers 1- legal contract
2- risk transfer and pooling

industrialized society correct answers - specialization of jobs/skills
- dependence on income

well organized legal system correct answers enforceable contracts

ethical environment correct answers supports contract enforceability

relatively stable economy correct answers - supports planning (insurance is FUTURE oriented)
- greater disincentives for loss

elements of insurable risk from the insurer's perspective correct answers - large number of
homogeneous exposure units to increase predictability
- fortuitous/ unintentional losses only to reduce moral hazard and adverse selection
- definite/measurable losses; quantification vital for indemity
- non-catastrophic occurence

elements of insurable risk from the insured's perspective correct answers - large-loss principle

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