The loss you inquire from a disaster not the value its correct answers The money invested into that property
what is risk? correct answers any uncertainty regarding financial loss, anything that could impact your money
what are some classifications of risk? correct answers pure vs speculative...
primary burdens of risk are? correct answers -Actual costs of losses
...to: individual & society
...current and future premiums
...loss control & compliance costs
-opportunity costs
...scarce resources; time and money
...risk/return trade-offs
-mental anguish
...a good night sleep
...general aggregation
...behavior motivation
exposure correct answers house, car, health all subject to being lost
MPL correct answers maximum probable loss
peril correct answers anything that could cause a loss to exposure
hazard correct answers frequency or severity of loss
3 types of hazards and an example for both correct answers -physical- ex. ice on roads
-moral- conscious desire or loss occurrence ex. swoop, squat
, -Morale- subconscious/facilitation of loss ex. making it easy to lose money like getting robbed
by not locking doors
adverse selection correct answers tendency for people who need insurance to get it/ people who
don't need insurance don't buy it
-misclassification of a high risk as a low risk
basic tools of risk management correct answers -avoiding all risks
-retain
-transfer
-control
-(hedging/arbitration)(not truly a marketing tool)
retain has 2 types: correct answers -passive- stupid, careless to risk(ignoring all risk)
-active- know what risk your taking
transfer has 2 types: correct answers -insurance- will share & help pay risk
-non-insurance- contracts/lease who is responsible
3 types of control: correct answers -prevention- focus: loss frequency (reduce loss)
-reduction- focus: loss severity
-diversification- focus: both frequency and severity
2 ways of diversification correct answers -separation-move apart
-combination/pooling- bring together
arbitrage correct answers selling something at a larger price than it is (large gains)
ex. buying gold in US for 1,300 and selling it in the UK for 2000
hedging correct answers really an ARTC decision in different dimensions ; some risk
-trying to us options to create leverage can be good or bad thing
how does insurance handle risk correct answers -nature of the "insurance mechanism"
-legal contracts
-risk transfer and sharing
cost of the insurance mechanism check phone correct answers check phone
basis for growth of insurance: correct answers -private vs public government property
-industrialized society
-well organized legal system
-ethical environment
-relatively stable economy
industrialized society correct answers -specialization of jobs/skills
-dependence on income
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