Exam (elaborations)
RMIN 4000 UGA test 1 Questions and Answers 2024
- Course
- Institution
RMIN 4000 UGA test 1
[Show more]
Content preview
RMIN 4000 UGA test 1types of risk - answer-pure risk
-speculative risk
-diversifiable risk
-no diversifiable risk
-enterprise risk
-systemic risk
risk - answer uncertainty concerning the occurrence of a loss
uncertainty - answer probabilities cannot be estimated
loss exposure - answer any situation or circumstance in which a loss is possible,
regardless of whether a loss actually occurs
example: earthquake or flood causing damage to a manufacturing plant
objective risk (degree of risk) - answer the relative variation of actual loss from expected
loss
example:10,000 houses insured of a long period of time and on average 100 houses
burn each year, however it would be rare for exactly 100 to burn each year
law of large numbers - answeras the number of exposure units increases, the more
closely the actual loss experience will approach the expected loss experience
example: as the number of homes under observation increases, the greater is the
degree of accuracy in predicting the proportion of homes that will burn
subjective risk (perceived risk) - answeruncertainty based on a person's mental
condition or state of mind
example: driver with previous convictions for drunk driving tries to drive home and
wonders if he will get arrested by the police or not
chance of loss - answerthe probability that an event will occur
objective probability - answerthe long run relative frequency of an event based on the
assumptions of an infinite number of observations and of no change in the underlying
conditions
, two ways objective probability can be determined - answer1) deductive reasoning (priori
probabilities): probability of getting a head from the toss of a perfectly balanced coin is
1/2 bc there are two sides
2) inductive reasoning: the probability that a person age 21 will die before age 26
cannot be logically deduced, life insurers can estimate the probability of death and sell a
5 year life insurance policy for a 21 yr old
subjective probability - answerthe individual's personal estimate of the chance of loss
example: people who buy a lottery ticket on their birthday may believe it is their lucky
day and overestimate the small chance of winning
objective risk - answerthe relative variation of actual loss from expected loss
peril - answerthe cause of loss
example: house burns down, peril is the fire
hazard - answercondition that creates or increases the frequency or severity of loss
4 types of hazards - answer1) physical hazard
2) moral hazard
3) attitudinal hazard
4) legal hazard
physical hazard - answerphysical condition that increases the frequency or severity of
loss.
example: icy roads that increase chance of automobile accident
moral hazard - answerdishonesty or character defects in an individual that increase the
frequency or severity of loss
example: faking an accident to collect benefits from an insurer
-can try to control this by careful underwriting of applicants for insurance and by various
policy provisions, such as deductibles, waiting periods
attitudinal hazard - answercarelessness or indifference to a loss, which increases the
frequency or severity of a loss
example: leaving car keys in an unlocked car, which increases the chance of theft,
changing lanes on highway without blinker
legal hazard - answercharacteristics of the legal system or regulatory environment that
increase the frequency or severity of losses.
example: adverse jury verdicts or large damage awards in liability lawsuits; statues that
require insurers to include coverage for certain benefits in health insurance plans
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 julianah420. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
72042 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now