Exam (elaborations)
RMIN 4000 uga test 1|102 Questions And Answers
- Course
- Institution
RMIN 4000 uga test 1|102 Questions And Answers
[Show more]
Content preview
RMIN 4000 uga test 1|102Questions And Answers
types of risk - --pure risk
-speculative risk
-diversifiable risk
-nondiversifiable risk
-enterprise risk
-systemic risk
- risk - -uncertainty concerning the occurrence of a loss
- uncertainty - -probabilities cannot be estimated
- loss exposure - -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) - -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 - -as 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) - -uncertainty 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 - -the probability that an event will occur
- objective probability - -the 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 - -1) 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 - -the 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 - -the relative variation of actual loss from expected loss
- peril - -the cause of loss
example: house burns down, peril is the fire
- hazard - -condition that creates or increases the frequency or severity of
loss
- 4 types of hazards - -1) physical hazard
2) moral hazard
3) attitudinal hazard
4) legal hazard
- physical hazard - -physical condition that increases the frequency or
severity of loss.
example: icy roads that increase chance of automobile accident
- moral hazard - -dishonesty 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 - -carelessness 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 - -characteristics of the legal system or regulatory
environment that increase the frequency or severity of losses.
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 Nursephil2023. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
76799 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now
