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IF1 - Chapter 1 questions with correct answers
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IF1 - Chapter 1 questions with correct answers
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IF1 - Chapter 1 questions with correctanswers
Risk - correct answer ✔✔The accepting of an unknown future potential risk by an insurer for an agreed
premium. Also known as risk transfer.
Other meanings of 'risk' - correct answer ✔✔- Peril or contingency
- The thing actually insured
- Both things insured and contingencies or scope of cover
Risk adverse - correct answer ✔✔Someone who dislikes risk and tries to stay away from it.
Risk tolerant - correct answer ✔✔Someone who seeks risks and takes risks.
Risk management - correct answer ✔✔The identification, analysis and economic control of those risks
which can threaten the assets or earnings of the enterprise.
Why risk management is important? - correct answer ✔✔- Reduces the potential for loss by identifying
and managing hazards.
- Gives shareholders a greater degree of confidence in a company's ability to manage its risks.
- Provides a disciplined approach to quantifying risks.
Risk Identification - correct answer ✔✔This involves discovering the treats that may already exist or the
potential threats in the future.
Risk analysis - correct answer ✔✔The examination of past data to evaluate the risk and to predict in the
future.
, Risk control - correct answer ✔✔For a potential adverse consequence, some course of action should
take place to control, reduce or eliminate the risk.
Types of risk control - correct answer ✔✔- Physical measures
- Financial measures
- Developing a good risk culture
Categories of risk - correct answer ✔✔- Insurable & Uninsurable
- Financial & Non Financial
- Pure & Speculative
- Particular & Fundament
Pure risk - correct answer ✔✔The possibility of a loss but not a gain. (Insurable)
Speculative risk - correct answer ✔✔The possibility of loss or gain.
Fundamental risk - correct answer ✔✔Arises from social, economic, political or natural causes and are
widespread in their effect. (Uninsurable)
Fortuitous event - correct answer ✔✔Accidental or unexpected and not inevitable. (Insurable)
Particular risk - correct answer ✔✔Localised or even personal in their cause and effect, this is more
widespread but the effect is localised.
Insurable interest - correct answer ✔✔The legally recognised financial relationship between the insured
and the object or liability that is being insured.
Public policy - correct answer ✔✔Insurers should not cover risks that are against public policy.
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