Term
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Definition
| Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected ro hoped for. |
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Term
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Definition
- if an event is possible it has a probability between 0 and 1.
- 100% certainty is p=1 and no chance at all would be p=0.
- the probability fo drawing the ace of spades from a deck of cards is 1/52 or p=.019
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Term
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Definition
a state of mind characterized by doubt based on a lack of knowledge about what will happen in the future. A psychological reaction to the abscence of knowledge about the future. |
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Term
| Risk with regard to an insurer |
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Definition
| Actuaries predict some amount of loss and charge a premium based on this prediction, this predicted loss is also the desired outcome. Therefore, for the insurer, RISK is the possibility that losses will deviate adversely from what was expected. |
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Term
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Definition
| is what an individual perceives to be a possible unwanted event |
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Term
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Definition
| related to the likelyhood of occurrence, those events with a high probability of loss are 'riskier' than those with a low probability |
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Term
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Definition
| A cause of a loss: fire, hurricane, hail or theft |
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Term
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Definition
A hazard is something that may create or increase the chance of a loss arising from a given peril IE: You own a home insured against fire. The existence of faulty wiring is a hazard that may increase the chance of a fire occuring. |
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Term
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Definition
| physical aspects that increase the chance of a loss from a given peril. IE faulty wiring in a home |
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Term
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Definition
an increase in the probability of a loss resulting from dishonesty in the character of the insured person. IE: Insurance fraud, or the exaggeration of a loss |
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Term
Morale Hazard (not moral hazard) |
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Definition
when people have purchased insurance they may have a more relaxed attitude about preventing loss - Drs may be more thorough providing care when insurance is present
- Juries may award more money when an insurance company is paying
- both are deep-pocket syndrome
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Term
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Definition
| Risks resulting from changes in the economy: these risks affect many people, are considered less-predictable, and have no precise degree of regularity |
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Term
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Definition
losses that would occur even if there were no changes in the economy - tend to occur with regularity
- generally predictable
- more suited to treatment by insurance
- destruction of the asset or a change in its possession
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Term
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Definition
impersonal in origin and consequence, group risks, caused for the most part by economic, social, and political phenomena. war, inflation, earthquakes liberal social safety-nets and government programs deal with many of these |
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Term
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Definition
involves losses that arise out of individual events and are felt by individuals rather than by the entire group - they are considered to be an individuals own responsibility. burning of a house robbery of a bank |
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Term
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Definition
is used to designate those situations that involve only the chance of loss or no loss normally only pure risks are insurable |
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Term
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Definition
the possibility of loss of income or assets based on a loss of ability to earn income - premature death
- dependent old age
- sickness / disability
- unemployment
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Term
Property Risk (Direct & Indirect Loss) |
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Definition
if a house is destroyed by fire, the owner loses the value of the house However, the loss of the USE of the asset is an indirect or consequential loss |
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Term
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Definition
| the peril behind liability risk is the unintentional injury of other persons or damage to their property through negligence or carelessness. |
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