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Summary English 2
Chapter 1: Insurance & risk
1.1 What is insurance?
= Financial product sold by insurance companies to safeguard individuals/organizatons and/
or their property against the risk of loss, damage or theft
= Insurance is a policy from a large fnancial insttuton that ofers a person, company or
other entty compensation or fnancial protection against possible future losses or damagest
You buy a POLICY and pay PREMIUMS to the insurer to get covert
You can make a claim Compensaton for the loss if it is covered under the policyt
Insurers make this possible by grouping ppl exposed to the same sort of risk in a poolt
This fund pays out the insuredt
not everybody pays the same amount (jaguar or old Ford) = logical, Is not the same riskt
Opmt Person who calculates the likelihood of a risk = actuary
Ext You have to take out THIRD-PARTY LIABILITY MOTER INSURANCE, buildings insurance as
a mortgage, …
1.2 What is risk?
Peril vs Hazard
At Peril: cause of loss ext Flood, fre, thef, …
Bt Hazard: any factor that increases the likelihood or severity of a loss ext Thatched roof
Bad risk = higher premium
Surveyors and risk managers can suggest ways in which the likelihood of some risks
occurring may be reducedt They can give advicet
physical hazard vs moral hazard + example
At Moral = type of hazard that increases the possibility of loss because of
dishonesty/lying/ … ext Speculaton/lying/not telling things
Bt Physical = physical conditons that increase the possibility of losst Ext
Smoking/mining/racing/steeple jack (=klimmer)
1.3 Brainstorming. Discuss in pairs and then report.
Nothingt
1.4 New interest in risk management.
Risk management has only made real impact on major companies so fart
1t Surveying all the areas of risk
2t Recommendatons to minimize potental losses (done by consultants or brokers)
Fire = greatest potental risk, how to prevent?
- Prevent spreading with more walls
- Sprinkler system
Industrial espionage = increasing risk
,Cyber security = important
- Restrictng access
Working conditons
- Accident preventon
- Increased liability because new consumer protecton legislaton
Many recommendatons = common sense
- Not one supplier for raw materials (risk of strike
- Not all the managers on the same plane
- Valuable goods not stored in one place
1.5 The basics of insurance
You can’t prevent disasters but you can insure against themt
- Most insurances are voluntary
- Some compulsory:
1t TPLMI = 3 partes: you, your insurance company and anybody else sometmes
also intermediary like broker or agent
2t social security in some countries: when you earn money on regular basis you
have to pay a sum to the state in the form of taxes : this money is used to cover
natonal health services like unemployment benefts, industrial injury benefts, …
Opmt Now you can also take out a comprehensive policy: insurance against all riskst
Way of sales:
1t Broker (sells insurance form diferent companies)
2t Agent (sells insurance from one company)
3t Direct Sales (without intermediary)
, Chapter 2: Insurance principles
a. Can anything be insured? (more info in book)
1t The statstcal probability of the loss must be calculablet
2t The loss must be measurable in money terms
3t The risk to insure should not involve any prospect of gain or proftt
4t The loss must not be deliberatet The loss must be fortuitous and accidentalt
5t It is not possible to insure against public interestt
6t The person who takes out the insurance must be the one who sufers from the losst
Chapter 3: Lloyd’s
3.1 What is Lloyd’s?
- Insurance market, most important one in the world
- Only for registered Lloyd’s brokers
- Started as a cofee house run by Edward Lloyd’s in the 17th centuryt
- “Slip” = proposal form
- Underwriters are the “investors” = capital fow grouped in syndicates or “Names”
They had unlimited liability untl 1994, afer 1994 no longer
- Specialized in:
1t MAT (Marine, aviaton, transport insurance)
2t Reinsurance
3t Very big and special risks
- Partes in the business: London
market
1t IUA (lobby + research)
2t Lloyd’s of London (=
insurance market)
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