Exam (elaborations)
C11 principles and practice of insurance chapters 1 & 2.
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- Captains Career Course Module 5 Post Test 2
C11 principles and practice of insurance chapters 1 & 2.
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C11 principles and practice of insurancechapters 1 & 2
Risk - CORRECT ANSWER-Uncertainty about an outcome, event might occur
and it might not be favorable, the possibility of loss
Differentiate between risk and chance - CORRECT ANSWER-chance can have a
good outcome whereas risk is always negative
Peril - CORRECT ANSWER-Event that gives rise to a loss. Beyond anyone's
control. Examples are fire, theft, storm, explosion, acident, flood and vandalism
Hazard - CORRECT ANSWER-Factor that influences outcome of a loss.
Hazards can increase likelihood of a peril occurring or make results more
serious. Poorly maintained heating and cooling systems, damaged extensions
cords, slippery floors, frayed carpets, flammable debris.
Risk Management - CORRECT ANSWER-Minimization at a minimum cost of the
detrimental effects of risk by identifying, measuring and controlling the risk
Risk Managers - CORRECT ANSWER-Responsible for determining what risks
exist and what to do about them
How is risk measured? - CORRECT ANSWER-by determining the likelihood of
each peril occurring (loss frequency) and the severity of the resulting loss or
damage
Methods of controlling risk - CORRECT ANSWER-Reduce the risk by preventive
effort, assume or retain them, or transfer them
Three ways of assuming or retaining risk - CORRECT ANSWER-Ignore the risk,
self insure, transfer the risk
Definition of insurance - CORRECT ANSWER-Method of sharing the losses of a
few who suffer them among the many members of the group who do not
, Indemnify - CORRECT ANSWER-Put back in the same financial position as just
prior to the loss
Expenses insurance premiums cover - CORRECT ANSWER--Payment of losses
suffered by those who have claims.
-Reserves for losses that have occurred but have not yet been reported yet
(outstanding losses).
-reserves for returns of partial premiums to those who cancel a policy part way
through its term (unearned premiums).
-Cost of managing the pot.
Reserves - CORRECT ANSWER-Funds, required by law, to be set aside to pay
for losses reported but not yet paid or not yet reported and to cover unearned
premiums.
Unearned premiums - CORRECT ANSWER-Consist of that portion of the
premium that has not yet been earned on a given policy. Since the premium paid
for a policy does not belong to an insurer in its entirety until the last day of the
policy period, funds must be kept available to refund any unearned premium
should the policy be cancelled at some point during its term
Main objective of insurance - CORRECT ANSWER-to spread the losses of a
small number of people over as great a population as possible so it becomes
affordable to all
How has insurance developed over the centuries? - CORRECT ANSWER--Code
of Hammurabi - form of robbery and life insurance
-Babylonian Caravan owners - Pledged their assets and families for safe
transport of others goods
-Phonecians - offered their families into slavery if shipped goods were lost
-Commercial Insurance evolved in 12th century - Belgian Bank offered insurance
on goods
-Great fire of london 1666 sparked creation of number of insurance companies
-Nicholas Barbon 1667 - opened an office in London to provide fire insurance for
select residences
-Philadelphia Contributorship 1752 - America's first fire insurance company
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