Exam (elaborations)
C16 Business of Insurance Chapter 1 Exam/6 Q’s and A’s
C16 Business of Insurance Chapter 1 Exam/6 Q’s and A’s
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C16 Business of InsuranceChapter 1 Exam/6 Q’s and A’s
Principles of Insurance - -#1 Principle: premiums of the many used to pay
losses of few
2 Principle: premium shall be commensurate with the risk
-Short-tail lines - -Short-tail lines injury becomes known quickly
e.g., most property losses
-Long-tail lines - -Long-tail lines injury not settled for maybe 10 - 25 years
e.g., products' liability lines
-Impact of long tail lines - -Length of such gaps are considered when pricing
risks
to ensure proper cash flow and cash reserves in many years to come
-Insurance provides the following in the economy - -security
confidence
savings
encouragement of investment
reduction in price of consumer goods
-Insurance encourages the following activities in the Canadian Economy - -
Banks issue mortgages on insured buildings
Developers advance funds to contractors on projects guaranteed by surety
bonds
Retailers accept commercial risk of operating when purchase liability
insurance
Professionals provide services when able to insure against malpractice
liability
Manufacturers accept risks of shipping when insured
Members of society sanction use of auto when insured
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