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CAIB 1 / CH 1 / SEC 1 / STUDY GUIDE 2023/2024 with Complete Solutions
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CAIB 1 / CH 1 / SEC 1 / STUDY GUIDE 2023/2024 with Complete Solutions
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CAIB 1 / CH 1 / SEC 1 / STUDY GUIDE 2023/2024 with Complete SolutionsDefine in pure insurance terms "risk" - ANSWER-The chance of financial loss to which an object of insurance is exposed
List the 3 categories of risk generally faced by people - ANSWER-Personal Risk; Property Risk; Liability Risk
State 4 possible options people can choose to deal with risk - ANSWER-Avoidance of Risk; Controlling Risk; Retention of Risk; Transfer of Risk
Give a brief explanation and example of Avoidance of Risk - ANSWER-When chance of
financial loss is eliminated. (Ex. People who rent rather than purchase their own business premises avoid the chance of financial loss from the ownership of that property)
Give a brief explanation and example of Controlling Risk - ANSWER-Taking measures to reduce the frequency and severity of losses. (Ex. Intrusion Detection Alarms, Fire Alarms)
Give a brief explanation and example of Retention of Risk - ANSWER-Large corporations such as Canadian Pacific, Canadian National Railways, assume financial responsibility for their own losses. This is generally less expensive than other options available to them
Give a brief explanation and example of Transfer of Risk - ANSWER-A person unable to
withstand the financial consequences of a potential loss "transfer all" or a portion of their
risk. Insurance companies usually agree to assume the financial responsibility of persons for their losses
Give 2 examples of loss control measures that can be taken to reduce frequency and severity of losses - ANSWER-Intrusion Detection Alarms; Fire Detection Alarms
State 2 reasons why loss control measures are not a total solution in eliminating financial loss - ANSWER-Equipment may not work 100% of the time; losses such as wind, hail and lightning cannot be controlled
Which of the 4 possible options is generally not an effective means of dealing with risk - ANSWER-Avoidance of Risk. In most cases, exposure to financial loss is simply replaced with another
Which of the 4 possible options is the most popular and practical means of dealing with risk - ANSWER-Transfer of Risk
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