RMI 211 Exam 1 Study Guide Questions and Answers Latest Update Fully Solved 100%
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Course
RMI 211
Institution
RMI 211
refers to the long-run relative frequency of an event based on the assumptions of an infinite number of
observations and of no change in the underlying conditions - Objective Probability
a method other than insurance by which a pure risk and its potential financial consequences are
transferred t...
RMI 211 Exam 1 Study Guide
refers to the long-run relative frequency of an event based on the assumptions of an infinite number of
observations and of no change in the underlying conditions - Objective Probability
a method other than insurance by which a pure risk and its potential financial consequences are
transferred to another - Non-insurable transfer
a specified amount subtracted from the loss payment otherwise payable to the insured -
Deductable
Uncertainty concerning the occurrence of an event (usually a loss) - risk
used in situations where such probabilities cannot be estimated - uncertainty
Any situation or circumstance in which a loss is possible, regardless of whether a loss occurs - Loss
Exposure
- defined as the relative variation of actual loss from expected loss
- It can be statistically calculated by some measure of dispersion, such as the standard deviation -
Objective Risk
defined as uncertainty based on a person's mental condition or state of mind - Subjective
(perceived) risk
The probability that an event will occur - Chance of loss
the individual's personal estimate of the chance of loss - subjective probability
, defined as the cause of the loss. - peril
a condition that increases the chance of loss - Hazard
a physical condition that increases the frequency or severity of loss - Physical hazard
dishonesty or character defects in an individual that increase the frequency or severity of loss -
Moral hazard
carelessness or indifference to a loss, which increases the frequency or severity of a loss -
Attitudinal Hazard (Morale Hazard)
refers to characteristics of the legal system or regulatory environment that increase the frequency or
severity of losses - Legal Hazards
a situation in which there are only the possibilities of loss or no loss (earthquake) - Pure Risk
a situation in which either profit or loss is possible (gambling) - Speculative Risk
affects only individuals or small groups (car theft). It can be reduced or eliminated by diversification. -
diversifiable risk
affects the entire economy or large numbers of persons or groups within the economy (hurricane). It is
also called fundamental risk. - nondiversifiable risk
encompasses all major risks faced by a business firm, which include: pure risk, speculative risk, strategic
risk, operational risk, and financial risk. - Enterprise Risk
refers to uncertainty regarding the firm's financial goals and objectives. - Strategic Risk
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