RMIN 4000 Final Exam Questions and Answers well Explained Latest 2024/2025 Update 100% Correct.
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Course
RMIN 4000
Institution
RMIN 4000
Assessment Mutual Insurer - Has the right to assess policyowners an additional amount if the
insurer's financial operations are unfavorable
Retention - Firms retain part or all of the losses that can result from a given loss; Ex: Expense, set
aside liquid, credit line
Risk - Uncertainty about c...
RMIN 4000 Final Exam
Assessment Mutual Insurer - Has the right to assess policyowners an additional amount if the
insurer's financial operations are unfavorable
Retention - Firms retain part or all of the losses that can result from a given loss; Ex: Expense, set
aside liquid, credit line
Risk - Uncertainty about chance, timing, or amount of loss
Chance of Loss - Probability that an event will occur
Objective Risk - The relative variation of actual loss from expected loss; (Actual-
Expected)/Expected; higher variation means higher risk
Law of Large Numbers - Objective risk varies inversely with the square root of the number of cases
Subjective Risk - Uncertainty based on a person's mental condition or state of mind
Hazard - A condition that increased the frequency or severity of the loss
Moral Hazard - Arson
Morale Hazard - Driving drunk
Pure risk - Chance of loss or no loss (no gain)
Speculative risk - Chance of loss, no loss, or gain
, Particular risk - Risk that affects only affects individuals as individuals
Legal hazard - Large damage awards in litigation
Fundamental/systematic risk - Affects a large number of individuals or the entire economy
Enterprise risk - All major risks faced by a business
Direct loss (property) - Financial loss that results from physical damage, destruction, or theft
Peril - Cause of loss
Indirect loss (property) - Financial loss arising from loss of USE of property
Liability risk - Responsibility for actions that cause injury or property damage to another (no limit)
Fortuitous loss - Unforeseen and unexpected by the insured and occurs as a result of chance
Risk Transfer - Pure risk is transferred from the insured to the insurer, who typically is in a better
financial position to pay the loss than the insured
Indemnification - The injured is restored to his approximate financial position prior to the
occurrence of the loss
Adverse Selection - The tendency of persons with a higher-than-average chance of loss to seek
insurance at standard (average) rates, which if not controlled by underwriting, results in higher-than-
expected loss levels
Viatical settlement - Benefactor pays AIDS patient to take out life policy
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