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RMIN 4000 Final Exam Questions and Answers well Explained Latest 2024/2025 Update 100% Correct. $9.89
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RMIN 4000 Final Exam Questions and Answers well Explained Latest 2024/2025 Update 100% Correct.
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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...

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  • September 11, 2024
  • 11
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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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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