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| Indemnification |
compensation to the victim of a loss |
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labiblioteca Wed, 01 Feb 2012 03:48:42 GMT |
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| What type of accounting standard is required for insurance? |
statutory |
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labiblioteca Tue, 31 Jan 2012 08:36:24 GMT |
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| cross sell |
trying to sell customers more insurance |
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labiblioteca Tue, 31 Jan 2012 08:34:58 GMT |
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| independent adjustor |
organization that adjusts claims for a fee |
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labiblioteca Tue, 31 Jan 2012 08:34:58 GMT |
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| public adjustor |
somebody you use if you think the insurance company is ripping you off |
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labiblioteca Tue, 31 Jan 2012 08:34:58 GMT |
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| difference between insurance agent adjustor and company adjustor |
Agent handles small claims and company adjustor handles larger claims |
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labiblioteca Tue, 31 Jan 2012 08:34:58 GMT |
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| reinsurance |
transferring risk from one insurance company to another |
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labiblioteca Tue, 31 Jan 2012 08:28:15 GMT |
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| underwriting |
the process of selecting, classifying, and pricing applicants for insurance |
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labiblioteca Tue, 31 Jan 2012 08:28:15 GMT |
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| actuaries |
people who price insurance |
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labiblioteca Tue, 31 Jan 2012 08:28:15 GMT |
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| exclusive agency system |
agent only represents one insurer or group of insurers under common ownership |
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labiblioteca Tue, 31 Jan 2012 08:28:15 GMT |
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| direct writer |
salesperson is an employee of the insurer |
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labiblioteca Tue, 31 Jan 2012 08:25:02 GMT |
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| independent agency system |
will sell a wide array of products |
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labiblioteca Tue, 31 Jan 2012 08:25:02 GMT |
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| direct response system |
insurance sold directly, without an agent |
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labiblioteca Tue, 31 Jan 2012 08:25:02 GMT |
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| Agency building system v non agency building system |
agency: insurer builds own agency by recruiting other agents that represent only the insurer.
Non agency: insurer enters into contracts with successful agents who agree to sell the insurer's products |
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labiblioteca Tue, 31 Jan 2012 08:25:02 GMT |
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| captive insurer |
insurer who is owned by a parent firm |
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labiblioteca Tue, 31 Jan 2012 08:20:30 GMT |
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| Insurance agents and brokers are different in: |
the individual they represent. Agents represent the insurance company, brokers represent the individual |
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labiblioteca Tue, 31 Jan 2012 08:21:22 GMT |
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| Insurance agents and brokers are similar in that: |
They are both marketers and compensated through commission |
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labiblioteca Tue, 31 Jan 2012 08:20:30 GMT |
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| Demutualization |
when a mutual company becomes a public company |
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labiblioteca Tue, 31 Jan 2012 08:20:30 GMT |
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| Reciprocal exchange |
insurance is exchanged among members |
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labiblioteca Tue, 31 Jan 2012 08:18:43 GMT |
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| Lloyd's of London |
not an insurer, but allows its members to write specialized lines of insurance |
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labiblioteca Tue, 31 Jan 2012 08:18:43 GMT |
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| stock companies v mutual companies (in terms of ownership) |
Stock: owned by its stockholders
Mutual: customers are owners |
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labiblioteca Tue, 31 Jan 2012 08:18:43 GMT |
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| Trends in Insurance companies: |
Consolidation: Less and less companies
Covergence: companies buying out each other now offer a wide array of services |
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labiblioteca Tue, 31 Jan 2012 08:18:43 GMT |
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| when you drive a car and have liability insurance that is considered : _____. when you have a deductible on your physical damage that is called: _____ . when you use your seat belt that is called: ____ |
transfer, retention, and loss control |
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labiblioteca Tue, 31 Jan 2012 07:47:59 GMT |
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| Risk financing: retention vs transfer |
retention: means the firm retains all or part of a loss. financed through current income, borrowing, getting insurers.
Transfer: insurance and noninsurance (contracts, etc) |
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labiblioteca Tue, 31 Jan 2012 07:46:04 GMT |
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| loss prevention v loss reduction |
prevention: refers to measures that reduce the frequency of a particular loss.
reduction: refers to the measures that reduce the severity of a loss after it occurs. |
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labiblioteca Tue, 31 Jan 2012 07:46:04 GMT |
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| Box: High frequency and high severity |
avoidance |
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labiblioteca Tue, 31 Jan 2012 07:46:04 GMT |
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| Box: Low frequency and high severity |
transfer |
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labiblioteca Tue, 31 Jan 2012 07:46:04 GMT |
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| Box: High frequency and low severity |
loss control |
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labiblioteca Tue, 31 Jan 2012 07:42:42 GMT |
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| Box: Low frequency and low severity |
retention |
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labiblioteca Tue, 31 Jan 2012 07:42:42 GMT |
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| Maximum probable loss v maximum possible loss |
probable: worst loss that is likely to happen
possible: worst loss that could happen to firm in its lifetime |
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labiblioteca Tue, 31 Jan 2012 07:42:42 GMT |
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| 4 steps in Risk Management process |
1. Identify loss exposure
2. measure and analyze loss exposure
3. Select between risk control and risk financing
4. Implement and monitor the program |
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labiblioteca Tue, 31 Jan 2012 07:42:42 GMT |
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| How risk management changed in 2000 |
some firms started taking all risks into consideration: speculative, financial, reputation, etc |
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labiblioteca Tue, 31 Jan 2012 07:38:55 GMT |
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| risk management: pre 1990s |
Risk management was only limited to property, liability and personal loss |
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labiblioteca Tue, 31 Jan 2012 07:38:55 GMT |
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| post-loss objectives |
-survival of firm/continue operating
-earnings stability
-social responsibility
-earnings growth |
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labiblioteca Tue, 31 Jan 2012 07:38:55 GMT |
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| pre loss objectives |
-prepare for loss in most economical way
-reduce anxiety
-meet legal obligations |
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labiblioteca Tue, 31 Jan 2012 07:38:55 GMT |
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| Risk management definition |
process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating such exposures |
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labiblioteca Tue, 31 Jan 2012 07:35:22 GMT |
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| Costs of insurance |
-expenses of insurance companies
-fraudulent claims
-inflated claims |
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labiblioteca Tue, 31 Jan 2012 07:35:22 GMT |
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| Benefits of insurance |
-indemnification of losses
-reduction of fear and worry
-source of investment funds
-incentive for loss control (experience rating) |
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labiblioteca Tue, 31 Jan 2012 07:35:22 GMT |
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| Government Insurance (& 3 types) |
Social insurance: funded by mandatory taxes
unemployment, workers compensation, social security |
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labiblioteca Wed, 01 Feb 2012 03:18:34 GMT |
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| 1 similarity between gambling and insurance |
they both employ the law of large numbers |
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labiblioteca Mon, 30 Jan 2012 17:36:23 GMT |
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| 2 differences between insurance and gambling |
1) gambling creates a new speculative risk, while insurance is a technique for handling already existing pure risk
2) gambling is socially unproductive, because the winner's gain comes at the expense of the loser. |
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labiblioteca Mon, 30 Jan 2012 17:36:23 GMT |
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| underwriting |
refers to the process of selecting and classifying applicants for insurance |
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labiblioteca Mon, 30 Jan 2012 17:36:23 GMT |
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| adverse selection |
TENDENCY of person with higher than average chance of loss to seek insurance, LEADING to higher than expected loss levels |
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labiblioteca Mon, 30 Jan 2012 07:48:14 GMT |
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| 6 characteristics of insurable risk: |
-large # of similar exposure units
-fortuitous losses
-determinable and measurable losses
-losses are not catastrophic
-calculable chance of loss
-affordable premiums |
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labiblioteca Mon, 30 Jan 2012 07:46:55 GMT |
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| Risk transfer |
pure risk is transferred from the insured to the insurer, who typically is in a position to pay for the loss of the insured. |
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labiblioteca Mon, 30 Jan 2012 07:46:55 GMT |
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| fortuitous loss |
fortuitous loss = one that is unforseen and unexpected by the insured and occurs as a result of chance |
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labiblioteca Wed, 01 Feb 2012 03:52:43 GMT |
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| law of large numbers |
the greater the number of exposures, the more closely will the actual results approach the probable results expected |
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labiblioteca Mon, 30 Jan 2012 07:42:53 GMT |
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| pooling of losses |
spreading the losses occurred by a few over the entire group |
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labiblioteca Mon, 30 Jan 2012 07:42:53 GMT |
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| 4 elements of insurance |
-Pooling (law of large #s)
-Payment of fortuitous losses
-Risk Transfer
-Indemnification |
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labiblioteca Mon, 30 Jan 2012 07:42:53 GMT |
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| noninsurance transfer v insurance transfer |
noninsurance: transferring risk somewhere other than an insurance company (like incorporating, hedging price risks)
insurance transfer: transferring your risk over to an insurance company |
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labiblioteca Mon, 30 Jan 2012 07:42:53 GMT |
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| active retention v passive retention |
active: when individual is aware of potential loss and agrees to retain part of it (like paying a $500 deductible)
passive: unknowingly retaining a risk due to ignorance, indifference, or laziness. |
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labiblioteca Mon, 30 Jan 2012 07:38:01 GMT |
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| loss prevention v loss reduction |
prevention: reducing the probability of the loss
reduction: to reduce the severity of the loss after the inevitable loss occurs |
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labiblioteca Mon, 30 Jan 2012 07:38:01 GMT |
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| risk avoidance |
avoid the risk by avoiding the situation entirely |
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labiblioteca Mon, 30 Jan 2012 07:38:01 GMT |
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| personal risk (4 types) |
risk that affects individual:
-risk of premature death (unfulfilled financial obligations)
-risk of insufficient retirement income
-risk of poor health
-risk of unemployment |
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labiblioteca Mon, 30 Jan 2012 07:38:01 GMT |
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| commercial risks |
property risks, liability risks, crime, speculative financial risks. |
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labiblioteca Fri, 27 Jan 2012 04:48:33 GMT |
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| individual risk |
personal risks like poor health or unemployment |
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labiblioteca Fri, 27 Jan 2012 04:48:33 GMT |
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| legal hazard |
characteristics of the legal system that increase the frequency or severity of loss. like statues that require coverage for alcoholism |
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labiblioteca Fri, 27 Jan 2012 04:48:33 GMT |
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| attitudinal hazard |
indifference towards a loss, which increases the frequency or severity of a loss. like leaving your car unlocked |
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labiblioteca Fri, 27 Jan 2012 04:48:33 GMT |
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| moral hazard |
dishonesty or character defects in an individual that increase the frequency or severity of loss. action takes place to benefit from insurance |
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labiblioteca Fri, 27 Jan 2012 04:45:15 GMT |
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| physical hazard |
like ice, increases the chance of loss |
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labiblioteca Fri, 27 Jan 2012 04:44:44 GMT |
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| hazard |
a condition that increases the frequency or severity of loss. |
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labiblioteca Fri, 27 Jan 2012 04:44:44 GMT |
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| peril |
the cause of loss |
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labiblioteca Fri, 27 Jan 2012 04:44:44 GMT |
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| Pure risk v Speculative risk |
Pure risk: there is loss or no loss.
Speculative: a gain could occur. |
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labiblioteca Fri, 27 Jan 2012 04:42:46 GMT |
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| the law of large numbers |
as the number of exposure units increases, the more closely the loss experience will approach the expected loss experience |
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labiblioteca Fri, 27 Jan 2012 04:42:46 GMT |
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| subjective risk |
the individual's perception on how risky a situation is. |
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labiblioteca Fri, 27 Jan 2012 04:42:46 GMT |
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| Objective Risk |
variation between actual and expected results |
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labiblioteca Fri, 27 Jan 2012 04:42:46 GMT |
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