General Insurance - Risk Management Key Terms

Morale Hazard

Arise from a state of mind that causes indifference to loss, such as carelessness. Actions taken without forethought may cause physical injuries.

Hazards

Conditions or situations that increase the probability of an insured loss occurring.

Loss

Defined as the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril. Insurance provides a means to transfer loss

Physical Hazards

Individual characteristics that increase the chances of the cause of loss. Physical hazards exist because of a physical condition, past medical history

Speculative Risk

Involves the opportunity for either loss or gain. An example of this is gambling. These types of risks are not insurable.

Pure Risk

Refers to situations that can only result in a loss or no change. No opportunity for financial gain. This is the only type of risk that insurance companies are willing to accept

Moral Hazard

Tendency towards increased risk. This refers to those applicants who may lie on an application for insurance, or in the past have submitted fraudulent claims against an insurer.

Peril

The causes of loss insured against an insurance policy