Chapter 2

For insurance purposes, similar objects which are supposed to the same group of Perros are referred to as...?

Homogenous exposure units

Which of these statements regarding insurance is false?

As the number of insured units increases, the number of losses decreases

Risk _________ is the process of analyzing exposures that create risk and designing programs to handle them.

Management

Which of the following can be defined as a cause of loss?

Peril

An insurer has a contractual agreement which transfers a portion of its risk exposure to another and sure. What type of contractual agreement is this?

Reinsurance contract

According to the law of large numbers, how would losses be affected if the number of similar insured units increases?

Predictability of losses will be improved

What type of risk involves the potential for loss with no possibility for gain?

Pure risk

ABC company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk..?

Reduction

How can an insurance company minimize exposure to loss?

Reinsuring risks

Which of the following can be defined as "the potential for loss"?

Risk

Which term describes the elimination of hazard?

Risk avoidance

Which of the following describes the act of nsuring a risk against possible loss?

Risk transfer

Which one of these is NOT considered to be an element of insurable risk?

Speculative risk

And insurable risk requires..?

That the chance of loss be calculable