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