Insurance Pooling and Loss Spreading Quiz

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What is the main purpose of insurance pooling?

To render services connected with the risk

To provide financial benefits to the insured

To indemnify the insured for potential losses (correct)

To eliminate the possibility of future losses

Which best describes the concept of fortuitous losses?

Predictable, planned, and intentional

Controlled, known, and deliberate

Inevitable, certain, and avoidable

Unforeseen, unexpected, and occurs as a result of chance (correct)

What is the goal of spreading losses over the entire group in insurance pooling?

To maximize the potential for high individual losses

To substitute average loss for actual loss and reduce variation in possible outcomes (correct)

To predict exact losses for each individual in the group

To distribute losses equally among all group members

What is the process of transferring pure risk from the insured to the insurer known as?

Risk transfer Signup and view all the answers

What does underwriting involve in the insurance context?

Selecting and classifying applicants for insurance Signup and view all the answers

What characterizes an ideally insurable risk?

Meets certain criteria including being unforeseen and accidental Signup and view all the answers

Which characteristic of insurance ensures that the insurer can accurately predict losses?

Large number of exposure units Signup and view all the answers

In insurance, what condition indicates that the loss should be unforeseen, unexpected, and outside the control of the insured?

Loss is accidental and unintentional Signup and view all the answers

Which characteristic of insurance specifies that the insurer must be able to calculate the average frequency and severity of future losses accurately?

Chance of loss is calculable Signup and view all the answers

What type of insurance indemnifies owners against loss or damage to property caused by natural perils?

Property insurance Signup and view all the answers

Under government insurance, which type usually requires mandatory contributions from employers, employees, or both?

Social insurance Signup and view all the answers

What are some of the costs associated with insurance?

All of the above Signup and view all the answers

Which characteristic of an insurance contract means that it depends upon some contingent event that is uncertain?

Aleatory Signup and view all the answers

What type of insurance covers the insured's legal liability arising out of property damage or bodily injury to others?

Liability insurance Signup and view all the answers

Under social insurance, what do recipients derive the right to receive benefits from?

Recipient's past contributions Signup and view all the answers

Insurance Pooling and Loss Spreading Quiz

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