RMIN chapter 2

<p>It could prevent the pooling technique from working properly. (C)</p> Signup and view all the answers

<p>Individuals with pre-existing conditions seeking insurance at a standard rate. (D)</p> Signup and view all the answers

<p>Auto Insurance (D)</p> Signup and view all the answers

<p>Personal Articles (B)</p> Signup and view all the answers

<p>Government insurance programs are social programs designed for the general public and private insurance is sold by private entities. (C)</p> Signup and view all the answers

<p>To decide which applicants they should cover and at what rate. (D)</p> Signup and view all the answers

<p>Products liability (A)</p> Signup and view all the answers

<p>Benefits are heavily weighted in favor of low-income groups (A)</p> Signup and view all the answers

<p>To ensure the loss is random, as required by the law of large numbers. (B)</p> Signup and view all the answers

<p>A client knowing they have a serious medical condition but not disclosing it when applying for health insurance. (A)</p> Signup and view all the answers

<p>Unemployment insurance (B)</p> Signup and view all the answers

<p>Federal Deposit Insurance Corporation (FDIC) (D)</p> Signup and view all the answers

<p>Beach and Windstorm Plans (A)</p> Signup and view all the answers

<p>The insurer aims to restore the insured to their financial position before the loss, but not better than that position. (D)</p> Signup and view all the answers

<p>It diversifies risks across various policyholders to reduce uncertainty and stabilize losses. (A)</p> Signup and view all the answers

<p>To allow insurers to accurately predict average losses and set appropriate premiums. (B)</p> Signup and view all the answers

<p>A loss that was unexpected or accidental from the perspective of the insured. (C)</p> Signup and view all the answers

<p>The loss must be accidental and unintentional. (B)</p> Signup and view all the answers

<p>It enables insurers to statistically predict losses with greater accuracy. (D)</p> Signup and view all the answers

<p>The insured pays their premium to the insurer to be covered against a financial loss. (A)</p> Signup and view all the answers

<p>Loss should not be catastrophic. (C)</p> Signup and view all the answers

Combining the losses of many individuals to reduce the impact of individual losses.

An event that is unforeseen, unexpected, and occurs due to chance.

Shifting a pure risk from the insured to the insurer, who is better equipped to handle it financially.

Restoring the insured to their approximate financial position before a loss occurred.

The principle that as the number of exposures increases, the actual results will get closer to the expected probability.

A risk that can be insured must have a large number of similar exposure units to allow the insurer to predict average losses.

An insurable risk must be accidental and not intentional, meaning the loss should not be caused by the insured's own actions.

An insurable risk must be measurable and have a clear value assigned to it, so the insurer can determine the amount of compensation.

A large number of similar exposure units are needed to apply the Law of Large Numbers and predict the probability of loss.

The loss insured against should be something outside of the insured's control. This ensures that the insurer is not covering deliberate or predictable events.

The loss needs to be verifiable. Determining if a loss occurred should be easy but can be hard if there's no documentation or evidence.
The amount of the loss should be quantifiable. Calculating the exact financial impact should be possible, although it can be complex in some cases.

A catastrophic loss is a large-scale event that is very costly to insure. Catastrophic events include natural disasters and terrorist attacks. If an insurer experiences a large number of claims from one event, its financial stability can be threatened.

Insurers need to be able to statistically predict the frequency and severity of losses. This is essential for setting premiums and managing risk.

The premium must be affordable to the insured. In some cases, premiums can be very expensive. For example, a very old person seeking life insurance will likely face high premiums.

A situation where individuals with a higher risk of loss seek insurance at the same rates as those with lower risk. It can be tricky to know how much risk each customer presents, leading to losses that outweigh premiums.

An imbalance of information. One party in a transaction has more information than the other. This often happens in insurance deals, where the insurer doesn't have complete knowledge of the insured's risk profile.

Covers the insured's legal responsibility for damages to others' property or bodily injury.

Insurance that covers a variety of risks not covered by fire, marine, or life insurance.

Covers losses to real estate or personal property.

Insurance designed for individuals, covering personal vehicles, homes, and belongings.

Insurance specifically designed for businesses, including commercial vehicles, employee injuries, and general risks.

Government-run insurance programs funded by contributions from employers and employees.

Government-provided insurance programs available at the federal or state level.

Insurance that covers the insured's financial losses due to risks like employee dishonesty, crime, and cyber threats.