15 Questions
According to the American Academy of Actuaries, how is risk distinguished from uncertainty?
Risk involves known or estimated probabilities, while uncertainty involves unknown or unestimated probabilities.
What is loss exposure used for, according to corporate risk managers?
Identifying potential losses
Which type of risk involves situations where the probabilities of possible outcomes are known or can be estimated with some degree of accuracy?
Pure Risk
What is the term used for situations where the probabilities cannot be estimated?
Uncertainty
How does the text define risk?
Risk is defined as uncertainty concerning the occurrence of a loss.
What is the term used to describe the uncertainty concerning the occurrence of a loss?
Pure risk
In which type of risk are the probabilities of possible outcomes known or can be estimated with some degree of accuracy?
Enterprise risk
What term is used to identify potential losses by corporate risk managers?
Loss exposure
According to the American Academy of Actuaries, which term is used in situations where such probabilities cannot be estimated?
Uncertainty
What do we call risk that involves situations where the probabilities of possible outcomes can be estimated with some degree of accuracy?
Objective risk
What is the essence of insurance based on the given text?
Pooling of losses
What is substituted for actual loss in the process of pooling?
Average loss
What is typically included in an insurance plan or arrangement based on the provided definition?
Transfer of risks
Which characteristic is specifically excluded by most insurance policies based on the text?
Intentional losses
What does the text identify as the social benefits of insurance?
Reduction of risk
Test your knowledge of risk definition and its various types with this quiz. Explore concepts such as pure risk, speculative risk, physical hazard, moral hazard, and more.
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