Podcast
Questions and Answers
What is an example of financial value risk?
What is an example of financial value risk?
- Loss of business profit (correct)
- Deciding on a restaurant menu item
- Choosing a career
- Loss of trust
Which type of risk involves the potential for loss of income due to unforeseen circumstances?
Which type of risk involves the potential for loss of income due to unforeseen circumstances?
- Personal risk (correct)
- Liability risk
- Property risk
- Market risk
What does indirect loss refer to in property risk?
What does indirect loss refer to in property risk?
- Immediate financial loss from theft
- Increased property value after damage
- Direct destruction of property
- Loss of income during repairs (correct)
Which of the following best describes liability risk?
Which of the following best describes liability risk?
Which risk is associated with the high costs of medical care and potential income loss?
Which risk is associated with the high costs of medical care and potential income loss?
What would be an example of an extra expense in property risk?
What would be an example of an extra expense in property risk?
What type of risk includes the potential for insufficient income during retirement?
What type of risk includes the potential for insufficient income during retirement?
What is the main consequence of a personal risk associated with unemployment?
What is the main consequence of a personal risk associated with unemployment?
What is the definition of risk as described by Vaughan and Vaughan?
What is the definition of risk as described by Vaughan and Vaughan?
What is a characteristic of risk?
What is a characteristic of risk?
What does 'proximate cause' refer to in the context of insurance?
What does 'proximate cause' refer to in the context of insurance?
Which of the following exemplifies a 'peril'?
Which of the following exemplifies a 'peril'?
In insurance terms, what is usually classified as having a high frequency and low severity?
In insurance terms, what is usually classified as having a high frequency and low severity?
What does the frequency of loss measure in the context of risk?
What does the frequency of loss measure in the context of risk?
Which statement best describes the nature of uncertainty in risk?
Which statement best describes the nature of uncertainty in risk?
What impact does risk generally have on our lives?
What impact does risk generally have on our lives?
Which of the following is NOT a risk category associated with the hotel and tourism industry?
Which of the following is NOT a risk category associated with the hotel and tourism industry?
What does the Law of Large Numbers state?
What does the Law of Large Numbers state?
Which of the following is considered a part of Economic Factors in the hotel and tourism industry?
Which of the following is considered a part of Economic Factors in the hotel and tourism industry?
In the context of insurance, what does 'adverse deviation' refer to?
In the context of insurance, what does 'adverse deviation' refer to?
Which of the following perils falls under the Health risk category?
Which of the following perils falls under the Health risk category?
What is meant by the term 'insurer'?
What is meant by the term 'insurer'?
Which of the following risk categories includes 'fraud and crime'?
Which of the following risk categories includes 'fraud and crime'?
What does 'frequency of loss' indicate in an insurance context?
What does 'frequency of loss' indicate in an insurance context?
What is the defining characteristic of pure risk?
What is the defining characteristic of pure risk?
Which type of probability is calculated using historical data?
Which type of probability is calculated using historical data?
What distinguishes speculative risk from pure risk?
What distinguishes speculative risk from pure risk?
Which probability type relies on expert judgement for determination?
Which probability type relies on expert judgement for determination?
Which of the following is an example of fundamental risk?
Which of the following is an example of fundamental risk?
What is a key aspect of empirical probability's reliability as observations increase?
What is a key aspect of empirical probability's reliability as observations increase?
Which of the following best defines particular risk?
Which of the following best defines particular risk?
Which scenario exemplifies judgemental probability?
Which scenario exemplifies judgemental probability?
What is classified as a moral hazard?
What is classified as a moral hazard?
Which of the following is NOT a type of natural hazard?
Which of the following is NOT a type of natural hazard?
What defines a physical hazard according to the classification provided?
What defines a physical hazard according to the classification provided?
Which example illustrates a morale hazard?
Which example illustrates a morale hazard?
Which type of hazard is primarily related to an individual’s character flaws?
Which type of hazard is primarily related to an individual’s character flaws?
What condition is a common example of a physical hazard?
What condition is a common example of a physical hazard?
Which of the following describes a hazard rather than a peril?
Which of the following describes a hazard rather than a peril?
Why are morale hazards considered unconscious?
Why are morale hazards considered unconscious?
Which of the following is considered a peril that causes loss?
Which of the following is considered a peril that causes loss?
What is a possible outcome of a burglary or theft?
What is a possible outcome of a burglary or theft?
Which term best describes a condition that increases the chance of loss?
Which term best describes a condition that increases the chance of loss?
Which of the following is NOT an example of a loss?
Which of the following is NOT an example of a loss?
What type of loss is primarily associated with illness?
What type of loss is primarily associated with illness?
Which outcome can result from legal liability?
Which outcome can result from legal liability?
What does 'loss' refer to in the context of perils and hazards?
What does 'loss' refer to in the context of perils and hazards?
Which of the following statements about probability is correct?
Which of the following statements about probability is correct?
Flashcards
Risk
Risk
A condition where there's a chance of an unfavorable outcome compared to what was expected or hoped for.
Chance of Loss
Chance of Loss
The possibility of something bad happening.
Uncertainty
Uncertainty
The state of not knowing what will happen in the future.
Dispersion of Results
Dispersion of Results
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Frequency of Loss
Frequency of Loss
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Severity of Loss
Severity of Loss
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Proximate Cause
Proximate Cause
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Peril
Peril
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Hazard
Hazard
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Loss
Loss
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Probability
Probability
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Physical Hazard
Physical Hazard
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Moral Hazard
Moral Hazard
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Morale Hazard
Morale Hazard
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Social Hazard
Social Hazard
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Natural Hazard
Natural Hazard
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Miscellaneous Hazard
Miscellaneous Hazard
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A Priori Probability
A Priori Probability
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Empirical Probability
Empirical Probability
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Judgemental Probability
Judgemental Probability
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Pure Risk
Pure Risk
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Speculative Risk
Speculative Risk
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Fundamental Risk
Fundamental Risk
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Particular Risk
Particular Risk
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Law of Large Numbers
Law of Large Numbers
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Adverse Deviation
Adverse Deviation
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Compensation
Compensation
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Insured Peril
Insured Peril
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Insurer
Insurer
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Law of Large Numbers
Law of Large Numbers
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Financial Value Risk
Financial Value Risk
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Non-Financial Value Risk
Non-Financial Value Risk
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Direct Loss
Direct Loss
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Indirect Loss
Indirect Loss
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Extra Expenses
Extra Expenses
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Liability Risk
Liability Risk
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Risk of Premature Death
Risk of Premature Death
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Risk of Old Age
Risk of Old Age
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Study Notes
Risk Definition
- Risk is defined as a condition where there's a possibility of adverse deviation from a desired outcome.
- It implies uncertainty about an outcome, usually unfavorable or undesirable.
- Risk involves the chance of loss, uncertainty, and the possibility of an unfortunate occurrence.
Concept of Risk
- Risk is inherent in all aspects of life.
- Risk involves uncertainty about outcomes in a given situation.
- Risk creates both problems and opportunities.
- Risk brings surprises and makes life interesting.
- Risk doesn't always imply negative consequences.
Elements of Risk
- Uncertainty is a state of mind characterized by doubt, stemming from a lack of knowledge about future events (e.g., predicting road accidents).
- The degree of risk considers the frequency and severity of losses.
- Proximate cause is the actual and active cause of loss in insurance; insurers are only liable for losses directly caused by insured perils.
Level of Risk
- Insurance often involves high-frequency, low-severity incidents (e.g., numerous minor car accidents) alongside low-frequency, high-severity incidents (e.g., rare plane crashes).
- Motor accidents are frequent but less severe than plane crashes, which are less frequent but have severe consequences.
Peril
- A peril is a cause of loss (e.g., fire, lightning, explosion, accidents).
- Additional perils include social factors (strikes, riots), miscellaneous events (aircraft impacts, water tank bursts), and natural events (floods, storms, earthquakes).
Hazard
- A hazard is a condition that creates or increases the chance of loss.
- Hazards are categorized into physical, moral, and morale hazards.
Types of Hazard
- Physical hazard: A physical condition increasing loss chance (e.g., faulty wiring).
- Moral hazard: A character defect (dishonesty) increasing loss chance, often related to the insured person.
- Morale hazard: An attitudinal defect, where an individual increases loss chance due to awareness of insurance coverage.
Examples of Hazards
- Physical hazards include types of construction, property location, building occupancy, and road/vehicle conditions.
- Moral hazards involve dishonesty, exaggerating claims, speeding, smoking, carelessness, and poor housekeeping.
- Morale hazards cover failure in safeguarding property, reckless driving, unhealthy lifestyles, and dangerous hobbies.
Loss
- Loss is a reduction or disappearance of economic value.
- Types of loss include property damage, bodily injury, death, loss of income, cost of repair, legal costs, loss of property, and more.
Peril, Hazard, and Loss
- Perils are causes of loss, hazards increase loss chance, and losses result from these.
- Risk situations involve storage of hazardous materials, poor housekeeping, motor vehicle accidents, legal liability issues, negligence, and carelessness.
- Loss scenarios include property damage, bodily harm, premature death, loss of income, additional expenses, and legal costs.
Probability Theories
- Probability is the chance of a particular event occurring.
- Types of probability theories include a priori probability, empirical probability, and judgemental probability.
A Priori Probability
- A priori probability is determined when the total number of possible events is known (e.g., probability of rolling a six on a die).
- Limited practical application in risk study due to rarity of known outcomes.
Empirical Probability
- Empirical probability is determined by historical data (e.g., number of road accidents, fires).
- The predicted loss increasingly approaches the actual loss as observation numbers increase (law of large numbers).
Judgemental Probability
- Judgemental probability is based on expert judgment, used when historical data is lacking (e.g., astronaut programs).
Types of Risk
- Pure risk: Possibility of only loss or no loss (e.g., accidents).
- Speculative risk: Possibility of profit or loss (e.g., investments).
- Fundamental risk: Affects the entire economy or large groups (e.g., natural disasters).
- Particular risk: Affects individuals (e.g., car accidents).
- Financial value risk: Measured in monetary terms (e.g., property damage).
- Non-financial value risk: Not measured in monetary terms (e.g., loss of reputation).
Types of Pure Risk
- Personal risk: Loss of income due to death, old age, or ill health.
- Property risk: Damage or loss of property.
- Liability risk: Financial losses due to injuries to others or damage to their property.
Property Risks
- Direct loss: Damage to property by a peril.
- Indirect loss: Losses resulting from a direct loss (e.g., business interruption).
- Extra expenses: Additional costs related to the loss.
Liability Risks
- Liability risk stems from unintentional injuries to others or property damage, though intentional acts can also create this risk.
- Risk of being sued due to negligence, malpractice, or intentional harm.
- Financial loss potential exists even if not liable.
Risk Categories Associated With Hotel and Tourism Industry
- Risks in the hotel and tourism industry stem from various factors: natural disasters, crime, health issues, political instability, economic factors, technology, and socio-demographic aspects (e.g., cultural practices).
Law of Large Numbers
- The law of large numbers states that the larger the group of similar risks, the closer the actual losses experienced by the group approach the expected losses.
Glossary of Terms
- Key terms in risk management are defined, including adverse deviation, compensation, frequency, hazard, insured peril, insurer, and the law of large numbers.
- Additional terms include liability, likelihood, loss, peril, proximate cause, risk, and severity of loss.
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Description
This quiz explores the definition, elements, and levels of risk. It delves into how uncertainty affects outcomes and the inherent nature of risk in everyday life. Understanding these concepts can help in navigating opportunities and challenges effectively.
