What is the first problem when understanding the term risk?
There is no universally recognised definition for risk. There is at least 4 different ways the term risk is used with the insurance industry.
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Give examples as to how risk means different things to different people in different circumstances
A business owner may be worried about a possible recession
in comparison to a parent who is generally worried about risk to their child’s safety.
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What does personal assessment of a risk usually involve, give an example.
Personal assessment of a risk usually involves and informal decision in a low risk situation.
An example is deciding whether to take an umbrella with you the informal decision is appropriate for the situation as the severity of the risk.
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In what context is it essential to use measurement tools to determine risk?
Where the potential for loss is significant
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What is the definition of risk management?
Collectively Measuring risks, and the means of attempting to deal with these risks.
In a commercial context this is often a well-defined and scientific process
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Is the statement not every risk is insurable true or false?
TRUE
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Explain how insurance is a means of transferring risk, using an example
It is possible to insure, for example a car, to insure - (to transfer)the risk. This is done by the owner paying a known premium to the insurer, in return for the insurer accepting the future unknown cost of the insured risk. Policy .....
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Other than in the generic sense, how are 3 other ways it’s used within the insurance market?
1) referring to the peril or contingency that is insured -The fire risk or the theft risk 2) when the risk relates to the thing or liability actually insured eg. a factory or a manufacturer’s liability to the public. 3)underwriter wider sense - thing insu
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What do risk-seeking and risk adverse mean?
Risk seeking individuals are more willing to carry greater risksthemselves
Risk adverse individuals feel happier minimising risks they’re exposed to - perhaps by having insurance to transfer risk
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Other cards in this set
Card 2
Front
Give examples as to how risk means different things to different people in different circumstances
Back
A business owner may be worried about a possible recession
in comparison to a parent who is generally worried about risk to their child’s safety.
Card 3
Front
What does personal assessment of a risk usually involve, give an example.
Back
Card 4
Front
In what context is it essential to use measurement tools to determine risk?
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