Expense loadings are not a benefit of insurance; they are a cost associated with insurance policies. Expense loadings represent the administrative and operational costs that insurance companies incur when providing coverage. These costs include underwriting, administrative expenses, commissions, marketing, and other operational costs. Expense loadings are factored into insurance premiums to cover these costs and ensure the financial sustainability of the insurance company.
Insurance regulation primarily occurs at the state level in the United States. Each state has its own insurance department or regulatory body responsible for overseeing and regulating insurance activities within its jurisdiction. This includes regulating insurance companies, setting insurance rates, approving insurance products, and ensuring that insurance practices are fair and transparent.
Rebating is unfair.Rebating includes giving a policyholder a portion of the insurance premium or other financial incentive to buy insurance. It distorts insurance pricing and underwriting and gives some policyholders an unfair advantage. Rebating affects fairness and actuarial concepts insurance companies use to set premiums.
The act of pooling involves distributing the cost of losses suffered by a small number of people or corporations among a wider group. In order to lessen the impact of individual losses, the group as a whole is averaged in this process. In this procedure, the actual loss of each individual is replaced with the average loss endured by the group.
Risk financing includes retention, transfer, and commercial insurance. Risk finance addresses how firms manage financial risk. These tactics minimize financial losses.
Yes you are correct, loss prevention/loss reduction
Unlike commercial contracts, insurance contracts may not trade equal value. The insured pays a premium to the insurance company for financial protection against covered losses or catastrophes. This reward rarely matches anticipated losses. Insurance contracts are asymmetric, with the insured paying a tiny premium for future coverage
Subjective risk refers to the uncertainty or risk that is perceived and experienced by an individual based on their mental condition, emotions, feelings, or personal judgments. It involves how an individual perceives and responds to potential risks, and it can vary from person to person due to different perceptions, attitudes, and emotions.
Yes you are correct, Atlanta
Risk management pre-loss objectives focus on pre-loss activities. These goals help the company prepare for losses. "Survival of the firm" is rarely a pre-loss risk management objective.
The law of large numbers is a statistical principle that describes the phenomenon where, as the number of exposure units (individuals or events) increases, the actual observed outcomes (such as losses or accidents) become more consistent and predictable, approaching the expected outcomes based on probabilities.
Option a is false regarding insurance versus gambling. Insurance does not create a new risk; rather, it provides a mechanism to manage and mitigate existing risks.
Yes you are correct, 2; active and passive
An optimal insurance risk fits certain characteristics. Option d is not an ideal insurable risk, unlike a, b, and c. Insurable hazards are rarely catastrophic. Insurance firms may struggle to cover huge claims from catastrophic occurrences like natural disasters.
The unequal value exchange based on an unpredictable event makes an insurance contract aleatory.Aleatory contracts have unknown outcomes and values. The insured pays a premium to the insurer for coverage of particular losses or events. The insured's potential payment from a covered loss is usually significantly greater than the premium paid. Insurance contracts are based on uneven value exchange.
The act of pooling involves distributing the cost of losses suffered by a small number of people or corporations among a wider group. In order to lessen the impact of individual losses, the group as a whole is averaged in this process. In this procedure, the actual loss of each individual is replaced with the average loss endured by the group.
