Provide a complete definition of Insurance and briefly discuss the essential elements of the definition.
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August 5, 2017Complete a self-assessment to identify and list three primary core and personal values, attitudes, and communication styles.
August 5, 2017Provide a complete definition of Insurance and briefly discuss the essential elements of the definition.
FIN 3610 Assignment 1 Name_______________________
Chapters 1 and 2
Please remember that you must do your own work. Any plagiarism will result in a grade of zero for all students involved. Please use your own words even if you are using the textbook for answers. Always provide a citation when a reference is used.
- Provide a complete definition of Insurance and briefly discuss the essential elements of the definition.
- The Law of Large Numbers is used in the development of insurance rates. Explain how this statistical tool is important to the success of insurance. The law of large numbers states that the greater the number of exposures, the more closely the actual results will approach the probable results expected from an infinite number of exposures. As the number of exposures increases, the relative variation of actual loss from expected loss will decline. Thus, the insurer can predict future losses with a greater degree of accuracy as the number of exposures increases. This is important, since an actuary must charge a premium that is adequate for paying all losses and expenses during the policy period. The lower the degree of objective risk, the more confidence an insurer has that the actual premium charged will be sufficient to pay all claims and expenses and leave a margin for profit.
- Briefly define and discuss risk as it relates to insurance. Provide an example of how insurance reduces risk.
- Provide an example of the following terms:
- Physical Hazard physical condition that increases the chance of loss. Examples are icy streets, poorly designed intersections, and dimly lit stairways.
- Moral Hazard dishonesty or characteristics of an individual that increase the chance of loss
- Morale Hazard carelessness or indifference to a loss, which increases the frequency or severity of loss
- How does enterprise risk management differ from traditional risk management?
Enterprise risk management combines into a single unified treatment program all major risks faced by the firm. These risks include pure risk, speculative risk, strategic risk, operational risk, and financial risk.
(b) Traditional risk management considered only major and minor pure risks faced by a corporation. Enterprise risk management considers all risks faced by a corporation as described in (a) above.
