Risk and Insurance: Chapter 3 & 6

What is Group Insurance?

life/health insurance provided for the benefit of the employee by an employer

What is risk retention group?

a group that provides risk management and retention to a few players in the same industry who are too small to act on their own

What is captive insurance company?

a company that provides insurance coverage to its parent company and other affiliated organizations

What are governmental risk pools?

pools formed for government entities to provide group self-insurance coverage

What is insurance?

economically feasible when the possible loss is relatively large compared to the amount of the premium charged

What is dependent loss?

when loss to one exposure unit affects the probability of loss to another

What is law of large numbers?

as a sample of observations is increased in size, the relative variation about the mean declines

What is risk pooling?

sharing of losses by a large number of exposure units

What is discrimination?

classification of exposures according to expected losses

Why is the law of large numbers necessary for insurance?

it enables better prediction of future losses

What is personal insurance?

individuals or families purchase insurance to cover their risks

What is stock insurers?

profit-making companies, created for the purpose of maximizing the value of the organization for the benefit of the owners

What is mutual insurers?

owned and controlled, in theory if not in practice, by their policyowners

What is risk profiling?

evaluates all the risks of the organizations and measures the frequency and severity of each risk

What is data warehousing?

a system of housing large sets of data for strategic analysis and operations

What is cash flow analysis?

analysis that looks at the amount of cash that will be saved and brings it into today’s present value

What are business risks?

all of the risks to a firm’s financial viability

What is operational risks?

risks related to the ongoing day-to-day business activities of an organization

What is financial risk?

uncertainty regarding the outcome of financial decisions

What is risk profiling?

a process that evaluates all of an organization’s risks and measures the frequency and severity of each risk