Chapter 1-10 PCE

What is the meaning of risk in the context of insurance?

Risk refers to the hazard, danger, and chance of loss or injury, also considered as the exposure to danger or the possibility of loss.

What are the four types of risk?

Pure risk, Speculative risk, Fundamental risk, Particular risk.

What is a pure risk?

A risk that may result in financial loss or breakeven, such as a factory fire.

What is a speculative risk?

A risk that may result in loss, gain or breakeven, such as an investment in the stock market.

What is a fundamental risk?

A risk that affects a large number of people or communities, such as natural disasters.

What is a particular risk?

A risk that affects only individuals or small groups, such as illness or accidents.

What are perils in insurance?

Perils are specific risks or events that can cause a loss, such as fire or theft.

What are hazards in insurance?

Hazards are conditions that increase the likelihood of a peril occurring, such as poor building materials.

What is risk management?

The identification, analysis, and economic control of risks that threaten the assets or earning capacity of an enterprise.

What are the basic steps in the risk management process?

Identify, Analyze, Control.

What is risk avoidance?

Avoiding risk by not participating in an activity.

What is risk prevention?

Taking measures to reduce the likelihood of loss.

What is risk control?

Mitigating the potential for severe losses through disaster recovery and continuity plans.

What does it mean to retain risk?

To bear minor losses within one's financial capacity.

How does insurance function as a risk transfer mechanism?

Insurance transfers the risk of loss from an individual to an insurer.

What is Takaful?

A Shariah-compliant form of insurance based on mutual assistance among participants.

What are the key elements of Takaful?

Mutual assistance, shared contributions, and management by a Takaful operator.

What are the functions of insurance?

Risk transfer, equitable premiums, and creation of a common pool.

What does the principle of indemnity entail?

Restoring the insured to the financial position they were in before the loss.

What is subrogation in insurance?

The right of an insurer to pursue a third party responsible for a loss after indemnifying the insured.

What is insurable interest?

The financial interest a person has in the subject matter of the insurance policy.

What is the definition of a void contract in insurance?

A contract that has no binding effect, often due to lack of insurable interest.

What are the essential factors for forming a valid insurance contract?

Offer and acceptance, intention to create a legal relationship, consideration, legal form, and contractual capacity.

What is the duty of utmost good faith in insurance?

The obligation of both parties to deal honestly and openly in the formation of the contract.

What happens during the claims process?

Notification of loss, registration of claims, verification and investigation of claims, and settlement.

What is the primary function of the Central Bank of Malaysia in relation to insurance?

To oversee the conduct and solvency of insurers and protect the rights of financial consumers.

What key legislation governs the insurance industry in Malaysia?

Insurance Act 1996 and Financial Services Act 2013.

What is the role of the Shariah Advisory Council in Takaful?

To validate all Islamic banking and Takaful products for compliance with Shariah principles.

What does the term 'cash-before-cover' mean?

Premiums must be collected in full before the assumption of risk by the insurer.

What is a composite insurance company?

A company that carries on both life and general insurance business.

What is the purpose of the Financial Mediation Bureau?

To settle disputes between consumers and financial service providers.

What are the economic benefits of insurance to society?

Stabilizing costs, promoting social benefits, providing employment, and encouraging savings.

What factors influence the calculation of equitable premiums?

The risk brought to the insurance pool; higher risks lead to higher premiums.

What constitutes personal data under the PDPA 2010?

Any information relating to a data subject that can be used to identify that individual.

What is the objective of customer due diligence in the context of anti-money laundering?

To prevent and report suspicious transactions related to money laundering or terrorism financing.

What is the definition of property insurance?

Insurance that covers tangible property against loss or damage.

What are the main exclusions typically found in a fire insurance policy?

Earthquake, flood, and other natural disasters.

What is personal accident insurance designed to cover?

Loss of income due to accidental injury.

What are the main categories of liability insurance?

Public liability, product liability, professional indemnity, and directors' and officers' liability.

What factors affect the underwriting process?

Risk assessment, selection of risks, and pricing of premiums.

What is professional indemnity insurance?

Insurance that protects professionals against claims for negligence or breach of duty.

Why is reinsurance necessary for insurance companies?

It helps insurers manage risk, protects against catastrophic loss, and improves solvency.

What is defined as 'pro-rata condition of average' in insurance?

A clause that adjusts claims payments based on the ratio of the sum insured to the value at risk.

What does the term 'non-contributory' refer to in group health insurance?

Where the employer pays the full premium for the group health insurance.