Study 1-Intro to Risk & Insurance Lecture

A set of 50 comprehensive vocabulary practice flashcards covering fundamental insurance topics including risk classification, insurable risk criteria, perils and hazards, underwriting principles, and proximate cause.

Risk

In simple terms, the chance of loss; uncertainty or lack of predictability.

Pure Risk

A category of risk that entails a chance of loss but no chance of profit, such as the destruction of property or vehicle collision damage.

Speculative Risk

A situation where there is either a chance of loss or a chance of profit, such as gambling, a wager on a throw of dice, or a typical business operation.

Insurable Risk

A risk that insurance covers, which is strictly concerned with pure risk where loss is accidental, measurable, and not certain to occur.

Personal Risk

The chance of loss arising from one's own bodily injury, death, physical disability, unemployment, old age, or loss of income.

Property Risk

The chance of financial loss arising from the destruction of or damage to property, divided into direct loss and indirect loss.

Direct Loss

Immediate physical damage or destruction to property, such as the cost of repairing a collision-damaged automobile.

Indirect Loss

A secondary financial loss occurring as a consequence of direct property destruction, such as lost rental income from a burned basement apartment.

Liability Risk

The chance of loss arising from an individual's legal obligation to pay damages because of negligent acts causing injury, death, or property damage to another.

General Insurance

The category of insurance sold by insurers covering personal lines, commercial lines, and special risks, requiring brokers and agents to hold a general licence.

Life Insurance

The category of insurance policies covering life, health, and accident and sickness, requiring brokers and agents to hold a life licence.

Personal Lines

Insurance relating to individuals in their private capacity, including private dwellings, contents, personal autos, seasonal dwellings, boats, jewellery, and furs.

Commercial Lines

Insurance relating to commercial operations, such as retail stores, professional offices, trucking operations, and construction contractors.

Special Risks

A specialized class of general insurance relating to marine exposures, aviation, and high-risk industrial operations.

Peril

An event that may cause a loss, such as fire, windstorm, riot, theft, or collision.

Hazard

A condition that may cause a peril to occur, increase its likelihood, or make the resulting loss more severe.

Physical Hazard

A tangible condition of or pertaining to property that can be ascertained by inspection, such as bare electrical wires, ungrounded sockets, or slippery floors.

Moral Hazard

A hazard stemming from character defects, dishonesty, or criminal intent of an insured that increases the chance of loss, such as fraud or arson for profit.

Morale Hazard

An attitude of carelessness, neglect, or indifference toward property maintenance simply because insurance exists ("Why worry? It's insured").

Underwriter

An insurance company professional whose responsibility is to evaluate, accept, decline, or attach conditions to risks submitted for coverage.

Underwriting Choices

The three decisions an underwriter can make regarding a risk: accept the risk, decline the risk, or accept the risk with conditions.

Crime Insurance Perils

Perils clearly defined under burglary and fidelity insurance, including burglary, robbery, theft, holdup, dishonesty, embezzlement, and forgery.

Equipment Breakdown Insurance (EBI)

Insurance formerly known as boiler and machinery insurance that covers perils of equipment breakdown, mechanical malfunction, and sudden explosion.

Negligence

Doing something a reasonable person would not do, or not doing something a reasonable person would do; the peril insured in liability insurance.

Fire Peril

A property insurance peril covering damage from fire, lightning, certain explosions, and resulting smoke or water used to put out the fire.

Proximate Cause

The active, efficient cause that sets in motion an unbroken chain of events leading naturally and directly to a loss without any new intervening cause.

Immediate Cause

The final link or last event in the chronological chain of occurrences immediately preceding the loss.

Remote Cause

A cause that is distinct and separate from the proximate cause in the chain of events, for which policy recovery is not granted.

The "Squib Case" (Scott v. Shepherd, 1773)

The landmark legal ruling establishing proximate cause, holding the original thrower of a lighted firecracker liable because intervening parties acted instinctively in an emergency.

Arson for Profit

The intentional burning of commercial or residential premises by an insured to collect policy proceeds, serving as an extreme example of moral hazard.

Insurable Risk Test

The basic two-question qualifying test for insurability: asking if there is a chance of loss (Yes) and if there is a chance of profit (No).

Government-Run Automobile Insurance

Public automobile insurance provided by the provincial government in British Columbia, Manitoba, Saskatchewan, and Quebec.

Food Safety Training

A liability risk control procedure in commercial hospitality used to prevent food spoilage, bacterial contamination, and customer injury.

Hood Cleaning Schedule

A physical fire risk control method used in commercial restaurant kitchens to eliminate grease accumulation and prevent catastrophic kitchen fires.

Frequency of Loss

A risk measurement metric tracking the rate of occurrence or number of loss incidents experienced over a specific period.

Severity of Loss

A risk measurement metric evaluating the financial magnitude or total monetary cost associated with a specific loss incident.

Cash Reserve

A financial risk control tool maintained by a business to absorb tourist-driven revenue swings, renewal spikes, or unexpected overhead costs.

Lloyd's Coffee House

The London establishment founded in $1688$ that served as a central marketplace for marine insurance underwriting on ships, goods, and freight.

Marine Insurance Policy

A contract insuring vessels, cargo, and freight at home and abroad, exemplified by the $1767$ policy on the ship Providence for $\pounds 2{,}000$.

Unbroken Chain of Events

A continuous unfolding of circumstances from the initial triggering act to the loss, uninterrupted by any independent intervening cause.

Exposure Units

A large number of similar or homogeneous risk objects necessary for an insurer to evaluate probability and calculate accurate insurance premiums.

Definite and Measurable Loss

An insurable risk requirement stipulating that a loss must be verifiable in time, place, and financial value.

Accidental Loss Requirement

A criterion of insurable risk requiring that a loss be fortuitous, unintentional, and beyond the deliberate control of the insured.

Jordan's Computer Scenario

An exercise demonstrating proximate causation where spilled coffee was the proximate cause of laptop destruction rather than running late or traffic delays.

Petro Canada Gas Station Scenario

A causation case study where a rioter intentionally setting fire to the station was identified as the proximate cause of its total destruction.

Sam O's Stereos Scenario

A causation example where a fire spreading from the neighboring Mean Jean Clothing Company was the proximate cause of Sam O's wall collapse.

Hospital Surgery Scenario

A case illustration where an initial auto collision was the proximate cause of death, while post-surgical septicemia served as the immediate cause.

Fracture Clinic Scenario

A case illustration where contracting Legionnaires' disease from clinic air conditioning was the proximate cause of death, making an earlier broken leg remote.

Lightning Weakened Wall Scenario

A causation scenario where lightning was the proximate cause of structural collapse, and subsequent high wind was the immediate cause.

Clara's Building Scenario

A case study where a repair contractor's negligence was the proximate cause of building collapse, rendering an earlier fire in an adjacent building remote.