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19 Cards in this Set

  • Front
  • Back
the relative variation of actual loss form expected loss.
Objective Risk
uncertainty concerning the occurrence of a loss.
Risk
the number of exposure units increases, the more closely the actual loss experience will approach the expected loss experience.
law of large numbers.
uncertainty based on a person's mental condition or state of mind.
subjective risk
the probability that an event will occur
chance of loss
the long-run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in the underlying conditions.
objective probablitity
the individuals personal estimate of the chance of loss
subjective probability
as the cause of loss
peril
a condition that creates or increases the chance of a loss
hazard
physical
moral
morale
Legal
types of hazards
a physical condition that increases the chance of loss
physical hazard
dishonesty or character defects in an individual that increase the frequency or severity of loss.
Moral hazard
carelessness or indifference to a loss because of the existence of insurance
morale hazard
characteristics of the legal system or regulatory environment that increase the frequency or severity of losses.
legal hazard
a situation in which there are only possibilities of loss or no loss.
pure risk
defined as a situation in which either profit or loss is possible.
Speculative risk
risk that affects the entire economy or large numbers of persons or groups within the economy.
fundamental risk
a risk that affects only individuals and not the entire community.
particular risk
the term that encompasses all major risk faced by a business firm. (pure risk, speculative risk, strategic risk, operational risk, and financial risk)
enterprise risk