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