Please remember that you must do your own work. Any plagiarism will result in a grade of zero for all students involved. Please use your own words even if you are using the textbook for answers. Always provide a citation when a reference is used.

 

1.     Provide a complete definition of Insurance and briefly discuss the essential elements of the definition.

 

2.     The Law of Large Numbers is used in the development of insurance rates. Explain how this statistical tool is important to the success of insurance.

 

3.     Briefly define and discuss risk as it relates to insurance. Provide an example of how insurance reduces risk.

 

4.     Provide an example of the following terms:

a.     Physical Hazard

b.     Moral Hazard

c.     Morale Hazard

 

5.     How does enterprise risk management differ from traditional risk management?

 

6.     Identify an appropriate risk management technique, or combination of techniques, that would be appropriate for dealing with the following risk exposures.

a.     A student may not be able to finish school as his financial aid is discontinued.

b.     A family head may die prematurely because of a heart attack.

c.     An individual’s home may be totally destroyed in a hurricane.

d.     A new car may be severely damaged in an auto accident.

e.     A negligent motorist may be ordered to pay a substantial liability judgment to someone who is injured in an auto accident.

 

7.     List and briefly describe the six characteristics of an ideally insurable risk:

a.      

b.      

c.      

d.      

e.      

f.       

 

8.     Explain the concept of adverse selection as it relates to insurance. Provide an example of adverse selection.

 

9.     Explain the two major differences between insurance and gambling.

 

10.  How have you practiced risk management today? Be specific.