INS200 C3

What is the primary function of insurance?

• To act as a risk transfer mechanism

• To remove fear and worry

• To release funds otherwise tied up in reserves

• To stimulate business enterprise

What is the concept of common pool in insurance based on?

• The random distribution of losses among policyholders

• The larger the group of similar risks, the closer the actual losses experienced by the group will approach the expected losses

• The individual losses experienced by each policyholder

• The successful application of the Law of small numbers

What are the characteristics of insurable risks?

• Fortuitous, financial value, insurable interest, homogeneous exposures

• Random, no financial value, similar exposures

• Certain, high financial value, unique exposures

• Predictable, low financial value, diverse exposures

What is the indirect function of insurance related to investment?

• Investment of funds

• Savings

• Invisible exports

• Source of employment

What is the main benefit of insurance related to peace of mind?

• Investment of funds

• Social benefits

• Reduced fear and worry

• Increased control over risks

What is the operation of insurance based on?

• Collecting premiums from a group of individuals and using them to pay losses

• Collecting premiums from individuals and keeping them as profits

• Paying losses without collecting premiums

• Pooling losses without compensating the insured

What is the concept of common pool in insurance?

• The insurer takes contributions from many insured and pays for the losses of a few

• The insurer does not compensate for any losses

• The insurer pays for all the losses suffered by the few

• The insurer collects premiums from a few and keeps them as profits

What is the primary function of insurance related to risk?

• To release funds otherwise tied up in reserves

• To act as a risk transfer mechanism

• To remove fear and worry

• To stimulate business enterprise

What is the concept of common pool in insurance based on?

• The successful application of the Law of small numbers

• The random distribution of losses among policyholders

• The larger the group of similar risks, the closer the actual losses experienced by the group will approach the expected losses

• The individual losses experienced by each policyholder

What are the characteristics of insurable risks?

• Certain, high financial value, unique exposures

• Fortuitous, financial value, insurable interest, homogeneous exposures

• Random, no financial value, similar exposures

• Predictable, low financial value, diverse exposures