Chapter 2 RMIN

Pooling of losses
payment of fortuitous losses
risk transfer
indemnification

the spreading of losses from a few individuals over the entire group

unforseen and unexpected actions that happens from the insured and happens by chance

A pure risk that gets transferred from the insured to the insurer

the insured is restored close it its financial position before the loss happened

Large number of exposure units
Loss must be accidental and unintentional
Loss must be determinable and measurable through money
Loss must not be catastrophic
Chance of loss must be calculable
Premium must be affordable

When people who have more losses than the average person gets insurance at an average price

Occurs when one party does not have the same amount of information as the other parties

Process of selecting and classifying applicants for insurance

private insurance
government insurance

Life
Health
Property&Liability
Casualty

pays a benefit to holders when the insured dies

pays medical expenses because of sickness or injury

compensates owners when their property gets stolen or damaged

covers money when the insured steals property and hurts people

broad term that refers to insurance that is not covered by other insurance

Personal lines
Commercial lines

They need this predict the average loss

The loss must be outside of the insurer's control; If they do it on purpose, then the amount the insured pays would increase

Can you determine if a loss occured

Can you determine the amount of loss in dollars?

So that pooling works

To be able to find the average frequency and average severity

The greater the number of exposures, the more close the actual results will reach the probable results

Financed by contributions from employers and/or employees
Benefits are more into low income groups
Eligibility and benefits are different