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Identify the six characteristics of an ideally insurable loss exposure.
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Explain why insurance is designed to cover pure, not speculative risk.
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CPCU510

Chapter 08

QuestionAnswer
Identify the six characteristics of an ideally insurable loss exposure. 1. Pure risk 2. Fortuitous loss 3. Definite and measurable 4. Large number of similar exposure units 5. Independent and not catastrophic 6. Affordable
Explain why insurance is designed to cover pure, not speculative risk. The purpose of insurance is to indemnify the insured for a loss, not to enable the insured to profit from the loss. If the loss exposure has a possibility of gain, the insurance premium the insurer would have to charge would offset the potential gain.
Identify the factors an insurer must be able to determine for a loss exposure to be definite in time, cause, and location. 1. The event that led up to the loss 2. When that event or series of events occurred 3. Where that event occurred.
Describe the types of losses an insurer might consider uninsurable because the premium charged would not be economically feasible. Losses involving only low-severity losses and those involving a high frequency of loss.
What are the two common sources of liability risk faced by many commercial organizations? 1. Premises and operations liability 2. Products liability
What is premises and operations liability? Liability because of bodily injury or property damage caused by an accident on owned or rented premises or away from the premises if it arises out of the ongoing operations.
What is products liability? Liability because of bodily injury or property damage resulting from defective or inherently dangerous products.
Compare the insurability of personnel losses caused by an employee's death and those caused by an employee's retirement. Personnel losses caused by an employee's death generally exhibit the six characteristics of an ideally insurable loss exposure while an employee's retirement doesn't.
Identify property loss factors used in determining the degree of insurability of personal residences for fire, windstorm, and flood causes of loss. Insurers identify buildings with higher-than-normal hazards, guard against arson-for-profit, avoid excessive concentration of loss exposures, and ensure adequate diversification of exposures.
Identify common sources of liability risk faced by individuals. 1. Real property ownership 2. Personal property ownership liability loss exposure 3. Liability loss exposures arising from their behavior toward others
Identify the bases on which government insurance programs vary. 1. Purpose or rationale 2. Level of governmental involvement 3. Whether the program is run at the federal or state level
The three categories of government insurance programs. 1. Property-casualty insurance plans 2. Social insurance plans 3. Financial security plans
Identify the major difference between the objectives of private market insurance and government provided insurance. Private insurance seeks to provide actuarial equity and government provided insurance programs aim to provide social equity.
Identify reasons for government involvement in insurance. 1. To fulfill insurance needs unmet by private insurers 2. To compel people to buy a particular type of insurance 3. To obtain greater efficiency and/or provide convenience to insurance buyers 4. To achieve collateral social purposes
Identify three levels of governmental participation in governmental insurance programs. 1. Exclusive insurer 2. Partner with private insurers 3. Competitor to private insurer
What is the relationship between continuous learning and competent performance? Continuous learning is a prerequisite to competent performance.
What is the most appropriate remedy for employer-employee disputes? They are best resolved through the procedures established for this purpose within the organization or through civil legal action. The Code of Ethics is not a remedy for employer-employee disputes.
The Board of Ethical Inquiry (BEI) will hear ethics complaints involving Rule R4.1 only under certain circumstances. What circumstances are specified in Guideline G4.1? BEI will hear ethics complaint after all other remedies have been exhausted and either a proven violation caused unjust harm to another and brings substantial discredit on CPCU designation or it would be in public interest to take disciplinary action.
How might a CPCU violate Rule R4.2? By supporting changes in the insurance mechanism that would come at the expense of the public or by putting personal interest ahead of public interests.
Created by: ttran
 

 



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