Insurance principles
What is the main purpose of insurance in the economy
TO transfer and manage risk collectiivity
What is a premium?
The price paid by the insured to the insurer for coverage
What is microinsurance?
Low-cost insurance designed for low-income individuals in developing countries
What principle requires an insured to suffer a real financial loss before being compensated?
Principle of Indemnity
What factors are typically considered when calculating an insurance premium? If you identify at least 5 out of 7 factors, your answer will be considered correct.
Age, health, risk level, sum insured, duration, claim history
Why is reinsurance essential in global risk management?
It stabilizes international insurance markets and prevents major losses from bankrupting firms
Which principle prevents an insured from profiting from a loss?
Principle of Utmost Good Faith (Uberrimae Fidei)
What is actuarial science in insurance?
The use of statistics and probability to calculate premiums and risk
What ethical issue arises when insurers use AI to price policies?
Potential bias and discrimination in risk assessment
What principle states that both insurer and insured must act honestly and disclose all material facts?
Principle of Disclosure
If an insurer collects more premiums than claims paid, what is this difference called?
Underwriting profit
How did COVID-19 challenge traditional travel and health insurance policies?
Massive claim surges and exclusions for pandemics led to disputes and legal reforms
What is the difference between *risk avoidance*, *risk reduction*, and *risk transfer*?
Avoidance = eliminating risk; Reduction = minimizing impact; Transfer = shifting risk to insurer
How does reinsurance help an insurance company manage its risk exposure?
It allows insurers to transfer part of their risks to another insurer to prevent large losses
Explain the term catastrophic risk pooling in global insurance.
Spreading the financial burden of large-scale disasters (e.g., earthquakes, floods) across global reinsurers and governments