Question: 1. How do insurers predict the increase of individual risks?

Answer: Law of large numbers

Question: 2. Which of the following is considered to be an event or condition that increases the probability of an insured’s loss?

Answer: Hazard

Question: 3. An example of risk sharing would be?

Answer: Doctors pooling their money to cover malpractice exposures

Question: 4. All of the following are examples of pure risk EXCEPT?

Answer: Losing money at a casino

Question: 5. What is known as the immediate specific event causing loss and giving rise to risk?

Answer: Peril

Question: 6. An individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging in

Answer: Risk Avoidance

Question: 7. Insurance represents the process of risk

Answer: transference

Question: 8. People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

Answer: Adverse Selection

Question: 9. Insurance companies determine risk exposure by which of the following?

Answer: Law of large numbers and risk pooling

Question: 10. Cause of a loss is referred to as a

Answer: peril