Chapter 1 Summary Notes - View
Terms | Definitions |
|---|---|
 Principles of Insurance | #1 Principle: premiums of the many used to pay losses of few 2 Principle: premium shall be commensurate with the risk |
| Short-tail lines | Short-tail lines injury becomes known quickly e.g., most property losses |
| Long-tail lines | Long-tail lines injury not settled for maybe 10 - 25 years e.g., products' liability lines |
| Impact of long tail lines | Length of such gaps are considered when pricing risks to ensure proper cash flow and cash reserves in many years to come |
| Insurance provides the following in the economy | security confidence savings encouragement of investment reduction in price of consumer goods |
| Insurance encourages the following activities in the Canadian Economy | Banks issue mortgages on insured buildings Developers advance funds to contractors on projects guaranteed by surety bonds Retailers accept commercial risk of operating when purchase liability insurance Professionals provide services when able to insure against malpractice liability Manufacturers accept risks of shipping when insured Members of society sanction use of auto when insured |