Chapter 1 - Chapter 1 Risk in our Society I. Meaning of...

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Chapter 1 – Risk in our Society I. Meaning of Risk – uncertainty concerning the occurrence of a loss A. Objective Risk – the relative variation of actual loss from expected loss B. Subjective Risk – uncertainty based on a person’s mental condition or state of mind C. Chance of Loss Distinguished from Risk – the probability that an event will occur II. Chance of Loss A. Objective Probability – the long-run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in the underlying conditions. B. Subjective Probability – the individual’s personal estimate of the chance of loss III. Peril and Hazard A. Peril – the cause of loss B. Hazard – a condition that creates or increases the chance of loss 1. Physical Hazard – a physical condition that increases the chance of loss 2. Moral Hazard – dishonesty or character defects in an individual that increase the frequency or severity of loss 3. Morale Hazard – carelessness of indifference to a loss because of the
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Chapter 1 - Chapter 1 Risk in our Society I. Meaning of...

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