Answers for Tutorial Questions due Week 13

Answers for Tutorial Questions due Week 13 - Answers for...

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Answers for Tutorial Questions due Week 13 Learning Check Questions: 16.1 Define insurance. What are the requirements for privately insurable risks? Insurance is a contract which transfers pure risk to a third party. Insurable risks are fortuitous and random, but losses associated with them are determinable and measurable. Insurable risks are manageably distributed across time, not likely to happen at one time (not catastrophic). Premiums must be high enough to cover losses but affordable enough so to attract widespread purchase and build a risk pool. 16.2 What is meant by the term ‘objective risk’ and why is it so important to insurers? Objective risk is deviation of actual from expected. Expected losses are a starting point for calculating premiums. If objective risk is small, premiums will cover losses; but if objective risk is large, premiums may not cover losses and “underwriting loss” may occur. Repeated underwriting losses can lead to insurer insolvency. 16.3 What are the different types of insurers and how do they differ? In Australia, there are three broad types of insurance: life, general and health. Life insurers offer a wide variety of risk and investment products including term life insurance, whole-life insurance and business overhead insurance. The primary purpose of life insurance is to provide financial support to dependants in the case of premature death. General insurers
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This note was uploaded on 06/09/2009 for the course ACCOUNTING 1203AFE taught by Professor Ms.mirellamalin during the Three '08 term at Griffith.

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Answers for Tutorial Questions due Week 13 - Answers for...

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