CPCU 510 CG 1
Terms
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- Legal Hazard
- condition where legal environment causes frequency and/or severity of loss such as courts in certain districts are more likely to award lrg liab. settlements.
- Possibility of Negative Outcome
- At least 1 of the potential outcomes is negative, which means a loss or reduction in value
- Net income Loss Exposure
- loss can result from a reduction of net income and often the result of prop. liability, or personnel lines.
- Uncertainty of Outcomes
- Risk involves uncertainty about type of outcome, the timing or both the type and timing of the outcome
- Probablity
- likely the Outcome or Event Will Occur; quantifies risk, is measureable and has a value between 0-1.
- Property Loss Exposure
- loss can result from damage to property in which person/organization has a financial interest
- Various Outcome Probabilities
- Organization can focus its risk mngmnt efforts on risks that can be appropriately managed. Org. can also use probabilities to decide which activities/assoc. risks to undertake & which risk mgmt techniques to use.
- Personal Property
- Tangible property other than real prop...clothing, sports equip
- Residual Uncertainty
- Level of risk that remains after individuals/orgs. implement their risk mgmt programs.
- Tangible Property
- Prop. w/physical form..piece of equipment, printer
- Assets exposed to loss
- Types: Orgs assets (prop. investments, $ owed to org., $$, intangible assets & HR; Individual Assets-prop. investments, $ owed to indiv., $$, prof. qualifications, unique skill set, valuable experience.
- Personnel Loss Exposure
- loss can result from key person's death, disability, retirement, resignation deprives org of that person's skill.
- Are Canons or Rules Enforceable
- CPCU is not subject to discipline for violating a Canon of the Code. Only Rules are enforceable.
- Moral Hazard
- Condition that increases the frequency and/or severity of loss resulting from a person acting dishonestly ex. exagerates loss.
- Liability loss exposure
- loss can result from a claim alleging that person/org. is legally responsible for BI and/or PD
- Cost of Residual Uncertainty
- Difficult to measure, but can impact indiv or org. Individual-cost may include lost salary or forgone investment opporunities; For Orgs: effect that uncertainty has on consumers, investors and suppliers ie.: suppliers may be less likely to sell supplies on credit if they are aware of lrg amts of residual uncertainty for the org.
- Financial Consequences of Risk
- 3 components: Expected cost of loss/gains; Expenditures on risk mngment; Cost of residual incertainty.
- Loss Exposure
- 3 elements:Asset exposed to loss; Cause of loss(peril); Financial consequences of that loss.
- Physical Hazard
- condition of property, persons, or operatains that increses the frequency and or severity of loss...ie icy sidewalks
- Affect Financial Consequences
- Factors: type of loss exposure, cause of loss, loss frequency & severity of a loss.
- Which Sanctions CPCU Applicts & Candidates
- Denied admission to CPCU exams-indefinitely or specified period; CPCU Designation may be withheld pending proof of candidates rehab; Cadidates may be admonition, reprimand or censure.
- Intangible Property
- Prop. NO physical form..patent or copyright.
- CPCU Designation Requirements
- Education req's by passing the prescribed exams, Experience requirement, in 3 yrs ins insurance experience in related fields such as law, teaching, providing svcs to ins. industry. Candidates need not have met this reqs. to begin CPCU studies, but must meet b4 earning the CPCU designations.; Ethics requirement adherence to the Code of Professional Ethics of the American Institute for CPCU.
- Hazards
- Classifications: Moral, Morale, Physical, Legal
- Morale Hazard
- condition increases freq or severity of loss results from careless indifference ie.: fails to lock veh.
- How does Classifying Risk...
- It helps orgs. assess, control & finance risk as part of risk mngment. Also avoids risks in classifications being overlooked.
- Hidden Costs loss cost calculation
- Time lost by injd employee; time lost by others who stop work; time lost by foreman, supervisors, other executives; time spent by first aid attendants & hospital dept (when not pd by insurere); Dmg to machine, tools or other prop or spoilage of material; interference w/production, failed to fill orders timely,; interference w/production;
- assesment of Subjective/Objective Risk
- Severity over Frequency-If effect of particular event may be severe, persons subjective perception of the frequency of deaths resulting from event may overstate the objective frequency or severity of potential losses.
- Sanctions imposed on CPCU
- If subject to Code & found guilty of Rule viols-Private admonition, Reprimand given limited publication, Censure given wide publication, Suspension of priviledge to use the designation indefinitely or period of time; Revocation of Designation.
- Real Property
- Prop consisting of Land, all structures permanently attached to land & growing on the land
- Not subject to the CODE
- CPCU's who earned designations b4 1976 and did not voluntarily choose to be bound by the Code of Professional Ethics are not subject to the Code.
- Property Exposed to Loss
- Tabgible Property, Intangible Property, Real Property, Personal Property
- Familitarity & control Subjective & Objective Risk
- Differ: Familiarity & control-Perception of a risk is influenced by person's level of familiarity & control person exherts over the risk. If individuals are often exposed to the risk they believe they can control , their subjective assessment of risk will often understate the objective frequency or severity of potential losses.
- Possibility
- An outcome or event May or May Not occur, Does Not quantifie risk; it only verifies the risk is present