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1
1 Chapter

Risk and insurance

Contents Syllabus learning
outcomes
Learning objectives

Introduction
Key terms
A The concept of risk 1.1, 1.7, 1.8
B Risk management 1.3, 1.7
C Categories of risk 1.2, 1.7
D Insurable risks 1.5, 1.7
E Components of risk 1.4, 1.6, 1.7

F The need for insurance 1.8
G Pooling of risks 1.9
H Benefits of insurance 1.10 Reference copy for CII Face to Face Training
I Risk sharing 1.11
J Dual insurance 1.11
K Self-insurance 1.11
L Classes of insurance 1.12
Key points
Answers

Self-test questions

Learning objectives

After studying this chapter, you should be able to:
• list the main components of risk;
• describe how risk is perceived;
• state the function of risk management;
• describe the process of risk management;
• demonstrate how insurance relates to risk;
• identify the categories into which risks are divided;
• compare insurable and uninsurable risks;
• describe the relationship between frequency, severity, risk and insurance;
• explain the terms peril and hazard as they relate to insurance;
• describe how insurance operates as a risk transfer mechanism;
• describe how the common pool operates;
• outline how insurance benefits policyholders and society;
• describe what is meant by co-insurance, dual insurance and self-insurance; and
• outline the main classes of insurance.