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6.E: The Insurance Solution and Institutions(Exercises)
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- How can small insurers survive without a large number of
- Professor Kulp said, “Insurance works well for some exposures,
to some extent for many, and not at all for others.” Do you agree?
Why or why not?
- Insurance requires a transfer of risk. Risk is uncertain
variability of future outcomes. Does life insurance meet the ideal
requisites of insurance when the insurance company is aware that
death is a certainty?
- What are the benefits of insurance to individuals and to
- What types of insurance exist? Describe the differences among
- What are the various types of insurance companies?
- What are the various types of insurance corporate
- Hatch’s furniture store has many perils that threaten its
operation each day. Explain why each of the following perils may or
may not be insurable. In each case, discuss possible exceptions to
the general answer you have given.
- The loss of merchandise because of theft when the thief is not
caught and Hatch’s cannot establish exactly when the loss
- Injury to a customer when the store’s delivery person backs the
delivery truck into that customer while delivering a chair.
- Injury to a customer when a sofa catches fire and burns the
customer’s living room. Discuss the fire damage to the customer’s
home as well as the customer’s bodily injury.
- Injury to a customer’s child who runs down an aisle in the
store and falls.
- Mental suffering of a customer whose merchandise is not
delivered on schedule.
- Jack and Jill decide they cannot afford to buy auto insurance.
They are in a class with 160 students, and they come up with the
idea of sharing the automobile risk with the rest of the students.
Their professor loves the idea and asks them to explain in detail
how it will work. Pretend you are Jack and Jill. Explain to the
class the following:
- If you expect to have only three losses per year on average
(frequency) for a total of $10,000 each loss (severity), what will
be the cost of sharing these losses per student in the class?
- Do you think you have enough exposures to predict only three
losses a year? Explain.