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6.E: The Insurance Solution and Institutions(Exercises)

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    1. How can small insurers survive without a large number of exposures?
    2. 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?
    3. 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?
    4. What are the benefits of insurance to individuals and to society?
    5. What types of insurance exist? Describe the differences among them.
    6. What are the various types of insurance companies?
    7. What are the various types of insurance corporate structures?
    8. 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.
      1. The loss of merchandise because of theft when the thief is not caught and Hatch’s cannot establish exactly when the loss occurred.
      2. Injury to a customer when the store’s delivery person backs the delivery truck into that customer while delivering a chair.
      3. 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.
      4. Injury to a customer’s child who runs down an aisle in the store and falls.
      5. Mental suffering of a customer whose merchandise is not delivered on schedule.
    9. 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:
      1. 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?
      2. Do you think you have enough exposures to predict only three losses a year? Explain.

    6.E: The Insurance Solution and Institutions(Exercises) is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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