Insurance WAEC

Hazards

Aperçu

Two traders in the same market insure identical shops for the same sum, yet one pays a far higher premium than the other, and one is quietly refused cover altogether. The difference is not the risk they carry but the hazard they bring to it: the conditions, and the conduct, that make a fire or a theft more likely to happen and more costly when it does.

In this lesson you will learn exactly what a hazard is and how it differs from a peril and from a risk, meet the three hazards every examiner expects you to know apart (physical, moral and the easily confused morale), see how each one pushes up the frequency or the severity of a loss, and follow how an underwriter hunts for hazard on a proposal form and decides what to do about it.

Objectifs

  1. Define a hazard and explain how it differs from a peril and from a risk
  2. Identify and describe physical, moral and morale hazards
  3. Explain how each type of hazard increases the likelihood or severity of a loss
  4. Describe how insurers detect and control hazard when underwriting a proposal

Carte mentale

Ce theme est schematise pour montrer comment les idees se relient.

Cartes memoire

Entrainement rapide sur les faits evalues dans ce theme.

Note de cours

Two provision shops sit side by side in a market in Aba. Both are worth ₦5,000,000, both are insured against fire, both pay the same declared value. Yet the underwriter charges the first owner a modest premium and the second a much steeper one, and later declines to renew the second policy at all. Nothing about the buildings has changed. What the underwriter has spotted is hazard: the first shop is wired properly and run by a careful owner, while the second stores drums of petrol at the back and is run by a man who has already had two suspicious fires. Read the hazard correctly and you can read almost every underwriting decision in the market.

Évaluation de la leçon

Félicitations, vous avez terminé la leçon sur Hazards. Maintenant que vous avez exploré le concepts et idées clés, il est temps de mettre vos connaissances à lépreuve. Cette section propose une variété de pratiques des questions conçues pour renforcer votre compréhension et vous aider à évaluer votre compréhension de la matière.

Vous rencontrerez un mélange de types de questions, y compris des questions à choix multiple, des questions à réponse courte et des questions de rédaction. Chaque question est soigneusement conçue pour évaluer différents aspects de vos connaissances et de vos compétences en pensée critique.

Utilisez cette section d'évaluation comme une occasion de renforcer votre compréhension du sujet et d'identifier les domaines où vous pourriez avoir besoin d'étudier davantage. Ne soyez pas découragé par les défis que vous rencontrez ; considérez-les plutôt comme des opportunités de croissance et d'amélioration.

  1. A hazard is best described as: A. The actual cause of a loss B. The uncertainty that a loss will occur C. A condition that increases the frequency or severity of a loss D. The amount payable when a loss occurs Answer: C
  2. Which of the following is a peril rather than a hazard? A. Defective electrical wiring B. Flood C. Storing petrol indoors D. A watchman who sleeps on duty Answer: B
  3. A trader secretly sets fire to unsold stock in order to claim on the policy. This is an example of: A. Physical hazard B. Morale hazard C. Legal hazard D. Moral hazard Answer: D
  4. A driver stops locking his car because he knows it is fully insured. This carelessness is an example of: A. Moral hazard B. Morale hazard C. Physical hazard D. A peril Answer: B
  5. A risk carries a 4% chance of a loss, and each loss averages 2,000,000 naira. The expected loss is: A. 8,000 naira B. 80,000 naira C. 500,000 naira D. 800,000 naira Answer: B

Livres recommandés

Principles of Risk Management and Insurance
Principles of Risk Management and Insurance
Sous-titre: Thirteenth edition
Éditeur: Pearson
Année: 2016
ISBN: 978-0-13-408257-8
Description: The standard introduction to risk and insurance, covering risk management, insurer operations and the main lines of life, health, property and liability cover.
Fundamentals of Risk and Insurance
Fundamentals of Risk and Insurance
Sous-titre: Tenth edition
Éditeur: Wiley
Année: 2008
ISBN: 978-0-470-08753-4
Description: A clear account of the nature of risk and the economics of insurance, written for beginning students across life, health, property and liability insurance.
Fundamentals of Insurance
Fundamentals of Insurance
Sous-titre: Second edition
Éditeur: Himalaya Publishing House
Année: 2017
ISBN: 978-93-5097-079-9
Description: An accessible treatment of insurance in four parts: the basics of risk, insurance management, life insurance and non-life insurance.

Questions de révision

Vous vous demandez à quoi ressemblent les questions passées sur ce sujet ? Voici plusieurs questions sur Hazards des années précédentes.

WAEC SSCE - Insurance - 2017

Question 1 Rapport

(a) Explain the following terms used in insurance.
(i) peril
(ii) hazard.
(iii) disclosure.

(b) Differentiate . between the following classes of risks: (i) pure and speculative risks; particular and fundamental risks; (iii) static and dynamic risks. 
 

Détails de la réponse

(a) Explanation of terms used in insurance

  • (i) Peril: A peril is the actual cause of a loss, that is, the event or contingency that gives rise to damage, injury or destruction. Examples are fire, flood, accident, theft, storm and death. It is the immediate reason why a loss occurs and is what an insurance policy is taken out to protect against.
  • (ii) Hazard: A hazard is a condition or circumstance that increases the chance (frequency) or severity of a loss arising from a peril. It does not cause the loss directly but makes it more likely or more serious. A physical hazard relates to the physical characteristics of the risk (for example, storing petrol near a fire), while a moral hazard relates to the attitude, honesty or carelessness of the insured (for example, deliberate carelessness or fraud).
  • (iii) Disclosure: Disclosure is the duty of the proposer, under the principle of utmost good faith (uberrimae fidei), to reveal voluntarily and truthfully all material facts that could influence the insurer's decision to accept the risk or fix the premium. Failure to disclose such facts (non-disclosure or concealment) can make the contract voidable at the option of the insurer.

(b) Differences between the classes of risk

BasisFirst typeSecond type
(i) Pure vs SpeculativePure risk gives only two outcomes: loss or no loss. There is no chance of gain (e.g. fire, death, accident). Pure risks are insurable.Speculative risk gives three outcomes: loss, no loss or gain. It is deliberately undertaken in the hope of profit (e.g. gambling, business trading). Speculative risks are generally not insurable.
(ii) Particular vs FundamentalParticular risk is personal and localised in its cause and effect, affecting only an individual or a few persons (e.g. a house fire, a motor accident). Particular risks are usually insurable.Fundamental risk is impersonal in origin and widespread in effect, affecting the whole society or large groups (e.g. war, earthquake, flood, inflation, epidemic). Most fundamental risks are the responsibility of the state and are largely uninsurable.
(iii) Static vs DynamicStatic risk occurs whether or not there is a change in the economy; it results from natural causes or human dishonesty (e.g. fire, theft, perils of nature). It is regular, predictable and insurable.Dynamic risk arises from changes in the economy or society, such as changes in price levels, technology, consumer taste, income or government policy. It is less predictable and generally uninsurable.
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