Hazards

Übersicht

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.

Ziele

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

Lektionshinweis

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.

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Unterrichtsbewertung

Herzlichen Glückwunsch zum Abschluss der Lektion über Hazards. Jetzt, da Sie die wichtigsten Konzepte und Ideen erkundet haben,

Sie werden auf eine Mischung verschiedener Fragetypen stoßen, darunter Multiple-Choice-Fragen, Kurzantwortfragen und Aufsatzfragen. Jede Frage ist sorgfältig ausgearbeitet, um verschiedene Aspekte Ihres Wissens und Ihrer kritischen Denkfähigkeiten zu bewerten.

Nutzen Sie diesen Bewertungsteil als Gelegenheit, Ihr Verständnis des Themas zu festigen und Bereiche zu identifizieren, in denen Sie möglicherweise zusätzlichen Lernbedarf haben.

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
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
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
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
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

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Frühere Fragen

Fragen Sie sich, wie frühere Prüfungsfragen zu diesem Thema aussehen? Hier sind n Fragen zu Hazards aus den vergangenen Jahren.

WAEC SSCE - Insurance - 2017

Frage 1 Bericht

(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.

Antwort

(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

Basis	First type	Second type
(i) Pure vs Speculative	Pure 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 Fundamental	Particular 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 Dynamic	Static 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.

Antwortdetails

(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

Basis	First type	Second type
(i) Pure vs Speculative	Pure 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 Fundamental	Particular 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 Dynamic	Static 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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Hazards

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