Hazards
Gbogbo ọrọ náà
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.
Ebumnobi
- 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
Maapụ uche
E seela isiokwu a ka ị hụ otu echiche si ejikọta.
Kaadị ncheta
Omume ncheta ngwa ngwa n'ihe a na-anwale n'isiokwu a.
Akwụkwọ Ọmụmụ
Yi rajista ka ci gaba
Kpọpụta akaụntụ n’efu ka ị nweta ohere na ihe ọmụmụ niile, ajụjụ omume, ma soro mmepe gị.
Nnyocha Ọmụmụ
Ekele diri gi maka imecha ihe karịrị na Hazards. Ugbu a na ị na-enyochakwa isi echiche na echiche ndị dị mkpa, ọ bụ oge iji nwalee ihe ị ma. Ngwa a na-enye ụdị ajụjụ ọmụmụ dị iche iche emebere iji kwado nghọta gị wee nyere gị aka ịmata otú ị ghọtara ihe ndị a kụziri.
Ị ga-ahụ ngwakọta nke ụdị ajụjụ dị iche iche, gụnyere ajụjụ chọrọ ịhọrọ otu n’ime ọtụtụ azịza, ajụjụ chọrọ mkpirisi azịza, na ajụjụ ede ede. A na-arụpụta ajụjụ ọ bụla nke ọma iji nwalee akụkụ dị iche iche nke ihe ọmụma gị na nkà nke ịtụgharị uche.
Jiri akụkụ a nke nyocha ka ohere iji kụziere ihe ị matara banyere isiokwu ahụ ma chọpụta ebe ọ bụla ị nwere ike ịchọ ọmụmụ ihe ọzọ. Ekwela ka nsogbu ọ bụla ị na-eche ihu mee ka ị daa mba; kama, lee ha anya dị ka ohere maka ịzụlite onwe gị na imeziwanye.
- 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
Yi rajista ka ci gaba
Kpọpụta akaụntụ n’efu ka ị nweta ohere na ihe ọmụmụ niile, ajụjụ omume, ma soro mmepe gị.
Yi rajista ka ci gaba
Kpọpụta akaụntụ n’efu ka ị nweta ohere na ihe ọmụmụ niile, ajụjụ omume, ma soro mmepe gị.
Akwụkwọ A Na-atụ Aro
Ajụjụ Nnyocha
Nna, you dey wonder how past questions for this topic be? Here be some questions about Hazards from previous years.
Ajụjụ 1 Ripọtì
(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.
Akọwa Nkọwa
(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. |