风险管理与保险前半学期课后练习答案：IMch06

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1、CHAPTER 6Insurance as a Risk Management Technique: PrinciplesTHE NATURE OF INSURANCEPRINCIPLE OF INDEMNITYPRINCIPLE OF INSURABLE INTERESTWhat Constitutes Insurable InterestWhen the Insurable Interest Must ExistPRINCIPLE OF SUBROGATIONReasons for SubrogationExceptions to the Principle of SubrogationP

2、RINCIPLE OF UTMOST GOOD FAITHRepresentationsWarrantiesConcealmentsMistakesREQUISITES OF INSURABLE RISKSLarge Number of Similar ObjectsAccidental and Unintentional LossDeterminable and Measurable LossLoss Not Subject to Catastrophic HazardLarge LossProbability of Loss Must Not Be Too HighREQUIREMENTS

3、 OF AN INSURANCE CONTRACTRequirements of All Valid ContractsDISTINGUISHING CHARACTERISTICS OF INSURANCE CONTRACTSAleatory ContractConditional ContractContract of AdhesionUnilateral ContractROLE OF AGENTS AND BROKERSAuthority of Agents and BrokersPRINCIPLES OF SOCIAL INSURANCECompulsionSet Level of B

4、enefitsFloor of ProtectionSubsidyUnpredictability of LossConditional BenefitsContributions RequiredAttachment to Labor ForceMinimal Advance FundingSOCIAL AND ECONOMIC VALUES AND COSTS OF INSURANCESocial and Economic ValuesReduced Reserve RequirementsCapital Freed for InvestmentReduced Cost of Capita

5、lReduced Credit RiskLoss Control ActivitiesBusiness and Social StabilitySocial Costs of InsuranceOperating the Insurance BusinessLosses That Are Intentionally CausedLosses That Are ExaggeratedKEY TERMS AND CONCEPTSAdverse selectionFloor-of-protection conceptRatificationAffirmative warrantyGeneral ag

6、entReasonable expectationsAgency agreementImplied warrantiesReinsuranceAleatory contractIndemnifyRepresentationAsymmetric informationInsurable interestRequisites of insurable risksBeneficiaryInsuranceRisk reductionBindsInsuredSocial insuranceBrokerInsurerSpecial agentConcealmentLarge-loss principleS

7、ubrogationConditional contractMaterialUnderwritingConditional receiptPoliciesUnilateral contractConsiderationPoolingUtmost good faithContractPremiumValued policy lawsContract of adhesionPrinciple of indemnityWaiverEstoppelPromissory warrantyWarrantyExpress warrantiesANSWERS TO QUESTIONS FOR REVIEW A

8、ND DISCUSSION1. If an honest mistake is made in a written insurance contract, it may be reformed if there is proof of mutual mistake or a mistake on one side that is known to be a mistake by the other party.2. The beneficiary must prove insurable interest if evidence suggests that the policy was iss

9、ued in violation of anti-gambling laws. A beneficiary might have paid the insured to name him or her beneficiary of a policy obtained for speculative purposes. Evidence may suggest that the only thing giving rise to the speculation was the desire to make money at the expense of the insurer.3. The do

10、ctrine of insurable interest determines whether or not any loss is suffered by a person insured, whereas the principle of indemnity governs the measurement of that loss.4. No. D can collect only to the extent of his or her insurable interest, and each insurer will bear the loss equally.5. a.This cas

11、e constitutes a material misrepresentation on the part of the applicant and provides grounds for avoidance of the contract by the insurer. b.The doctrine of warranties and representations rests on the general premise that insurance is a contract of utmost good faith. The test of materiality is wheth

12、er or not the insurer would have issued the contract had the facts been known.6. An express warranty is a specific circumstance that must exist as described in writing in the insurance contract. An implied warranty is not in the contract, but it is assumed to be. Implied warranties are most commonly

13、 found in ocean marine insurance.7. Yes, one can be contractually responsible for nonowned property because he or she is renting it or has the property under his or her control.8. A warranty is a condition of the contract. A breach of a warranty can void the contract. A representation is a statement

14、 made by the insured before the contract is written and only affects the transaction if it is material.9. Legal capacity: persons have legal right and capacity to execute the contract.Legal purpose: must not be an illegal venture.Offer and acceptance: offer communicated effectively and accepted. In

15、insurance, the insured is usually the one deemed to have made the offer.Consideration: act or promise bargained for.Additional features of an insurance contract include:(l)Insurer must be properly approved by the insurance commissioner.(2)Insurable interest must exist.(3)There must exist some uncert

16、ainty as to loss.(4)Insurer must assume risk.10.In a contract of adhesion, ambiguities are construed against the insurance company.11.a.Large enough number, accidental loss, determinable and measurable, and noncatastrophic in nature.b.Sufficiently severe so as to cause financial hardship and probabi

17、lity of loss not too high so as to drive the premium up beyond the means of the buyer.12. A waiver is a relinquishing of a known right and is based on consent and contract law. Estoppel prevents one from asserting a right because of prior conduct that is inconsistent with such an assertion and is mo

18、re closely associated with contract law.13.Adverse selection is the tendency of insureds who have a greater than average chance of loss to purchase more than the average amount of insurance. Underwriting is necessary because the insurance company does not want to write insurance only for these high

19、risk insureds. Writing only this group would not spread the risk for the insurance company and would eventually cause higher and higher premiums. The company would eventually fail.14.Insurance is socially valuable because it reduces the need to accumulate funds to meet loss; increases the pool of in

20、vestable funds, thus reducing the cost of capital; improves credit; reduces losses through loss control; and reduces worry. The social costs are the need to operate the insurance business, intentionally caused losses, and losses that are exaggerated.15. The text definition states nothing about the b

21、uilding of a fund, but it certainly includes situations in which there is only transfer of risk instead of reduction of risk. 16. No. She should rejoice in not having a loss. First, had an accident occurred, the policy would not have paid all her losses. Delay, inconvenience, etc., would not have be

22、en reimbursed. Further, her rates might have been higher next year due to reclassification into a different rating group. Had the loss occurred, she would not have gained anything. The premium should be viewed as protection, not speculation.17. The decision as to whether a given proposition is or is

23、 not insurance must rest on the interpretation of what one believes to be the proper definition of insurance. Using the definition given in the text, the auto parts guarantee would actually seem to fall under the definition since it amounts to an enforceable guarantee to reimburse the “insured” for

24、a loss suffered during the term of the agreement. This is the legalistic definition of insurance. It does not conform to the “economic institution” definition. State courts have held differently on this question, some courts holding that guarantees are, in fact, insurance contracts and others holdin

25、g that they are not.18. a.Some students will agree and others will disagree. Those who disagree can argue that, in many cases, punitive damages stem from an accidental occurrence that was unintended by the insured, and hence, should be covered by liability insurance. Those who agree will argue that

26、if a corporation can insure losses from judgments that a court awards to punish and deter wrong conduct, the insurance, not the corporation suffers. The wrong conduct would thus go unpunished. Insurance policies usually exclude losses that are the result of deliberate and intentional behavior by the

27、 insured because such losses are not considered “accidental.” Courts are not uniform in saying whether or not punitive damages are “deliberate and intentional.” Some policies exclude coverage for punitive damages, but others are silent on the matter, leaving it to the courts to decide whether the in

28、surer must pay such damages.b. Not insurable privately because it is subject to catastrophic loss, lack of agreement on how to measure, and unpredictability. But, alleviative measures by government, unemployment insurance payments, diversification of industry, and other measures have been used to co

29、mbat losses caused by economic depression.c.Probably not insurable, at least directly. Theft coverage for definable property is available, of course, but the loss by trade secret theft would be hard to define, estimate, and predict.d.Similar comment to part c.e.Similar comment to part c. In parts c,

30、 d, and e, the loss would have to be handled through methods other than insurance. Loss control, risk transfer, and diversification are all possible to mitigate or prevent the possible loss.19.The indemnity allowed by the insurer will depend on the adjusters judgment on the actual loss sustained. It

31、 is the purpose of the insurer to indemnify the insured in such a way that his or her economic position after the loss is as it was before. If a reasonable judgment is that the bumper does not require replacement, only the cost to repair will be allowed. The insurer is not obligated to give new for

32、old. However, if only a new bumper can do the job, then a new bumper cost will be allowed. The question illustrates the moral hazard involved in loss settlements. Considerable subjective judgment is involved. More parties lose than the insurance company itself. Specifically, the policyholders must p

33、ay premiums to support loss; they are the real losers, particularly if these losses are exaggerated.20. Students answers may vary, but the cost of running the insurance business itself, which costs perhaps 15 to 20 percent of the premium dollar, may be considered the most significant cost. The probl

34、em of insurance fraud is also growing in importance.SUPPLEMENTARY QUESTIONS1. Some have argued that the social costs of some types of insurance are too high, and that the insurance itself should be eliminated rather than trying to use loss control activities. For example, some crime rings include di

35、shonest attorneys, physicians, and others who conspire to defraud insurers by what is termed “ambulance-chasing.” Accident victims are often unwitting accomplices to the crime, being duped into cooperating with the crime ring in exaggerating accident losses. False medical evidence may be used to obt

36、ain out-of-court settlements with liability insurers. Such activity would probably not exist if it were not for the existence of liability insurance. In your opinion, is this a sufficient reason to outlaw or restrict the issuance of liability insurance? Why? Is the social cost of liability insurance

37、 too high?An argument in favor of outlawing liability insurance is that a person should not be permitted to purchase insurance against his or her own negligence, an event at least partially within the control of the insured, not random, and hence, not insurable. An argument against outlawing liabili

38、ty insurance is that under our legal system, a person can be held liable for events that are unintended and accidental from the viewpoint of the defendant. For example, in the crime case cited above, a defendant in an auto liability case may not have deliberately or voluntarily committed an act resu

39、lting in his or her liability, but may still be held to blame and be required to respond financially.The social cost of insurance is not deemed “too high” considering the benefits of insurance, at least in our society. However, laws have been enacted to limit the operation of liability insurance, es

40、pecially in the case of product liability. For example, states have passed statutes of limitations that limit the number of years within which a manufacturer can be sued for having produced defective products that caused loss to a user. This is a step in the direction of taking the course of restric

41、ting insurance rather than using loss control as a solution to the problem of reducing the social costs of insurance.2. Distinguish between a concealment and a misrepresentation.A concealment is “silence when obligated to speak.” A misrepresentation is a misstatement of fact. A concealment is negati

42、ve while a misrepresentation is positive. Both, if material, void the contract.3. What are some of the differences between social and private insurance?Social insurance characteristics are (1) compulsory nature, (2) the set level of benefits, (3) the floor of protection, (4) an element of subsidy, (5) the unpredictability of loss, (6) conditional benefits, (7) contributions required, (8) attachment to labor force, and (9) minimal advance funding. Private insurance has few if any of these characteristics.