BUISENESS MANAGEMENT
INSURANCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Risk of loss is shared with the insurance company sales person
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Insured shares the risk of loss with all the other policy holders
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Insured can share the risk by spreading the cost over a number of years
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Risk of loss is shared with the government
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Detailed explanation-1: -Transfer of risk also is referred to as “spreading the risk:’ because the large losses of a few are distributed through an insurer to a large number of premium payers, each of whom pays a relatively small amount.
Detailed explanation-2: -The two most common risk sharing examples are insurance policies and indemnification clauses in contracts. Insurance policies are the most common risk sharing strategy. A company or individual will purchase an insurance policy from the insurance company that ensures coverage of unexpected loss.
Detailed explanation-3: -Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim.
Detailed explanation-4: -Reinsurance is insurance for insurance companies. It’s a way of transferring some of the financial risk insurance companies assume in insuring cars, homes and businesses to another insurance company, the reinsurer.