Mr. Ye7ia Tel: 0100 90 10 200.
Discuss questions:
Q1: Explain the difference between the following:
Financial and non financial loss:
Financial loss Non-financial loss
The outcome of accident is non
Lack of the asset value in case of financial loss
accident
like : like :
explosion lose of your pets (animals)
theft lose of your wife
motor accident depression , headache
This definition is not accepted because we can’t calculate the outcome of some accident in
some cases accurately such as: In non financial loss case as it is subjective case.
subjective & objective risk :
Subjective risk Objective risk
Don’t cause financial loss or gain - The difference between expected
but it causes only non financial loss loss from actual loss
It affects the mental situation of an Objective risk
individual
𝐚𝐜𝐭𝐮𝐚𝐥 𝐥𝐨𝐬𝐬−𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
= 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
Like : objective risk gives a higher
lose of husbands , friends degree of accuracy
subjective & objective probability :
Objective probability Subjective probability
It means the probability of an event will It is the individuals estimation for the
happened in the future depend on chance of loss depending on their
statistics & last knowledge education , intelligence & age
o like:
probability of accident is 0.005
, Mr. Ye7ia Tel: 0100 90 10 200.
objective risk & chance of loss :
Chance of loss Objective risk
Is the probability of frequent that an The difference between expected loss
event will happen in the future. from actual loss
may be the same for two different objective risk gives a higher degree of
groups accuracy
𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬 may be different for different groups
Chance of loss = 𝐞𝐱𝐩𝐨𝐬𝐞𝐝 𝐥𝐨𝐬𝐬 𝐚𝐜𝐭𝐮𝐚𝐥− 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
objective risk = 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
Peril & hazard:
Peril hazard
is the main cause of loss is a situation which cause, increase or
decrease the chance of loss or severity of
there are 2 types of peril loss
there are 3 types of hazard (physical,
property: personal: moral & morale hazard)
1) fire 1) death
2) collision 2) disability o Like:
the smoking is helping to increase the
chance of death
bad weather which increase car accident
types of hazard ( physical & moral & morale ) :
physical Moral Morale
Is a physical condition that increase It is individual dishonest which is defined as carelessness or
the chance of loss or severity increase the chance of loss or indifference to loss because of
severity the existence of insurance , so
insured be carelessness about
o Like: o Like: protecting their property , the
Bad weather can increase Making faking accident chance of loss or severity is
accident to collect money from there by increase
insurance company o Like:
if a person remain in the
hospital to collect health
ins. rather than back to
work
, Mr. Ye7ia Tel: 0100 90 10 200.
speculative & Pure risk :
Speculative risk Pure risk
The result (outcome) of speculative The result of this risk is loss only
may be loss or gain
Like: Like :
gambling , investing money in stock Theft , accident , fire , collusion
market because outcome of this
investment may be loss or gain ,
beating on a horse race, producing a
new product
Insurance company like to insure on pure risk rather than speculative risk
static risk and dynamic risk :
Static risk dynamic risk
are risks connected with losses caused risks associated with changing in
by irregular action of nature or by economy
mistakes and misdeeds of human
beings Including changing in tastes of
consumers, technological changes
same as pure risk and new methods of production.
would be present in an unchanging would be associated with changing
economy economy
always harmful always beneficial
Fundamental risk & Particular risk :
Fundamental risk Particular risk
It happens from cause outside the It comes from individual to individual
control of any individual & it affects & has a limited effect
large number of people at the same
time
It affects the whole society & economy It doesn’t affect the whole society &
economy
Like: Like:
Natural disaster: Earthquake, volcano, Fire , theft
flood.
economic changes: inflation,
unemployment
Discuss questions:
Q1: Explain the difference between the following:
Financial and non financial loss:
Financial loss Non-financial loss
The outcome of accident is non
Lack of the asset value in case of financial loss
accident
like : like :
explosion lose of your pets (animals)
theft lose of your wife
motor accident depression , headache
This definition is not accepted because we can’t calculate the outcome of some accident in
some cases accurately such as: In non financial loss case as it is subjective case.
subjective & objective risk :
Subjective risk Objective risk
Don’t cause financial loss or gain - The difference between expected
but it causes only non financial loss loss from actual loss
It affects the mental situation of an Objective risk
individual
𝐚𝐜𝐭𝐮𝐚𝐥 𝐥𝐨𝐬𝐬−𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
= 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
Like : objective risk gives a higher
lose of husbands , friends degree of accuracy
subjective & objective probability :
Objective probability Subjective probability
It means the probability of an event will It is the individuals estimation for the
happened in the future depend on chance of loss depending on their
statistics & last knowledge education , intelligence & age
o like:
probability of accident is 0.005
, Mr. Ye7ia Tel: 0100 90 10 200.
objective risk & chance of loss :
Chance of loss Objective risk
Is the probability of frequent that an The difference between expected loss
event will happen in the future. from actual loss
may be the same for two different objective risk gives a higher degree of
groups accuracy
𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬 may be different for different groups
Chance of loss = 𝐞𝐱𝐩𝐨𝐬𝐞𝐝 𝐥𝐨𝐬𝐬 𝐚𝐜𝐭𝐮𝐚𝐥− 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
objective risk = 𝐞𝐱𝐩𝐞𝐜𝐭𝐞𝐝 𝐥𝐨𝐬𝐬
Peril & hazard:
Peril hazard
is the main cause of loss is a situation which cause, increase or
decrease the chance of loss or severity of
there are 2 types of peril loss
there are 3 types of hazard (physical,
property: personal: moral & morale hazard)
1) fire 1) death
2) collision 2) disability o Like:
the smoking is helping to increase the
chance of death
bad weather which increase car accident
types of hazard ( physical & moral & morale ) :
physical Moral Morale
Is a physical condition that increase It is individual dishonest which is defined as carelessness or
the chance of loss or severity increase the chance of loss or indifference to loss because of
severity the existence of insurance , so
insured be carelessness about
o Like: o Like: protecting their property , the
Bad weather can increase Making faking accident chance of loss or severity is
accident to collect money from there by increase
insurance company o Like:
if a person remain in the
hospital to collect health
ins. rather than back to
work
, Mr. Ye7ia Tel: 0100 90 10 200.
speculative & Pure risk :
Speculative risk Pure risk
The result (outcome) of speculative The result of this risk is loss only
may be loss or gain
Like: Like :
gambling , investing money in stock Theft , accident , fire , collusion
market because outcome of this
investment may be loss or gain ,
beating on a horse race, producing a
new product
Insurance company like to insure on pure risk rather than speculative risk
static risk and dynamic risk :
Static risk dynamic risk
are risks connected with losses caused risks associated with changing in
by irregular action of nature or by economy
mistakes and misdeeds of human
beings Including changing in tastes of
consumers, technological changes
same as pure risk and new methods of production.
would be present in an unchanging would be associated with changing
economy economy
always harmful always beneficial
Fundamental risk & Particular risk :
Fundamental risk Particular risk
It happens from cause outside the It comes from individual to individual
control of any individual & it affects & has a limited effect
large number of people at the same
time
It affects the whole society & economy It doesn’t affect the whole society &
economy
Like: Like:
Natural disaster: Earthquake, volcano, Fire , theft
flood.
economic changes: inflation,
unemployment
