1. HAZARDS
1.1. PHYSICAL HAZARD
1.1.1. relate to the physical condition that increase the chances of loss
1.1.2. characteristics of the risk; some examples: > type of construction; > security protection; > proximity to the river
1.2. MORAL HAZARD
1.2.1. It refers to the dishonesty of the insured person leading to increase probability of loss from given risk exposure.
1.2.2. relates to the human aspects which may influence the outcome, for example the attitude of the insured: > towards safety; > at time of claim;
1.3. MORALE HAZARD
1.3.1. This refers to attitude of indifference to losses that results out of a known fact that the said losses were insured.
1.4. LEGAL HAZARD
1.4.1. This refers to characteristics of legal system or regulatory environment that increase the frequency or severity of losses
1.4.2. eg: statutes that require insurers to give coverage for alcoholism.
2. Probability Theory
2.1. PRIORI
2.1.1. determined when the total number of possible events are known.
2.2. EMPIRICAL
2.2.1. determined on the basis of historical data.
2.3. JUDGEMENTAL
2.3.1. determined based on the judgement of the person predicting the outcome.
2.3.2. eg: used when there is lack of historical data or credible statistics
2.3.3. In practice, an insurance company may, depending on the availability and credibility of data, either use the empirical or judgemental probability technique to predict future losses.
3. RISK IN INTERNATIONAL BUSINESS
3.1. ECONOMIC RISK
3.1.1. Either the economic country is stable or unstable
3.2. TECHNOLOGICAL RISK
3.2.1. Our country do not have the advance technologies that other countries have. Or otherwise whereby non developing countries do not have the new technology that we have.
3.3. OPERATIONAL RISK
3.3.1. Probability of loss occurring from the internal inadequacy of a firm or a breakdown in its controls, operations or procedures.
3.4. POLITICAL RISK
3.4.1. The possibility that political decisions or social events in a country will negatively affect the business climate
3.5. TERRORISM RISK
3.5.1. An act that is intended to create fear and targeted on civilians
4. Definition Of Risk
4.1. UNCERTAINTY OF LOSS
4.2. uncertain whether or not loss will occur
4.3. when the loss will take place
4.4. Concerned with the
4.5. PERIL ?
4.5.1. is a cause of loss
4.5.2. is a 'prime cause' & normally byond control of the insured eg : Earthquake, flood
4.6. LOSS ?
4.6.1. is a reduction/disappearance of economic value
4.7. HAZARD ?
4.7.1. is a condition that increases the chance of loss
4.7.2. factors which may influence the outcome (increase/decrease)
4.7.3. > the probability of the loss occurring; > the severity of the loss should the peril occur:
4.7.4. E.g. absence of proper security or fencing , poorly maintained fire alarm system etc.
5. Categories Of Risk
5.1. PURE
5.1.1. It exists when there is the possibility of either loss or no loss.
5.1.2. eg: risk of damage to property resulting from fire and the risk of premature death
5.2. SPECULATIVE
5.2.1. Speculative risk exists when there is the possibility of profit, loss or no loss.
5.2.2. eg: investment in the stock market or real estate & betting in a horse race
5.3. FUNDAMENTAL
5.3.1. risk affects the entire economy or large numbers of persons
5.3.1.1. gov bertanggungjwb
5.3.2. eg: risk of property damage from earthquake & the risk of mass unemployment
5.4. PARTICULAR
5.4.1. risk affects individuals and not the entire communIty/country
5.4.1.1. individu bertanggungjwb
5.4.2. eg: injury resulting from road accidents