SOCSCI 2PF3 Lecture Notes - Lecture 8: Seat Belt, Retail Loss Prevention, Adverse Selection
20 Feb 2017
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Document Summary
Chapter 8 insuring your life and health. Protect you and your family from catastrophic losses caused by the: loss or damage of important assets (e. g. car, house, loss of your ability to earn income, unexpected expenses. Risk is defined as uncertainty with respect to economic loss. Insurance planning used to reduce risk that losses will cause financial devastation. Risk can be dealt with in the following ways : risk avoidance. E. g. not driving at all: loss prevention and control. E. g. wearing a seat belt to reduce accident effects: risk assumption. You bear the risk of loss yourself. E. g. if someone steals your calculator, you bear the cost out of your pocket: transferring and sharing risk, insurance. Contract between you and the insurance company. Process in which the insurance company decides whom to insure and the rate to be charged. Company must guard against adverse selection, a disproportionate number of bad risks.
