lecturetworiskandinsurance.ppt

Lecture Two： Risk and Insurance Learning Objectives  Explain the meaning of the risk Distinguish between pure risk and speculative risk Understand how risk is a burden to society Explain the objectives of risk management process Describe the steps in the risk management Explain the major methods of handling risk Main Contents Risk in our society Types of risk Burdens of risk The objectives of risk management The steps in the risk management process Methods of handling risk Risk in our society  Definition of risk Characteristics of risk Peril, Hazard and risk What’s a risk ? What kinds of risks do we meet in our society? “天有不测风云，人有旦夕祸福。人事变迁无常，则危险亦必随之而起。沧海桑田，华屋山丘，寿命之修短，事业之兴替，举凡一切危险发生，动有出入意表者，如不绸缪未雨，熟筹先事预防之术，则一旦横逆之来，猝逢意外，未有不噬脐莫及，而叹应付之无方者。” Definition of risk There is no single definition of risk. Traditionally, risk is defined in terms of uncertainty. Based on this concept, risk is defined here as uncertainty concerning the occurrence of a loss. Two concepts objective risk subjective risk objective risk the relative variation of actual loss from expect loss. (on average in a long period VS a specific year; (examples;) Objective risk declines as the number of exposures increases. （inversely with the spare root of the number of cases under observation) can be statistically calculated subjective risk being defined as uncertainty based on a person’s metal condition or state of mind. High subjective risk often result in conservative and prudent behavior. While low subjective risk may result in less conservative behavior. Characteristics of risk  objective in occurrence potential loss uncertain predictable changeable Peril,Hazard and loss Peril Peril is defined as the cause of loss. Common perils that cause property damage include fire, lightning, windstorm, hail, earthquake, theft, burglary, etc. Peril, Hazard and loss Hazard A hazard is a condition that creates or increases the chance of loss. There are four m