Question

#10. Which statement regarding insurable risks is NOT correct? a) Insurance cannot be mandatory. b) The insurable risk needs to be statistically predictable. c) An insurable risk must involve a loss that is definite as to cause, time, place and amount. d) Insureds cannot be randomly selected.

Answer 1

The incorrect statement is that insurance cannot be mandatory, as it can be required by laws and regulations, such as auto insurance for drivers. Insurable risks must be predictable and definite in details, and insured individuals are selected based on risk grouping, not randomly.

Step-by-step explanation:

The statement regarding insurable risks that is NOT correct is: Insurance cannot be mandatory. In fact, insurance can be mandatory in certain cases. For instance, the government may require all drivers to have auto insurance to protect against the risk of traffic accidents. Regarding insurable risks, an insurable risk does need to be statistically predictable and involve a loss that is definite as to cause, time, place, and amount. Insureds cannot be randomly selected but are generally grouped based on risk factors. Insurance companies utilize information to estimate risks and separate insurance buyers into groups to avoid adverse selection and to ensure the viability of offering insurance products.

Answer 2

The statement that is NOT correct is: b) The insurable risk needs to be statistically predictable.

Insurable risks do not necessarily need to be statistically predictable. In fact, many insurable risks involve unpredictable events or occurrences. Insurers use actuarial science and statistical analysis to assess risk and set premiums, but the predictability of an individual event may vary. Some risks, such as natural disasters or accidents, are inherently unpredictable on an individual basis. Insurability is more about the ability to spread the risk among a large pool of insured individuals, allowing the insurer to manage risk effectively.

So, the correct answer is option B, i.e., the statement in option B is not correct.

Question:

Which statement regarding insurable risks is NOT correct?

A. Insurance cannot be mandatory.

B. The insurable risk needs to be statistically predictable.

C. An insurable risk must involve a loss that is definite as to cause, time, place and amount.

D. Insureds cannot be randomly selected.