Question

How is insurance defined?

a.

The process of mitigating risk through diversification of investments

b.

A social device for minimizing risk of uncertainty regarding loss by spreading the risk over a large number of similar exposures

c.

The act of providing financial assistance to individuals during difficult times

d.

A mechanism for guaranteeing profit in the event of a loss

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (b).A social device for minimizing risk of uncertainty regarding loss by spreading the risk over a large number of similar exposures Explanation:Insurance is defined as a social device for minimizing the risk of uncertainty regarding loss by spreading the risk over a large enough number of similar exposures to predict the individual chance of loss.

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