Florida Insurance Claims Adjuster License Practice Exam

What does 'risk' refer to in the insurance industry?

1. The possibility of a policy cancellation

2. The chance of financial loss

3. The certainty of an audit

4. The potential for insurance fraud

The correct answer is: The chance of financial loss

In the insurance industry, 'risk' refers to the likelihood of financial loss. It is not the possibility of a policy cancellation (A) as not all policies are cancelled due to risk. It is also not the certainty of an audit (C) as this is a separate process from evaluating risk. Finally, it is not the potential for insurance fraud (D) as this refers to deliberate deceit by policyholders, while risk is an inherent aspect of insurance. Therefore, the answer is B - the chance of financial loss.