PSI Ohio Insurance Practice Exam

Which of the following is NOT considered an element of an uninsurable loss?

1. High risk activity

2. Avoidable conditions

3. Affordability of premiums

4. Statistical data related to loss

The correct answer is: Affordability of premiums

In the context of insurance, elements of an uninsurable loss typically include factors that contribute to the likelihood or frequency of losses that are either too high for an insurer to assume or can be managed by the insured party. High-risk activities, such as extreme sports, present a greater chance of loss, while avoidable conditions relate to circumstances that can be controlled or mitigated by the insured, which makes them uninsurable due to the high probability of occurrence. Statistical data related to loss is essential for insurers to assess risks and determine premiums or coverage limits. It is part of the underwriting process and helps in understanding the likelihood of potential claims based on past occurrences. Affordability of premiums, on the other hand, does not categorize a loss as uninsurable, since it pertains to the financial aspect of the policyholder’s ability to pay for insurance rather than the intrinsic nature of the loss itself. Factors like risk, mitigation, and statistical assessments are more directly related to determining whether certain losses can be insured. Thus, affordability of premiums stands apart from the criteria that define uninsurable losses.