1. The principle of indemnity in insurance means an insured should be:

Restored to approximately the same financial position as before the loss

Indemnity aims to restore the insured to their pre-loss financial position, not to profit from a loss.

2. Insurance generally covers which type of risk?

Pure risk

Insurance covers pure risk (chance of loss or no loss), not speculative risk that includes a chance of gain.

3. Transferring the financial consequences of a risk to an insurer is an example of risk:

Transfer

Buying insurance is a form of risk transfer, shifting the financial burden of loss to the insurer.

4. Insurers can price coverage predictably because the law of large numbers makes results more reliable as:

The number of similar insureds increases

As the pool of similar exposures grows, actual loss experience more closely matches predictions.