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C.) uncertainty concerning the occurrence of a loss
Which of the following statements about financial risk is true?
1.) Enterprise risk does not include financial risk
2.) Financial risk is easily addressed through the purchase of insurance
A pure risk is defined as a situation in which there is?
An automobile that is a total loss as a result of a collision is an example of which of the following types of risk?
1.) Speculative Risk
Which of the following is a reason why premature death may result in economic insecurity?
1.) Additional expenses associated with death may be incurred
2.)The income of the deceased person's family may be inadequate to meet its basic needs
Which of the following are often consequences of long term disability?
1.) Continuing medical expenses
2.)n Loss or reduction of employee benefits
Which of the following statements about liability risks is true?
1.)Future Income and assets can be attached to pay judgments in inadequate insurance is carried
2.) There is an upper limit on the amount of loss
Loss control includes which of the following?
1.) Loss reduction
2.) Loss Prevention
Jenna opened a successful restaurant. One night, after the restaurant had closed, a fire started when the electrical system malfunctioned. In addition to the physical damage to the restaurant Jenna also had lost profits that could have been earned while the restaurant was closed for repairs. The lost profits are an example of?
Which of the following statements about chance of loss and risk is true?
1.) If the chance of loss is identical for two groups, the objective risk must be the same
2.) Two individuals may perceive differently the risk inherent in a given activity
Characteristics of a fortuitous loss include which of the following
1.) the loss is certain to occur
2.) The loss occurs as a result of chance
The requirement that losses should be accidental and unintentionain order to be insurable results in which of the following?
1.) Decrease in moral hazard
2.)More accurate prediction of future losses
both 1 & 2
Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable?
1.) The loss must be definite as to place
2.) The loss must be definite as to amount
Methods by which insurers may minimize or avoid catastrophic losses include which of the following?
1.)The use of reinsurance
2.) Concentrating coverage written in one geographic area
Reasons why market, financial, and production risks are often uninsurable include which of the following
1.) The potential to produce a catastrophic loss is great
2.) The chance of loss cannot be accurately estimated
Which of the following statements regarding insurance and gabling is true?
1.) Insurance is used to handle existing pure risks, while gabling creates a new speculative risk
2._ Insurance usually involves risk avoidance, while gambling typically involves only risk reduction
Which of the following statements about the insurance industry as a source of investment funds is true?
1.) These funds result in a lower cost of capital than would exist in the absence of insurance
2.) These funds tend to promote economic growth and full employment
Which of the following statements regarding insurance and hedging is true
1.) Insurance involves the transfer of insurable risk while hedging handles risk that typically is uninsurable
2.) Both insurance and hedging rely on the law of large numbers to reduce risk
Which of the following statements is true concerning private insurance
1.) social insurance programs are private insurance programs
2.) both individuals and businesses purchase private insurance
Preloss objectives of risk mgmt include which of the following
1.) preparing for potential losses in the most economical way
2.) reduction of anxiety
A risk manager is concerned with
1.) identifying potential losses
2.)Selecting the appropriate techniques for treating losses
Which of the following conditions is appropriate for using retention?
1.) Losses are difficult to predict
2.) The worst possible loss is not serious
Which of the following statements regarding the use of retention is true
1.) Retention is best used for loss exposures that have a low frequency and a high severity
2.) A financially strong firm can have a higher retention level than a firm whose financial position is weak
Which of the following statements about self insurance is true
1.) It is a form of planned retention
2.) State law usually prohibits its use for workers comp
Which of the following statements about the use of deductibles is true
1.)They represent risk retention by insurance purchasers
2.) They tend to increase the cost of adjusting small claims
Factors a risk manager must consider in selecting an insurer include which of the following?
1.) The availability of risk mgmt services
2.) the financial strength of the insurer
which of the following types of loss exposures may be appropriately handled through the purchase of insurance
1.) High frequency, low severity
2.) Low frequency, High severity
which statement about a company's cost of risk is true
1.) Cost of risk includes insurance premiums and retained losses
2.) Reducing the cost of risk increases profitability
which of the following statements about captive insurance companies is true?
1.) A captive insurance company established by a US co must be domiciled in the United States
2.) A captive insurance company may be owned by several partners
which of the following statements concerning the selection of risk mgmt techniques and insurance market conditions is true?
1.) Its easier to purchase affordable insurance during a soft market than during a hard market
2.) Retention is used more during a soft market than during a hard market
Which of the following statements about the scope of risk mgmt. is true?
1.) Traditionally, risk mgmt. was limited in scope to speculative loss exposures
2.) In the 90's some businesses began to expand the scope of risk mgmt. to include financial risks
which statements is true with respect to enterprise risk mgmt. programs
1.) They address traditional property, liability, and personnel loss exposures
2.) They do not address financial risks
Which statement is true regarding property ad liability insurance market conditions?
1.) Premiums are high when the insurance market is hard
2.) Underwriting standards are tight when the mkt is soft
Which of the following statements is true regarding investment returns and the underwriting cycle?
1.) Investment returns have no impact upon the underwriting cycle
2.) Investment returns can lengthen the duration of a soft market by offsetting underwriting losses
Which of the following statements is true with regard to probability analysis?
1.)If two events are independent, the occurrence of one event does not affect the occurrence of the second
2.) If two events are dependent, the occurrence of one event affects the occurrence of the second event
Which of the following statements is true regarding time value of money?
1.) Money received today is worth more that the same amount of money received in the future
2.) The present value of a future amount is greater than the future amnt
Which of the following statements is true regarding the net present value of a capital investment?
1.) Net present value does not consider time value of money
2.) A positive net present value represents an increase in value to the firm
Which of the following statements concerning the securitization of risk is true
1.) securitization increases the capacity of insurance industry
2.) Securitization can be used to protect against catastrophic loss
Which statement is true concerning catastrophe models?
1.) Business other than insurance companies use catastrophe models
2.) Catastrophe models are able to precisely predict disaster occurrences and loss values
Fundamental purposes of the principle of indemnity include which of the following?
1.) To reduce physical hazards
2.) To prevent the insured from profiting from insurance
Which of the following statements about the principle of insurable interest is true?
1.) It makes it difficult to measure the amount of an insured's loan
2.) It reduces moral hazard
Which of the following statements about an insurable interest in life insurance is true
1.) It is required of any person named as beneficiary
2.) It may result from a pecuniary(financial) interest
Which of the following statements about a warranty in an insurance contract is true?
1.) It is part of the insurance contract
2.) Statements made by an insurance applicant are considered warranties rather than representations
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