RMIN 4000 Exam 1 Brown Questions and
Answers 100% Accurate
Textbook definition of RISK - ANSWER-Uncertainty concerning the occurrence of a loss
Better definition of RISK - ANSWER-A calculated possibility of a negative outcome
Calculated Possibility - ANSWER-0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome - ANSWER-Loss
Losses must be __________? - ANSWER-Quantifiable
Pure Risk States - ANSWER-Loss
or
No Loss
Examples of Pure Risks - ANSWER-Fire, Cancer, Dog bites a visitor
Speculative Risk States - ANSWER-Loss
No Loss/No Gain
Gain
Examples of speculative risks - ANSWER-Investment, Gambling, Drinking
Frequency answers what question? - ANSWER-How often does a loss occur
The number of losses that occur in a specified time period
Probability of a loss - ANSWER-Frequency
Severity answers what question? - ANSWER-How much does it cost when a loss does occur? The dollar amount for a loss of a specific peril
Peril - ANSWER-Cause of a loss
Hazard - ANSWER-Condition that creates or increases the frequency and/or severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril - ANSWER-Fire, Tornado, Collision, Burglary
Types of Hazard - ANSWER-Physical
Moral
Morale (Attitudinal)
Legal
Physical Hazard - ANSWER-A physical condition that increases the frequency and/or severity of a loss
Book Definition of Moral Hazard - ANSWER-Dishonesty or character defects in an individual that increase the frequency and/or severity of a loss
Better Definition of Moral Hazard - ANSWER-The presence of insurance changes the behavior of the insured
Examples of Moral Hazard - ANSWER-Using a hammer to create "hail" damage to a roof
Exaggerating the value of insured property
Morale (Attitudinal) Hazard - ANSWER-Carelessness or indifference to a loss, which increases increases the frequency and/or severity of a loss
Examples of Morale Hazard - ANSWER-Leaving car keys in an unlocked car
Neglecting a tree limb growing over your roof
Legal Hazard - ANSWER-Characteristics of a legal system or regulatory environment that increase the frequency and/or severity of a loss
Examples of a Legal Hazard - ANSWER-Juries in some areas are more sympathetic than in other areas
Georgia now requiring Diminution in Value to be paid on property losses
Answers 100% Accurate
Textbook definition of RISK - ANSWER-Uncertainty concerning the occurrence of a loss
Better definition of RISK - ANSWER-A calculated possibility of a negative outcome
Calculated Possibility - ANSWER-0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome - ANSWER-Loss
Losses must be __________? - ANSWER-Quantifiable
Pure Risk States - ANSWER-Loss
or
No Loss
Examples of Pure Risks - ANSWER-Fire, Cancer, Dog bites a visitor
Speculative Risk States - ANSWER-Loss
No Loss/No Gain
Gain
Examples of speculative risks - ANSWER-Investment, Gambling, Drinking
Frequency answers what question? - ANSWER-How often does a loss occur
The number of losses that occur in a specified time period
Probability of a loss - ANSWER-Frequency
Severity answers what question? - ANSWER-How much does it cost when a loss does occur? The dollar amount for a loss of a specific peril
Peril - ANSWER-Cause of a loss
Hazard - ANSWER-Condition that creates or increases the frequency and/or severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril - ANSWER-Fire, Tornado, Collision, Burglary
Types of Hazard - ANSWER-Physical
Moral
Morale (Attitudinal)
Legal
Physical Hazard - ANSWER-A physical condition that increases the frequency and/or severity of a loss
Book Definition of Moral Hazard - ANSWER-Dishonesty or character defects in an individual that increase the frequency and/or severity of a loss
Better Definition of Moral Hazard - ANSWER-The presence of insurance changes the behavior of the insured
Examples of Moral Hazard - ANSWER-Using a hammer to create "hail" damage to a roof
Exaggerating the value of insured property
Morale (Attitudinal) Hazard - ANSWER-Carelessness or indifference to a loss, which increases increases the frequency and/or severity of a loss
Examples of Morale Hazard - ANSWER-Leaving car keys in an unlocked car
Neglecting a tree limb growing over your roof
Legal Hazard - ANSWER-Characteristics of a legal system or regulatory environment that increase the frequency and/or severity of a loss
Examples of a Legal Hazard - ANSWER-Juries in some areas are more sympathetic than in other areas
Georgia now requiring Diminution in Value to be paid on property losses
