CAIB 3. Chapter 6
Risk Management Rational - answer Applying a rational decision process to the risks
we face
- No about insurance at all!
- Is truly a management process with a focus on a "Plan"
Two stages
- Decision Process
- Management or Administrative Process
Brokers benefit from the use of Risk Management principles in their sales process.
Developing the program - answer1. Identify and analyze loss exposures
2. Examine alternative techniques
3. Select techniques
4. Implement techniques
5. Monitor the results
Step 1 - answer Identify exposures to loss
Analyze impact of loss exposures
Step one: Classifying Exposures - answerThe type of Value exposed:
- Property values
- Net income values
- Liability loss
- Personnel loss
The peril causing the loss
The financial consequences of the loss
Step one: Classifying Exposures: Property values - answerTangible: It's real, you can
touch it, it has form and substance
Intangible: Consists of legal rights rather than things
Step one: Classifying Exposures: Net Incomee Values - answerNet income values can
be represented as either a:
- Decrease in Revenues, or
- Increase in expenses
, Step one: Classifying Exposures: Liability Loss - answerThis exposure to loss can be
categorized into two areas:
- Identifying to whom a legal duty is owed, and
- Source of legal duty
Expenses which could result from a legal action
Step one: Classifying Exposures: Personnel Loss - answerTo measure this type of
exposure to loss you must:
- Place a value on the employee's service, and
- recognize the liability associated with providing employee benefits
Step one: Classifying Exposures: Peril Causing the Loss - answerNatural
Human
Economic
The financial consequences of the Loss - answerLoss frequency can range from almost
nil to definite
Loss severity can range from slight to severe
Loss frequency and loss severity are inversely related
Step one: Classifying Exposures: Tools to use to identify - answerStandardized surveys
Financial statements
Other records and documents
Flowcharts
Personal inspections
Consultation with experts
Step two: Examine Alternatives - answerTwo major alternatives are:
- Risk Control
- Risk Financing
Step two: Exposure Avoidance - answerThis is the most complete form of risk control. It
is accomplished by:
- Completely avoiding the exposure
- Eliminating the exposure
Unfortunately, eliminating one exposure usually creates another!
Step two: Loss Prevention - answerLoss prevention is designed to reduce the frequency
of losses
Almost every identified exposure can benefit from some of loss prevention
Unfortunately, no loss prevention technique is 100% effective
Risk Management Rational - answer Applying a rational decision process to the risks
we face
- No about insurance at all!
- Is truly a management process with a focus on a "Plan"
Two stages
- Decision Process
- Management or Administrative Process
Brokers benefit from the use of Risk Management principles in their sales process.
Developing the program - answer1. Identify and analyze loss exposures
2. Examine alternative techniques
3. Select techniques
4. Implement techniques
5. Monitor the results
Step 1 - answer Identify exposures to loss
Analyze impact of loss exposures
Step one: Classifying Exposures - answerThe type of Value exposed:
- Property values
- Net income values
- Liability loss
- Personnel loss
The peril causing the loss
The financial consequences of the loss
Step one: Classifying Exposures: Property values - answerTangible: It's real, you can
touch it, it has form and substance
Intangible: Consists of legal rights rather than things
Step one: Classifying Exposures: Net Incomee Values - answerNet income values can
be represented as either a:
- Decrease in Revenues, or
- Increase in expenses
, Step one: Classifying Exposures: Liability Loss - answerThis exposure to loss can be
categorized into two areas:
- Identifying to whom a legal duty is owed, and
- Source of legal duty
Expenses which could result from a legal action
Step one: Classifying Exposures: Personnel Loss - answerTo measure this type of
exposure to loss you must:
- Place a value on the employee's service, and
- recognize the liability associated with providing employee benefits
Step one: Classifying Exposures: Peril Causing the Loss - answerNatural
Human
Economic
The financial consequences of the Loss - answerLoss frequency can range from almost
nil to definite
Loss severity can range from slight to severe
Loss frequency and loss severity are inversely related
Step one: Classifying Exposures: Tools to use to identify - answerStandardized surveys
Financial statements
Other records and documents
Flowcharts
Personal inspections
Consultation with experts
Step two: Examine Alternatives - answerTwo major alternatives are:
- Risk Control
- Risk Financing
Step two: Exposure Avoidance - answerThis is the most complete form of risk control. It
is accomplished by:
- Completely avoiding the exposure
- Eliminating the exposure
Unfortunately, eliminating one exposure usually creates another!
Step two: Loss Prevention - answerLoss prevention is designed to reduce the frequency
of losses
Almost every identified exposure can benefit from some of loss prevention
Unfortunately, no loss prevention technique is 100% effective
