INSR 310 ULL test 1 Questions With Complete Solutions
2 ways of diversification correct answers -separation-move
apart
-combination/pooling- bring together
3 types of control: correct answers -prevention- focus: loss
frequency (reduce loss)
-reduction- focus: loss severity
-diversification- focus: both frequency and severity
3 types of hazards and an example for both correct answers -
physical- ex. ice on roads
-moral- conscious desire or loss occurrence ex. swoop, squat
-Morale- subconscious/facilitation of loss ex. making it easy to
lose money like getting robbed by not locking doors
adverse selection correct answers tendency for people who need
insurance to get it/ people who don't need insurance don't buy it
-misclassification of a high risk as a low risk
alternative risk financing techniques are: correct answers -
captive
-risk retention group
-self EDs,RRGs, captives create problems and opportunities for
this industry
-Akerlof's lemons
arbitrage correct answers selling something at a larger price
than it is (large gains)
ex. buying gold in US for 1,300 and selling it in the UK for 2000
, basic tools of risk management correct answers -avoiding all
risks
-retain
-transfer
-control
-(hedging/arbitration)(not truly a marketing tool)
basis for growth of insurance: correct answers -private vs public
government property
-industrialized society
-well organized legal system
-ethical environment
-relatively stable economy
common risk classifications correct answers life health vs
property liabilities, personal vs commercial lines, private vs
public, voluntary vs involuntary, admitted markets vs excess
surplus lines
cost of the insurance mechanism check phone correct answers
check phone
dynamic risk correct answers change- especially Tech
elements of insurable risk (from insured point of view) correct
answers -"large loss" principle (worry about large loss not
small)
-cost of insurance transfer must be reasonable ex. death
insurance is bought more than disability insurance because it's
cheaper
2 ways of diversification correct answers -separation-move
apart
-combination/pooling- bring together
3 types of control: correct answers -prevention- focus: loss
frequency (reduce loss)
-reduction- focus: loss severity
-diversification- focus: both frequency and severity
3 types of hazards and an example for both correct answers -
physical- ex. ice on roads
-moral- conscious desire or loss occurrence ex. swoop, squat
-Morale- subconscious/facilitation of loss ex. making it easy to
lose money like getting robbed by not locking doors
adverse selection correct answers tendency for people who need
insurance to get it/ people who don't need insurance don't buy it
-misclassification of a high risk as a low risk
alternative risk financing techniques are: correct answers -
captive
-risk retention group
-self EDs,RRGs, captives create problems and opportunities for
this industry
-Akerlof's lemons
arbitrage correct answers selling something at a larger price
than it is (large gains)
ex. buying gold in US for 1,300 and selling it in the UK for 2000
, basic tools of risk management correct answers -avoiding all
risks
-retain
-transfer
-control
-(hedging/arbitration)(not truly a marketing tool)
basis for growth of insurance: correct answers -private vs public
government property
-industrialized society
-well organized legal system
-ethical environment
-relatively stable economy
common risk classifications correct answers life health vs
property liabilities, personal vs commercial lines, private vs
public, voluntary vs involuntary, admitted markets vs excess
surplus lines
cost of the insurance mechanism check phone correct answers
check phone
dynamic risk correct answers change- especially Tech
elements of insurable risk (from insured point of view) correct
answers -"large loss" principle (worry about large loss not
small)
-cost of insurance transfer must be reasonable ex. death
insurance is bought more than disability insurance because it's
cheaper
