RMIN 4000 Brown Exam Questions and
Answers Graded A+
What is Risk? - Correct answer-A calculated possibility of a negative outcome.
Frequency - Correct answer-How often does a loss occur?
The number of losses that occur within a specified time period.
Probability of a loss.
Severity - Correct answer-How much does it cost when a loss does occur?
The dollar amount of loss for a specific peril. (fire, theft, collision)
frequency equation - Correct answer-Number of losses/Number of exposures
Severity Equation - Correct answer-Total losses ($) / Number of losses
Peril - Correct answer-cause of a loss
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,Ex. Fire, tornado, collision, burglary.
Hazard - Correct answer-Condition thaat creates or increases the frequency and/or
severity of a loss.
Does not cause a loss.
Four types of Hazard: Physical, Moral, Morale (Attitudinal), Legal.
Physical Hazard - Correct answer-A physcial condition that increases the frequency
and/or severity.
Ex. Old/rusty water pipes. Too many cords plugged into a wall.
Moral Hazard - Correct answer-The Presence of insurance changes the behavior of
the insured.
Ex. Using a hammer to create "hail" damage to a roof.
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, Exaggerating the value of insured property.
Morale Hazard (Attitudinal) - Correct answer-Carelessness or indifference to a
loss, which increases the frequency and/or severity of a loss.
Ex. Leaving car keys in an unlocked car.
Neglecting a tree limb growing over your roof.
Legal Hazard - Correct answer-Characteristics of legal system or regualtory
environment that increase the frequency and/or severity of a loss.
Ex. Juries in some areas are more sympathetic than other areas (meaning larger
damage awards in liability lawsuits.)
Georgia now requires Diminution in Value to be on property losses.
Types of Risk - Correct answer-Pure risk
Speculative Risk
Diversifiable Risk
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Answers Graded A+
What is Risk? - Correct answer-A calculated possibility of a negative outcome.
Frequency - Correct answer-How often does a loss occur?
The number of losses that occur within a specified time period.
Probability of a loss.
Severity - Correct answer-How much does it cost when a loss does occur?
The dollar amount of loss for a specific peril. (fire, theft, collision)
frequency equation - Correct answer-Number of losses/Number of exposures
Severity Equation - Correct answer-Total losses ($) / Number of losses
Peril - Correct answer-cause of a loss
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,Ex. Fire, tornado, collision, burglary.
Hazard - Correct answer-Condition thaat creates or increases the frequency and/or
severity of a loss.
Does not cause a loss.
Four types of Hazard: Physical, Moral, Morale (Attitudinal), Legal.
Physical Hazard - Correct answer-A physcial condition that increases the frequency
and/or severity.
Ex. Old/rusty water pipes. Too many cords plugged into a wall.
Moral Hazard - Correct answer-The Presence of insurance changes the behavior of
the insured.
Ex. Using a hammer to create "hail" damage to a roof.
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, Exaggerating the value of insured property.
Morale Hazard (Attitudinal) - Correct answer-Carelessness or indifference to a
loss, which increases the frequency and/or severity of a loss.
Ex. Leaving car keys in an unlocked car.
Neglecting a tree limb growing over your roof.
Legal Hazard - Correct answer-Characteristics of legal system or regualtory
environment that increase the frequency and/or severity of a loss.
Ex. Juries in some areas are more sympathetic than other areas (meaning larger
damage awards in liability lawsuits.)
Georgia now requires Diminution in Value to be on property losses.
Types of Risk - Correct answer-Pure risk
Speculative Risk
Diversifiable Risk
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