RMI 2101 COMPREHENSIVE 2026 EXAM QUESTIONS
AND ANSWERS RATED A+
✔✔Moral Hazard - ✔✔an individual's behavior changes because they know they have
insurance
-frequency or severity increase bc of existence
Includes: Presence of insurance & change of behavior
-costs you!!!! you pay more for insurance and taxes
✔✔Moral Hazard Examples - ✔✔Insurance Fraud
Arson
Life Insurance
Health Insurance?: we behave differently when things are free
lower price=greater demand, nothing morally wrong
✔✔Morale Hazard - ✔✔carelessness concerning a loss; NOTHING to do with
consciousness of insurance
ex. texting while driving
-still makes severity/frequency more likely
✔✔Financial Consequences of Risk:
1) Expected Cost of a Loss
2)Cost to Manage Risk Mgmt Expenditures
3)Residual Uncertainty - ✔✔1)things that could happen that could cost us
financial losses- lawsuits, legal fees
goodwill losses- loss of reputation
2)insurance, security, training, prevention programs
3)how society losses ex. spring fling canceled
✔✔Risk Management Decision Making Process - ✔✔goal is to manage pure and
speculative risks and minimize financial impact on an organization
Finance Dept:small
Risk Mgmt Dep: med
CRO: large
-continuously evolving
✔✔Steps in Risk Management Process:
1) Identify Exposures of Loss
2)Evaluate Exposures to loss
3) Identify possible alternatives
4)Select among alternatives
5)Implementation of the chosen option
6) Re-evaluate chosen strategies periodically - ✔✔
, ✔✔1)Identify Exposures of loss - ✔✔Loss exposure- probability of a financial loss that a
entity faces as a result of peril
*shit happens*
MOST CRUCIAL STEP IN PROCESS
must identify exposures or else!
✔✔How to identify exposures:
1. Inspections of plant facility - ✔✔a physical inspection
✔✔How to identify exposures:
2. Contract Analysis - ✔✔-leases
Hold harmless Agreements: you agree to accept liability for someone else's actions
contractually
ex. bouncy house at frat
✔✔How to identify exposures:
3. Look at past information - ✔✔is affective for static risk, not dynamic
May happen again in future
✔✔How to identify exposures:
4. Share loss info w/ similar firms through trade association - ✔✔benchmarking-
compares you to other companies
✔✔How to identify exposures:
5. Checklists/Standardized Surveys from insurance companies - ✔✔ex. shovel snow,
clear gutters
gives you ideas of possible risks
✔✔How to identify exposures:
6. Flow Chart approach - ✔✔maps out what happens if...?
-can highlight vulnerbilities
✔✔How to identify exposures:
7. Ask employees/managers in firm - ✔✔may recognize things you don't notice
✔✔How to identify exposures:
8. Financial Statements Approach - ✔✔see where your money comes from, who owes
what, liabilities
✔✔Types of Loss Exposures:
1) Property Loss Exposure
2)Net Income Loss Exposure
AND ANSWERS RATED A+
✔✔Moral Hazard - ✔✔an individual's behavior changes because they know they have
insurance
-frequency or severity increase bc of existence
Includes: Presence of insurance & change of behavior
-costs you!!!! you pay more for insurance and taxes
✔✔Moral Hazard Examples - ✔✔Insurance Fraud
Arson
Life Insurance
Health Insurance?: we behave differently when things are free
lower price=greater demand, nothing morally wrong
✔✔Morale Hazard - ✔✔carelessness concerning a loss; NOTHING to do with
consciousness of insurance
ex. texting while driving
-still makes severity/frequency more likely
✔✔Financial Consequences of Risk:
1) Expected Cost of a Loss
2)Cost to Manage Risk Mgmt Expenditures
3)Residual Uncertainty - ✔✔1)things that could happen that could cost us
financial losses- lawsuits, legal fees
goodwill losses- loss of reputation
2)insurance, security, training, prevention programs
3)how society losses ex. spring fling canceled
✔✔Risk Management Decision Making Process - ✔✔goal is to manage pure and
speculative risks and minimize financial impact on an organization
Finance Dept:small
Risk Mgmt Dep: med
CRO: large
-continuously evolving
✔✔Steps in Risk Management Process:
1) Identify Exposures of Loss
2)Evaluate Exposures to loss
3) Identify possible alternatives
4)Select among alternatives
5)Implementation of the chosen option
6) Re-evaluate chosen strategies periodically - ✔✔
, ✔✔1)Identify Exposures of loss - ✔✔Loss exposure- probability of a financial loss that a
entity faces as a result of peril
*shit happens*
MOST CRUCIAL STEP IN PROCESS
must identify exposures or else!
✔✔How to identify exposures:
1. Inspections of plant facility - ✔✔a physical inspection
✔✔How to identify exposures:
2. Contract Analysis - ✔✔-leases
Hold harmless Agreements: you agree to accept liability for someone else's actions
contractually
ex. bouncy house at frat
✔✔How to identify exposures:
3. Look at past information - ✔✔is affective for static risk, not dynamic
May happen again in future
✔✔How to identify exposures:
4. Share loss info w/ similar firms through trade association - ✔✔benchmarking-
compares you to other companies
✔✔How to identify exposures:
5. Checklists/Standardized Surveys from insurance companies - ✔✔ex. shovel snow,
clear gutters
gives you ideas of possible risks
✔✔How to identify exposures:
6. Flow Chart approach - ✔✔maps out what happens if...?
-can highlight vulnerbilities
✔✔How to identify exposures:
7. Ask employees/managers in firm - ✔✔may recognize things you don't notice
✔✔How to identify exposures:
8. Financial Statements Approach - ✔✔see where your money comes from, who owes
what, liabilities
✔✔Types of Loss Exposures:
1) Property Loss Exposure
2)Net Income Loss Exposure
