Risk Management Exam 1 || Questions & Answers (100% Expert Verified)

Risk Management Exam 1 || Questions & Answers (100% Expert Verified) Risk Management Exam 1 || Questions & Answers (100% Expert Verified) X company insures 200,00 vehicles and 100,00 houses. IN 2019, they paid a total of $136,000 in collision losses to the owners of 16,000 vehicles. What was X's collision loss FREQUENCY in 2019? - ANSWER - 0.08 Frequency = Total number of losses / total number of exposures 16,000 / 200,000 = 0.08 X company insures 200,00 vehicles and 100,00 houses. IN 2019, they paid a total of $136,000 in collision losses to the owners of 16,000 vehicles. What was X's collision loss SEVERITY in 2019? - ANSWER - $8500 Severity = Total loss amount (in $$) / Total number of losses $136,000 / 16,000 = $8500 California, Colorado, and Oregon are a few of the states in which marijuana can be purchased through licensed dispensaries. This is likely to lead a higher frequency of certain types of insurance claims in those states. Which type of hazard does this represent? - ANSWER - Legal Hazard Illegal in most states Michael Scott owns a condominium in Scranton, PA. A fire breaks out when his girlfriend, Jan, is dancing and knocks over a candle. The fire damages the condo and Michael's most prized possession - his plasma TV. The damage to Michael's plasma TV is considered a(n): - ANSWER - Direct loss - TV was directly lost in fire What is the most important step in the risk management process? - ANSWER - Step 1 - Identify loss exposures I have a high deductible ($2,200) in my health insurance plan. The high deductible is an example of which type of risk management technique? - ANSWER - Retention - firm retains part of all loses that can result from a given risk Insurance is the most appropriate risk management technique for which of the following types of loss exposures? - ANSWER - Low frequency, high severity Professor Brown discussed the early history of Blue Ribbon Sports (Nike) as an example of: - ANSWER - Diversification - Spreading loss exposure over multiple parties