RMIN 4000 uga test 1 Questions And Answers With Verified Solutions Graded A+

4 types of hazards - Answer-1) physical hazard 2) moral hazard 3) attitudinal hazard 4) legal hazard 6 characteristics of an insurable risk - Answer-1) there must be a large number of exposure units 2) the loss must be accidental and unintentional 3) the loss must be determinable and measurable 4) the loss should not be catastrophic 5) the chance of loss must be calculable 6) the premium must be economically feasible active retention - Answer-active risk retention means that an individual is consciously aware of the risk and deliberately plans to retain all or part of it. example: motorist may wish to retain the risk of a small collision loss by purchasing an auto insurance policy $500 or higher deductible actuary - Answer-rates and premiums are determined by this using company past loss experience and industry statistics adverse selection - Answer-the tendency of persons with a higher than average chance of loss to seek insurance at standard rates, which, if not controlled by underwriting results in higher than expected loss levels example: high risk drivers who purchase insurance at standard rates attitudinal hazard - Answer-carelessness or indifference to a loss, which increases the frequency or severity of a lossexample: leaving car keys in an unlocked car, which increases the chance of theft, changing lanes on highway without blinker avoidance - Answer-example: avoid the risk of being mugged in a high crime area by staying away from high crime rate areas benefits of insurance to society - Answer--indemnification for loss -reduction of worry and fear -source of investment funds -loss prevention -enhancement of credit captive insurer - Answer-insurer owned by a parent firm for the purpose of insuring the parent firm's loss exposures -single parent captive -association or group captive is owned by several parents ceding company - Answer-primary insurer cession - Answer-amount of insurance ceded to the reinsurer chance of loss - Answer-the probability that an event will occur commercial risks - Answer--property risk -liability risk -loss of business income -cybersecurity and identity theft -human resource exposures-foreign loss -intangible -government exposures deductible - Answer-specified amount subtracted from the loss payment otherwise payable to the insured direct loss - Answer-financial loss that results from the physical damage, destruction, or theft of property example: physical damage to home after fire diversifiable risk - Answer-a risk that affects only individuals or small groups and not the entire economy example: only individuals and business firms that experience such losses are affected, not the entire economy diversification - Answer-reduced the chance of loss by spreading the loss exposure across different parties. example: foreign customers and domestic customers duplication - Answer-having back ups or copies of important documents enterprise risk - Answer-a term that encompasses all major risks faced by a business firm. such risks include pure risk, speculative risk, strategic risk, operational risk, and financial risk enterprise risk management - Answer-combines into a single unified treatment program all major risks faced by the firm -by doing so it can offset one risk against another excess insurance policy - Answer--the insurer pays only if the actual loss exceeds the amount a firm has decided to retainexposure unit - Answer-unit of measurement used in insurance pricing