Risk Management & Insurance Final Exam
Loss Control
refers to efforts that reduce expected losses
Usually involve sometimes difficult trade-off decisions between the costs and benefits of loss
control efforts
Frequency
How many times something occurs
0:06
/
0:15
Brainpower
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Severity
Cost per event
Diversification through Segregation
reduces the variance of losses and reduces the probability of very high losses
When a company diversifies risk by segregating loss exposures into smaller exposure units,
they reduce the expected severity of losses but increase the expected frequency
Effects of Insurance on Loss Control
- Since insurance premiums are reduced in response to loss control efforts and the expected
impact to losses, insurance coverage does not reduce the incentive for loss control
- If this were not the case, it would create a moral hazard for companies would not have
incentive to reduce losses
PPE
Personal Protective Equipment (PPE) keeps workers safe from common types of injuries that
arise from the work
, Examples:
- Hard hats
- Safety goggles
- Special types of gloves
- Hearing protection
- Face masks
Ergonomics
is about designing a work environment that allows workers to work more safely and efficiently
Purpose of Claims Analytics
Accurately predict IBNR for the balance sheet and to improve outcomes in the future
Claims-handling outcomes
- Reserving practices
- Closing ratios
- Paid trends
- Litigation Avoidance
- Statutory/Adjudication changes
Safety and Loss Prevention
- Frequency of claims/preventing claims
- Severity of claims
- Timely reporting
- Litigation avoidance
The Risk Management Process
- Identify Significant Risk
- Evaluate Potential Frequency and Severity
- Develop Mitigation Plans
- Implement Chosen Methods
Measure Effectiveness & Adjust
Enterprise Risk
the threat of something happening that will impact an organization's ability to achieve its
objectives
Loss Control
refers to efforts that reduce expected losses
Usually involve sometimes difficult trade-off decisions between the costs and benefits of loss
control efforts
Frequency
How many times something occurs
0:06
/
0:15
Brainpower
Read More
Severity
Cost per event
Diversification through Segregation
reduces the variance of losses and reduces the probability of very high losses
When a company diversifies risk by segregating loss exposures into smaller exposure units,
they reduce the expected severity of losses but increase the expected frequency
Effects of Insurance on Loss Control
- Since insurance premiums are reduced in response to loss control efforts and the expected
impact to losses, insurance coverage does not reduce the incentive for loss control
- If this were not the case, it would create a moral hazard for companies would not have
incentive to reduce losses
PPE
Personal Protective Equipment (PPE) keeps workers safe from common types of injuries that
arise from the work
, Examples:
- Hard hats
- Safety goggles
- Special types of gloves
- Hearing protection
- Face masks
Ergonomics
is about designing a work environment that allows workers to work more safely and efficiently
Purpose of Claims Analytics
Accurately predict IBNR for the balance sheet and to improve outcomes in the future
Claims-handling outcomes
- Reserving practices
- Closing ratios
- Paid trends
- Litigation Avoidance
- Statutory/Adjudication changes
Safety and Loss Prevention
- Frequency of claims/preventing claims
- Severity of claims
- Timely reporting
- Litigation avoidance
The Risk Management Process
- Identify Significant Risk
- Evaluate Potential Frequency and Severity
- Develop Mitigation Plans
- Implement Chosen Methods
Measure Effectiveness & Adjust
Enterprise Risk
the threat of something happening that will impact an organization's ability to achieve its
objectives
