RMIN 4000- Exam 1|192 Questions and
Answers|100% Accurate
Exposures - -things of value (assets) that could be lost
- Car
health
life
money
future income
contents (stuff)
freedom
license - -Examples of exposures when driving car:
- Perils - -things that could happen to these assets
- Car accident
license revoked
act of god
breakdown
vandalism
maintenance
theft
lawsuit - -Examples of perils when driving car:
- risk management - -what you do to protect these assets and/ or prevent/
reduce losses
- Drive safely
insurance
car alarm
lock vehicle
driver's education
obey laws
wear seatbelt
park in safe areas - -Examples of risk management when driving car: (8)
- risk - -uncertainty concerning the occurrence of a loss (textbook definition)
- risk - -a calculated possibility of a negative outcome
- Calculated possibility - -probabilistic outcome (chance of loss, likelihood of
loss) that is known or estimated
- ranges from 0 to 1
, - Negative Outcome - -- Loss
- Must be quantifiable ($)
- Frequency - -The number of losses (such as fire, theft, collision) that occur
within a specified time period
- How often does a loss occur?
- Probability of a loss
- Severity - -The dollar amount of loss for a specific peril
- How much does it cost when a loss does occur?
- 5,000/100,000= .05 (5%) - -Lannister Insurance Company insures 100,000
homes. In 2018, they paid at total of $30,000,000 in wind damage losses to
the owners of 5,000 of those homes.
What was Lannister's wind loss frequency in 2018?
- Lannister Insurance Company insures 100,000 homes. In 2018, they paid
at total of $30,000,000 in wind damage losses to the owners of 5,000 of
those homes.
What was Lannister's average wind loss severity in 2018? - -
30,000,000/5,000= 6,000
- Peril - -cause of loss
- fire, tornado, collision, burglary, etc. - -Examples of perils
- Hazard - -condition that creates or increases the frequency and/ or
severity of a loss
- physical hazard
moral hazard
morale (attitudinal) hazard
legal hazard - -Four types of hazards:
- Physical Hazard - -physical condition that increases the frequency and/ or
severity of loss
- exposed power lines, corroded pipes, overcrowded electrical sockets - -
Examples of physical hazard
, - Moral Hazard - -The presence of insurance changes the behavior of the
insured.
Dishonesty or character defects in an individual that increase the frequency
and/or severity of a loss (textbook definition)
- using a hammer to create "hail" damage to a roof, exaggerating the value
of insured property - -Examples of moral hazard
- Morale (attitudinal) hazard - -carelessness or indifference to a loss, which
increases the frequency and/or severity of a loss
- leaving car keys in unlocked car, neglecting a tree limb growing over your
roof - -Examples of morale hazard
- Legal hazard - -characteristics of legal system or regulatory environment
that increase the frequency and/or severity of a loss
- 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 paid on property losses
(meaning increased severity in Georgia) - -Examples of legal hazard
- speculative - -Pure risk vs. ____________ risk
- loss or no loss - -Pure risks has two future states. What are they?
- Pure risk - -is a category of hazard in which the outcomes are a loss or no
loss, and there is no opportunity for gain
- fire, cancer, dog biting visitor - -Examples of pure risks
- Loss
No loss/ No gain
Gain - -Speculative risks has three future states. What are they?
- Investment, gambling, drinking - -Examples of speculative risks
- Speculative risk - -Uncertainty about an event under consideration that
could produce either a profit or a loss
- YES - -Can you buy insurance for a pure risks?
- NO - -Can you buy insurance for a speculative risks?
Answers|100% Accurate
Exposures - -things of value (assets) that could be lost
- Car
health
life
money
future income
contents (stuff)
freedom
license - -Examples of exposures when driving car:
- Perils - -things that could happen to these assets
- Car accident
license revoked
act of god
breakdown
vandalism
maintenance
theft
lawsuit - -Examples of perils when driving car:
- risk management - -what you do to protect these assets and/ or prevent/
reduce losses
- Drive safely
insurance
car alarm
lock vehicle
driver's education
obey laws
wear seatbelt
park in safe areas - -Examples of risk management when driving car: (8)
- risk - -uncertainty concerning the occurrence of a loss (textbook definition)
- risk - -a calculated possibility of a negative outcome
- Calculated possibility - -probabilistic outcome (chance of loss, likelihood of
loss) that is known or estimated
- ranges from 0 to 1
, - Negative Outcome - -- Loss
- Must be quantifiable ($)
- Frequency - -The number of losses (such as fire, theft, collision) that occur
within a specified time period
- How often does a loss occur?
- Probability of a loss
- Severity - -The dollar amount of loss for a specific peril
- How much does it cost when a loss does occur?
- 5,000/100,000= .05 (5%) - -Lannister Insurance Company insures 100,000
homes. In 2018, they paid at total of $30,000,000 in wind damage losses to
the owners of 5,000 of those homes.
What was Lannister's wind loss frequency in 2018?
- Lannister Insurance Company insures 100,000 homes. In 2018, they paid
at total of $30,000,000 in wind damage losses to the owners of 5,000 of
those homes.
What was Lannister's average wind loss severity in 2018? - -
30,000,000/5,000= 6,000
- Peril - -cause of loss
- fire, tornado, collision, burglary, etc. - -Examples of perils
- Hazard - -condition that creates or increases the frequency and/ or
severity of a loss
- physical hazard
moral hazard
morale (attitudinal) hazard
legal hazard - -Four types of hazards:
- Physical Hazard - -physical condition that increases the frequency and/ or
severity of loss
- exposed power lines, corroded pipes, overcrowded electrical sockets - -
Examples of physical hazard
, - Moral Hazard - -The presence of insurance changes the behavior of the
insured.
Dishonesty or character defects in an individual that increase the frequency
and/or severity of a loss (textbook definition)
- using a hammer to create "hail" damage to a roof, exaggerating the value
of insured property - -Examples of moral hazard
- Morale (attitudinal) hazard - -carelessness or indifference to a loss, which
increases the frequency and/or severity of a loss
- leaving car keys in unlocked car, neglecting a tree limb growing over your
roof - -Examples of morale hazard
- Legal hazard - -characteristics of legal system or regulatory environment
that increase the frequency and/or severity of a loss
- 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 paid on property losses
(meaning increased severity in Georgia) - -Examples of legal hazard
- speculative - -Pure risk vs. ____________ risk
- loss or no loss - -Pure risks has two future states. What are they?
- Pure risk - -is a category of hazard in which the outcomes are a loss or no
loss, and there is no opportunity for gain
- fire, cancer, dog biting visitor - -Examples of pure risks
- Loss
No loss/ No gain
Gain - -Speculative risks has three future states. What are they?
- Investment, gambling, drinking - -Examples of speculative risks
- Speculative risk - -Uncertainty about an event under consideration that
could produce either a profit or a loss
- YES - -Can you buy insurance for a pure risks?
- NO - -Can you buy insurance for a speculative risks?
