Risk Management and
Insurance (Exam 1)
questions with
complete solutions
How is Risk Measured - answer Objectively. Subjectively.
Chance of Loss - answer Probability that an event will occur.
Probability - answer Objective. Subjective.
Objective Probability - answer Long-run relative frequency of an
event based on the assumption of an infinite number of
observations and of no change in the underlying conditions.
Subjective Probability - answer Individual's personal estimate of the
chance of loss.
Chance of Loss Distinguished from Risk - answer Probability that an
event will occur versus relative variation of actual loss from
expected loss.
Peril - answer Cause of loss.
Physical Hazards - answer Physical conditions that create or
increase the chance of loss.
, Moral - answer Characteristics of a person that increase the chance
of loss - arson, fraud.
Morale - answer Careless attitude because of the presence of
insurance that leads to an increase in the chance of loss.
Legal Hazards - answer Legal system or regulatory environment that
increase the frequency or severity of losses.
Ways to Control Hazards - answer Underwriting. Contract Provisions.
Deductibles.
Pure Risk - answer Chance of loss, or no loss. (Insurable).
Speculative Risk - answer Chance of loss, no loss, or gain (Non
Insurable).
Particular/Diverifiable - answer Affect the individual business.
Fundamental/Non Diversifiable - answer Affect the large group.
Enterprise Risk - answer Encompasses all major risk faced by a
business form, such as Pure, Speculative, Strategic, Operational,
and Financial.
Personal Risk - answer Loss of income, premature death, insufficient
income during retirement, poor health, disability, unemployment.
Commercial Risk - answer Property, includes home, auto, boat,
belongings.
Insurance (Exam 1)
questions with
complete solutions
How is Risk Measured - answer Objectively. Subjectively.
Chance of Loss - answer Probability that an event will occur.
Probability - answer Objective. Subjective.
Objective Probability - answer Long-run relative frequency of an
event based on the assumption of an infinite number of
observations and of no change in the underlying conditions.
Subjective Probability - answer Individual's personal estimate of the
chance of loss.
Chance of Loss Distinguished from Risk - answer Probability that an
event will occur versus relative variation of actual loss from
expected loss.
Peril - answer Cause of loss.
Physical Hazards - answer Physical conditions that create or
increase the chance of loss.
, Moral - answer Characteristics of a person that increase the chance
of loss - arson, fraud.
Morale - answer Careless attitude because of the presence of
insurance that leads to an increase in the chance of loss.
Legal Hazards - answer Legal system or regulatory environment that
increase the frequency or severity of losses.
Ways to Control Hazards - answer Underwriting. Contract Provisions.
Deductibles.
Pure Risk - answer Chance of loss, or no loss. (Insurable).
Speculative Risk - answer Chance of loss, no loss, or gain (Non
Insurable).
Particular/Diverifiable - answer Affect the individual business.
Fundamental/Non Diversifiable - answer Affect the large group.
Enterprise Risk - answer Encompasses all major risk faced by a
business form, such as Pure, Speculative, Strategic, Operational,
and Financial.
Personal Risk - answer Loss of income, premature death, insufficient
income during retirement, poor health, disability, unemployment.
Commercial Risk - answer Property, includes home, auto, boat,
belongings.
