Principles of Risk Management and Insurance 14th
Edition By George Rejda, Michael McNamara |
100% Verified |Already Graded A+
Which of the following statements about a priori probabilities is correct?
a) They are subjective to probabilities based on ambiguity in the way probability is
perceived
b) They are subjective probabilities that may vary among individuals because of factors
such as age, gender, education, and the use of alcohol
c) They are objective probabilities that can be determined by deductive reasoning
d) They are objective probabilities that can be determined by subjective reasoning
c) They are objective probabilities that can be determined by deductive reasoning
Faking an accident to collect insurance proceeds is an example of ____
a) physical hazard
b) objective risk
c) attitudinal hazard
d) moral hazard
d) moral hazard
A name that encompasses all of the major risks faced by a business firm is
a) enterprise risk
b) financial risk
c) speculative risk
d) pure risk
a) enterprise risk
The premature death of an individual is an example of a
a) pure risk
b) speculative risk
,c) non-diversifiable risk
d) physical hazard
a) pure risk
All of the following statements about risk retention are true EXCEPT:
a) it may be used intentionally if commercial insurance is unavailable
b) it may be used passively because of ignorance
c) its use is most appropriate for low-frequency, high-severity types of risks
d) its use results in cost savings if losses are less than the cost of insurance
c) Its use is most appropriate for low-frequency, high-severity types of risks
Which of the following is a basic characteristic of insurance?
a) pooling of losses
b) avoidance of risk
c) payment of intentional losses
d) certainty about specific losses that will occur
a) pooling of losses
Which of the following is implied by the pooling of losses?
a) sharing of losses by an entire group
b) inability to predict losses with any degree of accuracy
c) substitution of actual loss for average loss
d) increase of objective risk
a) sharing of losses by an entire group
From the viewpoint of the insurer, all of the following are characteristics of an ideally
insurable risk EXCEPT
a) The loss must be accidental
b) The loss should be catastrophic
c) The premium must be economically feasible
d) There must be a large number of exposure units
b) The loss should be catastrophic
, The tendency for unhealthy people to seek life or health insurance at standard rates is an
example of:
a) moral hazard
b) fundamental risk
c) attitudinal hazard
d) adverse selection
d) adverse selection
According to the law of large numbers, what should happen as an insurance company
increases the number of loss exposures that it insures?
a) Fewer losses should be expected to occur
b) The amount of premiums needed to cover losses should decrease
c) The volatility of the insurance company's underwriting results should increase
d) The difference between actual and expected results should decrease
d) The difference between actual and expected results should decrease
Insurance companies collect premiums in advance. Since the premiums collected are not
needed to pay losses and expenses immediately, the funds can be loaned to business
firms. Because of this fact, insurance benefits society by:
a) enhancing credit
b) providing a source of investment funds
c) indemnifying losses
d) providing an incentive for loss prevention
b) providing a source of investment funds
Which of following statements regarding insurance and gambling is (are) true?
I. Insurance is used to handle existing pure risks, while gambling creates a new speculative
risk
II. Insurance usually involves risk avoidance, while gambling typically involves only risk
reduction
a) I only
b) II only
Edition By George Rejda, Michael McNamara |
100% Verified |Already Graded A+
Which of the following statements about a priori probabilities is correct?
a) They are subjective to probabilities based on ambiguity in the way probability is
perceived
b) They are subjective probabilities that may vary among individuals because of factors
such as age, gender, education, and the use of alcohol
c) They are objective probabilities that can be determined by deductive reasoning
d) They are objective probabilities that can be determined by subjective reasoning
c) They are objective probabilities that can be determined by deductive reasoning
Faking an accident to collect insurance proceeds is an example of ____
a) physical hazard
b) objective risk
c) attitudinal hazard
d) moral hazard
d) moral hazard
A name that encompasses all of the major risks faced by a business firm is
a) enterprise risk
b) financial risk
c) speculative risk
d) pure risk
a) enterprise risk
The premature death of an individual is an example of a
a) pure risk
b) speculative risk
,c) non-diversifiable risk
d) physical hazard
a) pure risk
All of the following statements about risk retention are true EXCEPT:
a) it may be used intentionally if commercial insurance is unavailable
b) it may be used passively because of ignorance
c) its use is most appropriate for low-frequency, high-severity types of risks
d) its use results in cost savings if losses are less than the cost of insurance
c) Its use is most appropriate for low-frequency, high-severity types of risks
Which of the following is a basic characteristic of insurance?
a) pooling of losses
b) avoidance of risk
c) payment of intentional losses
d) certainty about specific losses that will occur
a) pooling of losses
Which of the following is implied by the pooling of losses?
a) sharing of losses by an entire group
b) inability to predict losses with any degree of accuracy
c) substitution of actual loss for average loss
d) increase of objective risk
a) sharing of losses by an entire group
From the viewpoint of the insurer, all of the following are characteristics of an ideally
insurable risk EXCEPT
a) The loss must be accidental
b) The loss should be catastrophic
c) The premium must be economically feasible
d) There must be a large number of exposure units
b) The loss should be catastrophic
, The tendency for unhealthy people to seek life or health insurance at standard rates is an
example of:
a) moral hazard
b) fundamental risk
c) attitudinal hazard
d) adverse selection
d) adverse selection
According to the law of large numbers, what should happen as an insurance company
increases the number of loss exposures that it insures?
a) Fewer losses should be expected to occur
b) The amount of premiums needed to cover losses should decrease
c) The volatility of the insurance company's underwriting results should increase
d) The difference between actual and expected results should decrease
d) The difference between actual and expected results should decrease
Insurance companies collect premiums in advance. Since the premiums collected are not
needed to pay losses and expenses immediately, the funds can be loaned to business
firms. Because of this fact, insurance benefits society by:
a) enhancing credit
b) providing a source of investment funds
c) indemnifying losses
d) providing an incentive for loss prevention
b) providing a source of investment funds
Which of following statements regarding insurance and gambling is (are) true?
I. Insurance is used to handle existing pure risks, while gambling creates a new speculative
risk
II. Insurance usually involves risk avoidance, while gambling typically involves only risk
reduction
a) I only
b) II only
