CAIB 3 - CHAPTER 6 - RISK MANAGEMENT QUESTIONS WITH COMPLETE SOLUTIONS

CAIB 3 - CHAPTER 6 - RISK
MANAGEMENT

Describe four advantages brokers realize when using risk management in their sales
process - answeri) Clients who are more knowledgeable about their insurance

ii) Clients will be more likely to renew coverages

iii) Clients will be more likely to refer others to brokerage

iv) Clients will be more satisfied with claims process

Describe the process of

i) Identification of loss exposures

ii) Analysis of loss exposures - answeri) This process recognizes losses that may occur

ii) This process estimates impact losses may have

What are the three criteria used when classifying loss exposures? - answeri) Identifying
type of value exposed to losses

ii) Identifying perils causing losses

iii) Identifying financial impact of losses

What are four values exposed to loss? - answeri) Property Values
ii) Net Income Values
iii) Liability Loss
iv) Personnel Loss

What are two types of property values exposes to loss? - answeri) Tangible Property

ii) Intangible Property

Debris Removal - answerExpenses incurred removing debris after losses

Demolition Expense - answerExpenses incurred demolishing undamaged portion of
buildings after losses

, Undamaged property - answerLoss in value of property occurring after losses to related
structures

Increased cost of construction - answerExpenses incurred bringing buildings up to code
while repairing damage after loss

Pair or set value - answerDecrease in value of remaining item in a pair or set after loss
to other portion of pair or set

Going concern value - answerDifference in value of property that must be sold after
losses and value of operating business

What are four intangible properties exposes to loss? - answeri) Securities

ii) Trademarks

iii) Right to collect accounts

iv) Copyrights

What are two factors that impact on net income? - answeri) Decrease in revenues

ii) Increase in expenses

State five loss exposures that will result in decreases in revenues - answeri) Business
interruption

ii) Contingent business interruption

iii) Loss of profits on finished goods

iv) Reduced rental income

v) Decreased collection of accounts receivable

State three loss exposures that will result in increase in expenses - answeri) Increase in
A/R

ii) Increased in rental expenses

iii) Expediting expenses

When assessing liability loss exposures, what are two factors to consider? - answeri)
Entity to whom duty is owed

ii) Source of legal duty