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UGA RMIN 4000 - Brown Test 1 (2023)
Questions and Correct Answers
exposures Ans: things of value (assets) that could be lost
ex: Car, health/life, your money
perils Ans: things that could happen to these assets/exposures
ex: Car accident, license revoked, breakdown
risk management Ans: what do you do to protect these assets
and/or prevent/reduce losses?
ex:drive safely, insurance, car alarm
what is risk Ans: a calculated possibility of a negative outcome
Calculated possibility Ans: A probabilistic outcome (chance of
loss, likelihood of loss) that is known or estimated
Ranges from 0 to 1 (0% to 100%)
Negative outcome Ans: Loss
Must be quantifiable ($)
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Not quantifiable exs: pain and suffering, loss of sentimental
objects
Frequency Ans: How often does a loss occur?
The number of losses (such as fire, theft, collision) that occur
within a specified time period
Ex: probability of a fire is 0.0071 per loss exposure per year
Severity Ans: How much does it cost when a loss does occur?
The dollar amount of loss for a specific peril (fire, theft, collision)
Ex: average fire loss is $32, 547
Expected loss equation Ans: frequency x severity
Frequency equation Ans: number of losses/number of exposures
severity equation Ans: total losses ($) / number of losses
Lannister Insurance Company insures 100,000 homes. In 2021,
they paid a 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 2021 Ans: 5,000 /
100,000 = 0.05 (5%)
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, 3 | Page
Lannister Insurance Company insures 100,000 homes. In 2021,
they paid a 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 2021? Ans:
$30,000,,000 = $6,000
Peril Ans: Cause of loss
Ex: fire, tornado, collision, burglary, etc.
Hazard Ans: Condition that creates or increases the frequency
and/or severity of a loss
Does not cause a loss
Four types: physical, moral, morale (attitudinal), legal
Physical Hazard Ans: A physical condition that increases the
frequency and/or severity of a loss
Moral hazard Ans: the presence of insurance changes the
behavior of the insured
ex: At the doctor with insurance vs without insurance
Using a hammer to create "hail" damage to a roof
© 2025 All rights reserved
UGA RMIN 4000 - Brown Test 1 (2023)
Questions and Correct Answers
exposures Ans: things of value (assets) that could be lost
ex: Car, health/life, your money
perils Ans: things that could happen to these assets/exposures
ex: Car accident, license revoked, breakdown
risk management Ans: what do you do to protect these assets
and/or prevent/reduce losses?
ex:drive safely, insurance, car alarm
what is risk Ans: a calculated possibility of a negative outcome
Calculated possibility Ans: A probabilistic outcome (chance of
loss, likelihood of loss) that is known or estimated
Ranges from 0 to 1 (0% to 100%)
Negative outcome Ans: Loss
Must be quantifiable ($)
© 2025 All rights reserved
, 2 | Page
Not quantifiable exs: pain and suffering, loss of sentimental
objects
Frequency Ans: How often does a loss occur?
The number of losses (such as fire, theft, collision) that occur
within a specified time period
Ex: probability of a fire is 0.0071 per loss exposure per year
Severity Ans: How much does it cost when a loss does occur?
The dollar amount of loss for a specific peril (fire, theft, collision)
Ex: average fire loss is $32, 547
Expected loss equation Ans: frequency x severity
Frequency equation Ans: number of losses/number of exposures
severity equation Ans: total losses ($) / number of losses
Lannister Insurance Company insures 100,000 homes. In 2021,
they paid a 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 2021 Ans: 5,000 /
100,000 = 0.05 (5%)
© 2025 All rights reserved
, 3 | Page
Lannister Insurance Company insures 100,000 homes. In 2021,
they paid a 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 2021? Ans:
$30,000,,000 = $6,000
Peril Ans: Cause of loss
Ex: fire, tornado, collision, burglary, etc.
Hazard Ans: Condition that creates or increases the frequency
and/or severity of a loss
Does not cause a loss
Four types: physical, moral, morale (attitudinal), legal
Physical Hazard Ans: A physical condition that increases the
frequency and/or severity of a loss
Moral hazard Ans: the presence of insurance changes the
behavior of the insured
ex: At the doctor with insurance vs without insurance
Using a hammer to create "hail" damage to a roof
© 2025 All rights reserved
