RMIN4000 FINAL EXAM BROWN
Questions and Answers Graded A+
Lannister Insurance Company insures 200,000 vehicles. In 2019, they paid a total
of $136,000,000 in collision losses to the owners of 16,000 of those vehicles. What
was Lannister's collision loss frequency in 2019? - Correct answer-0.08 (16k/200k)
Lannister Insurance Company insures 200,000 vehicles. In 2019, they paid a total
of $136,000,000 in collision losses to the owners of 16,000 of those vehicles. What
was Lannister's collision loss severity in 2019? - Correct answer-8500 (136M/16K)
Michael Scott owns a condominium in Scranton, PA. A fire breaks out when his
girlfriend, Jan, is dancing and knocks over a candle. The fire damages the condo
and Michael's most prized possession - his plasma TV. The damage to Michael's
plasma TV is considered a(n): - Correct answer-direct loss
What is the most important step in the risk management process? - Correct answer-
Step 1: identify loss exposures
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,I have a high deductible ($2,200) in my health insurance plan. The high deductible
is an example of which type of risk management technique? - Correct answer-
retention
Insurance is the most appropriate risk management technique for which of the
following types of loss exposures? - Correct answer-high severity, low frequency
Review
The Very Good Building & Development Company is a general contractor
(builder). Due to difficulty finding affordable workers compensation insurance
(covering employee injuries), Very Good established its own insurance company
based in Vermont for the purpose of insuring Very Good's workers compensation
loss exposures. The company that Very Good formed is called a - Correct answer-
captive insurer
Jim Halpert and his wife, Pam, are selling the home they've lived in for the past
seven years. They are aware of an electrical problem in the home that they do not
want to fix because it would be expensive. Potential buyers of the home are
unaware of the electrical problem. This is an example of: - Correct answer-
Asymmetric Information
All of the following are examples of operational risks EXCEPT:
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,a) changing conditions in financial markets
b) employment practices
c) customer service
d) supply chain - Correct answer-A
Heisenberg Insurance has a home office in Albuquerque, New Mexico and they
specialize in insuring chemical manufacturers. Heisenberg is owned by its
policyholders and any annual profits are distributed through rate reductions. Which
type of insurer is Heisenberg? - Correct answer-mutual insurer
Reubens work in insurance sales. He sells insurance through several different
unrelated insurance carriers that he legally represents. What is Reuben's job? -
Correct answer-independent agent
Who handles the ratemaking function within insurance companies? - Correct
answer-Actuaries
Agent Michael Scarn sells insurance for the Federal Bureau of Insurance (FBI). He
is quoting a property insurance policy for Samuel Chang, the owner of an office
building. The office building is 15,000 square feet and FBI charges a gross rate of
$25 per 100 square feet. What is the gross premium for the property policy
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, covering the office building? - Correct answer-3750 (15K feet/ 100 feet = 150ft *
25$ = 3750$)
Antonio is employed by an insurance company. He reviews applications to
determine whether his company should insure the applicant. Antonio assigns the
applicant to a rating category based on the applicant's degree of risk. Antonio is
a(n): - Correct answer-underwriter
Walter White is the owner of A1A Car Wash. Jesse Pinkman is a regular A1A
customer. One day, while waiting for his car to be washed, Jesse slipped on a wet
spot on the floor and injured his back. As a result of his injury, he threatens to file
suit against Walt and A1A Car Wash. Walt quickly notifies his insurer to start the
claim process. This is an example of a: - Correct answer-third party claim
O'Houlihan Wrenches is a tool manufacturer. They have asked Average Joe
Insurance to insure their new $40 million manufacturing facility. Because of the
high amount of coverage needed, the Average Joe's underwriter has indicated that
they'll need to check with their reinsurer, Globo Re, to determine if they can obtain
a reinsurance policy to specifically cover the manufacturing facility. Which type of
reinsurance does Average Joe Insurance need for the manufacturing facility? -
Correct answer-Facultative
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Questions and Answers Graded A+
Lannister Insurance Company insures 200,000 vehicles. In 2019, they paid a total
of $136,000,000 in collision losses to the owners of 16,000 of those vehicles. What
was Lannister's collision loss frequency in 2019? - Correct answer-0.08 (16k/200k)
Lannister Insurance Company insures 200,000 vehicles. In 2019, they paid a total
of $136,000,000 in collision losses to the owners of 16,000 of those vehicles. What
was Lannister's collision loss severity in 2019? - Correct answer-8500 (136M/16K)
Michael Scott owns a condominium in Scranton, PA. A fire breaks out when his
girlfriend, Jan, is dancing and knocks over a candle. The fire damages the condo
and Michael's most prized possession - his plasma TV. The damage to Michael's
plasma TV is considered a(n): - Correct answer-direct loss
What is the most important step in the risk management process? - Correct answer-
Step 1: identify loss exposures
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,I have a high deductible ($2,200) in my health insurance plan. The high deductible
is an example of which type of risk management technique? - Correct answer-
retention
Insurance is the most appropriate risk management technique for which of the
following types of loss exposures? - Correct answer-high severity, low frequency
Review
The Very Good Building & Development Company is a general contractor
(builder). Due to difficulty finding affordable workers compensation insurance
(covering employee injuries), Very Good established its own insurance company
based in Vermont for the purpose of insuring Very Good's workers compensation
loss exposures. The company that Very Good formed is called a - Correct answer-
captive insurer
Jim Halpert and his wife, Pam, are selling the home they've lived in for the past
seven years. They are aware of an electrical problem in the home that they do not
want to fix because it would be expensive. Potential buyers of the home are
unaware of the electrical problem. This is an example of: - Correct answer-
Asymmetric Information
All of the following are examples of operational risks EXCEPT:
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,a) changing conditions in financial markets
b) employment practices
c) customer service
d) supply chain - Correct answer-A
Heisenberg Insurance has a home office in Albuquerque, New Mexico and they
specialize in insuring chemical manufacturers. Heisenberg is owned by its
policyholders and any annual profits are distributed through rate reductions. Which
type of insurer is Heisenberg? - Correct answer-mutual insurer
Reubens work in insurance sales. He sells insurance through several different
unrelated insurance carriers that he legally represents. What is Reuben's job? -
Correct answer-independent agent
Who handles the ratemaking function within insurance companies? - Correct
answer-Actuaries
Agent Michael Scarn sells insurance for the Federal Bureau of Insurance (FBI). He
is quoting a property insurance policy for Samuel Chang, the owner of an office
building. The office building is 15,000 square feet and FBI charges a gross rate of
$25 per 100 square feet. What is the gross premium for the property policy
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, covering the office building? - Correct answer-3750 (15K feet/ 100 feet = 150ft *
25$ = 3750$)
Antonio is employed by an insurance company. He reviews applications to
determine whether his company should insure the applicant. Antonio assigns the
applicant to a rating category based on the applicant's degree of risk. Antonio is
a(n): - Correct answer-underwriter
Walter White is the owner of A1A Car Wash. Jesse Pinkman is a regular A1A
customer. One day, while waiting for his car to be washed, Jesse slipped on a wet
spot on the floor and injured his back. As a result of his injury, he threatens to file
suit against Walt and A1A Car Wash. Walt quickly notifies his insurer to start the
claim process. This is an example of a: - Correct answer-third party claim
O'Houlihan Wrenches is a tool manufacturer. They have asked Average Joe
Insurance to insure their new $40 million manufacturing facility. Because of the
high amount of coverage needed, the Average Joe's underwriter has indicated that
they'll need to check with their reinsurer, Globo Re, to determine if they can obtain
a reinsurance policy to specifically cover the manufacturing facility. Which type of
reinsurance does Average Joe Insurance need for the manufacturing facility? -
Correct answer-Facultative
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