Which of the following statements is true regarding insurance market conditions and underwriting results? A) A combined ratio greater than one (or 100 percent) indicates profitable underwriting. B) In a “soft” insurance market, more retention is used than in a “hard” insurance market. C) Insurance rates are high and underwriting standards are tight when the […]
To better understand her company’s operations, a risk manager asked a production manager to draw a diagram tracing the steps in the production and distribution of the company’s products. Such a diagram, which is useful in risk identification, is called a A) financial statement. B) risk management matrix. C) flowchart. D) risk management audit. […]
David never stopped to consider the possible consequences of a long-term, permanent, disability. So David did not include disability income insurance in his personal risk management program. David is dealing with the risk of disability through A) passive retention. B) active retention. C) risk control. D) risk avoidance. ANSWER Answer: A
Bev lives in the suburbs and works downtown. She drives to work, and her most direct route to work would require her to pass through an area where carjackings and drive-by-shootings are common. Bev does not drive through this area. Instead, she uses a route which adds 10 minutes to her commute. Which risk management […]
Which of the following statements about a personal risk management program is (are) true? I. Insurance and retention are the only techniques used to handle potential losses. II. The steps in a personal risk management process are the same steps used by businesses. A) I only B) II only C) both I and II D) […]
Brenda identified all of the pure loss exposures her family faces. Then she analyzed these loss exposures, developed a plan to treat these risks, and implemented the plan. The process Brenda conducted is called A) personal insurance programming. B) personal estate planning. C) personal financial planning. D) personal risk management. ANSWER Answer: D
Which statement about a company’s cost of risk is (are) true? I. Cost of risk includes insurance premiums and retained losses. II. Reducing the cost of risk increases profitability. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
A useful measure for an organization to monitor is the total expenditures for treating loss exposures including retained losses, loss control expenses, insurance premiums, and other related expenses. This measure is called the organization’s A) cost of capital. B) cost of goods sold. C) cost of risk. D) cost of equity. ANSWER Answer: […]
Which of the following is least likely to occur during a “hard” insurance market period? A) difficulty in obtaining insurance B) tightening underwriting standards C) higher insurer profits D) increasing premiums ANSWER Answer: C
Purchasing health insurance illustrates the use of which personal risk management technique? A) avoidance B) risk transfer C) risk control D) risk retention ANSWER Answer: B
