Cal was just hired as XYZ Company’s first risk manager. Cal would like to employ the risk management process. The first step in the process Cal should follow is to A) evaluate potential losses faced by XYZ Company. B) formulate a treatment plan for XYZ Company’s loss exposures. C) identify potential losses faced by XYZ […]
The premium that insurance companies charge does not cover the cost of expected losses only. The premium must also cover the cost of compensating agents and other costs of doing business. The amount added to the pure premium to cover these costs is called the A) expense loading. B) deductible. C) dividend. D) loss reserve. […]
All of the following statements about avoidance are true EXCEPT A) Certain loss exposures are never acquired. B) Certain loss exposures may be abandoned. C) The chance of loss for certain loss exposures may be reduced to zero. D) It can be used for any loss exposure facing a firm. ANSWER Answer: D
A discount store chain is concerned that cashiers might steal money from cash registers. To provide protection against theft by the cashiers, the discount store chain can purchase a A) fidelity bond. B) liability insurance policy. C) surety bond. D) business income insurance policy. ANSWER Answer: A
BBB Auto Club provides emergency road service and other services to its members. BBB Auto Club charges a higher membership fee to new members than it charges to members who are renewing their membership. When asked to explain this pricing policy, the auto club president noted, “New members often sign-up prior to taking a long […]
Risk management is concerned with A) the identification and treatment of loss exposures. B) the management of speculative risks only. C) the management of pure risks that are uninsurable. D) the purchase of insurance only. ANSWER Answer: A
A situation or circumstance in which a loss is possible, regardless of whether a loss occurs, is called a A) deductible. B) loss exposure. C) loss avoidance. D) peril. ANSWER Answer: B
Which of the following is a post-loss risk management objective? A) treating loss exposures in the most economical way B) continuing operations C) reduction of anxiety D) meeting externally imposed legal obligations ANSWER Answer: B
A risk manager is concerned with which of the following? I. Identifying potential losses II. Selecting the appropriate techniques for treating loss exposures A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Preloss objectives of risk management include which of the following? I. Preparing for potential losses in the most economical way II. Reduction of anxiety A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
