Exam 3: Introduction to Risk Management

Ryan decided to review his personal risk management program.His car is 10 years old,and he would receive little money from his insurer if the car was damaged or destroyed.Ryan decided to drop the physical damage insurance on the car.From a risk management perspective,dropping the physical damage insurance on the car is best described as

The property and liability insurance industry fluctuates between periods of increasing insurance rates and tight underwriting standards,and decreasing insurance rates and loosening underwriting standards.Profitability in the industry follows these cyclical movements.What is this pattern of fluctuations called?

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.

Discount Department Stores is a national retail chain.The company had one large,central warehouse.At the suggestion of the risk manager,the company decided to build four smaller regional warehouses so that a loss at the central warehouse would not be a catastrophic blow to the company's distribution system.Splitting the inventory between four regional warehouses illustrates which risk management technique?

All of the following statements about avoidance are true EXCEPT

Which of the following is a post-loss risk management objective?

ABC Insurance retains the first $1 million of each property damage loss and purchases insurance for that part of any property loss that exceeds $1 million.The insurance for property losses above $1 million is called

Purchasing health insurance illustrates the use of which personal risk management technique?

Preloss objectives of risk management include which of the following? I.Preparing for potential losses in the most economical way II.Reduction of anxiety

Factors a risk manager must consider in selecting an insurer include which of the following? I.The availability of risk management services II.The financial strength of the insurer

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

Which of the following statements about the use of deductibles is (are)true? I.They represent risk retention by insurance purchasers. II.They tend to increase the cost of adjusting small claims.

Which of the following types of loss exposures are best handled by the use of avoidance?

Risk management is concerned with

Laura Evans is risk manager of LMN Company.Laura decided to retain certain property loss exposures.Which of the following is a method that Laura can use to fund the retained property losses?

Abandoning an existing loss exposure is an example of