Exam 1: Introduction to Enterprise Risk Management and Insurance

A flood is an example of a non-diversifiable risk.

Which of the following is not a type of risk when identifying a pure risk?

Explain briefly the law of large numbers.

Enterprise Risk Management is the response of the accounting profession to corporate fraud.

In the context of ERM, hazard risk is defined as:

Which of the following would not normally be identified in the risk management process?

Diversifiable risk is defined as:

"Loss" and "chance of loss" are terms with the same meaning.

Catastrophic losses are not insured by the private insurance industry because:

Which of the following is not a direct social benefit of the insurance mechanism?

An insurance applicant dying from cancer is not likely to be insured because:

The most difficult and important step in the risk management process generally is:

Which of the following is an accurate definition of "insurance"?

If a person installs an automatic sprinkler system to prevent serious fire damage, this action can be considered "insurance" as defined in the text.

All the following are direct losses except:

All the following are direct losses except:

What are the three basic methods of dealing with risk in the risk management process?

Risk Pooling is an example of:

Which of the following is not a goal of the government, employer or employee in providing employee benefits?

Assume that 1000 students, all healthy, all age 22, and all male, form a life insurance pool to pay $500 to the beneficiaries of any member who dies in the next 365 days. The chance of loss or probability of death for the members of this group is .002. To join the pool a member must pay: (Disregard interest earnings and reserves and assume expenses of operating the insurance pool are 30% of losses).