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RMIN 4000 Final Exam|119 Questions and Answers|100% Scores
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RMIN 4000 Final Exam|119 Questions and Answers|100% Scores
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RMIN 4000 Final Exam|119Questions and Answers|100%
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Peril - -Cause of loss
- Risk - -Uncertainty about chance, timing, or amount of loss
- Chance of Loss - -Probability that an event will occur
- Objective Risk - -The relative variation of actual loss from expected loss;
(Actual-Expected)/Expected; higher variation means higher risk
- Law of Large Numbers - -Objective risk varies inversely with the square
root of the number of cases
- Subjective Risk - -Uncertainty based on a person's mental condition or
state of mind
- Hazard - -A condition that increased the frequency or severity of the loss
- Moral Hazard - -Arson
- Morale Hazard - -Driving drunk
- Pure risk - -Chance of loss or no loss (no gain)
- Speculative risk - -Chance of loss, no loss, or gain
- Particular risk - -Risk that affects only affects individuals as individuals
- Legal hazard - -Large damage awards in litigation
- Fundamental/systematic risk - -Affects a large number of individuals or the
entire economy
- Enterprise risk - -All major risks faced by a business
- Direct loss (property) - -Financial loss that results from physical damage,
destruction, or theft
- Indirect loss (property) - -Financial loss arising from loss of USE of property
, - Liability risk - -Responsibility for actions that cause injury or property
damage to another (no limit)
- Fortuitous loss - -Unforeseen and unexpected by the insured and occurs as
a result of chance
- Risk Transfer - -Pure risk is transferred from the insured to the insurer,
who typically is in a better financial position to pay the loss than the insured
- Indemnification - -The injured is restored to his approximate financial
position prior to the occurrence of the loss
- Adverse Selection - -The tendency of persons with a higher-than-average
chance of loss to seek insurance at standard (average) rates, which if not
controlled by underwriting, results in higher-than-expected loss levels
- Viatical settlement - -Benefactor pays AIDS patient to take out life policy
- Risk Management - -Formal decision-making process to address risk,
including the potential financial consequences associated with loss
exposures
- Loss exposure - -Any item exposed to loss; any situation in which a loss
may occur
- Risk Control - -Reduce frequency or severity of losses
- Risk Management Process (IESI) - -1. Identify potential losses
2. Evaluate potential losses
3. Select appropriate RM technique
4. Implement and monitor
- Risk Financing - -Techniques that provide for the funding of losses
- Retention - -Firms retain part or all of the losses that can result from a
given loss; Ex: Expense, set aside liquid, credit line
- Retention level - -The dollar amount of losses the firm will retain
- Captive - -Insurer owned by a parent firm for the purpose of insuring the
parent firm's loss exposure; have easier access to a reinsurer; source of
profit
- Self-Insurance (self-funding) - -Form of retention; PArt or all of a given loss
exposure retained by firm; used for workers comp and health plans
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