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RMIN 4000 Brown UGA Test 1|Accurate Questions and Answers
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RMIN 4000 Brown UGA Test 1|Accurate Questions and Answers
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RMIN 4000 Brown UGA Test 1|Accurate Questions and Answers
Frequency - -How often does a loss occur?
The number of losses (such as fire, theft, collision) that occur within a
specified time period
probability of a loss
- severity - -How much does it cost when a loss does occur?
The dollar amount of loss for a specific peril (fire, theft, collision)
- Peril - -cause of a loss
Ex. fire, tornado, collision, burglary
- hazard - -condition that creates or increases the frequency and/or severity
of a loss
- physical hazard - -a physical condition that increases the frequency and/or
severity of a loss
- moral hazard - -dishonesty or character defects in an individual that
increase the frequency and/or severity of a loss
presence of insurance changes the behavior of the insured
Ex. using a hammer to create "hail" damage to a roof
- morale hazard - -carelessness or indifference to a loss, which increases
the frequency and/or severity of a loss
ex. leaving keys in an unlocked car
- personal risk - -directly affects an individual or family; involve the
possibility of loss of income, extra expenses, depletion of financial assets
ex. death, unemployment, disability/injury/ poor health, inadequate
retirement income
- direct loss - -cost to repair or replace property damaged by a peril
- indirect loss - -financial loss resulting as a consequence of a direct loss
, ex. fire damages your home, you have to live somewhere else while its
repaired
- risk management - -process that identifies loss exposures faced by an
organization and selects the most appropriate techniques for treating such
exposures
- loss exposure - -any situation or circumstance in which a loss is possible,
regardless of whether a loss actually occurs
- maximum possible loss - -worst loss that could happen to a firm during its
lifetime
- probable maximum loss - -the worst loss that is likely to happen
- risk control - -techniques that reduce the frequency or severity of losses
- avoidance - -a certain loss exposure is never acquired or an existing loss
exposure is abandoned
frequency reduced to zero
disadvantages:
may not be possible
usually has an opportunity cost
avoiding one loss exposure may create another
- loss prevention - -measures that reduce the frequency of a particular loss
does not completely eliminate risk
ex. airport security
- loss reduction - -measures that reduce the severity of a loss
no effect on frequency of a loss
ex. fire sprinklers
- duplication - -having backups or copies of important documents or
property available in case a loss occurs
- separation - -dividing assets exposed to loss to minimize the harm from a
single event
ex. firewalls in buildings
companies with multiple warehouses
- retention - -a firm or individual retains all or part of losses that can occur
from a given risk
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