100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
RMI 300 Final Exam Practice Questions and Answers $12.49   Add to cart

Exam (elaborations)

RMI 300 Final Exam Practice Questions and Answers

 0 view  0 purchase
  • Course
  • Prep Tests
  • Institution
  • Prep Tests

RMI 300 Final Exam Practice Questions and Answers What are the 3 ways a company decides who takes on what risks? - ANSWER--Better Opportunity to pool -Better way to use loss control incentives -Who has the benefit in taxes Prevention - ANSWER-Any measure that lessens the probability (frequenc...

[Show more]

Preview 3 out of 24  pages

  • November 11, 2024
  • 24
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • Prep Tests
  • Prep Tests
avatar-seller
OliviaWest
Copyright © OLIVIAWEST2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED




RMI 300 Final Exam Practice Questions

and Answers


What are the 3 ways a company decides who takes on what risks? - ANSWER✔✔--Better Opportunity to

pool


-Better way to use loss control incentives


-Who has the benefit in taxes


Prevention - ANSWER✔✔-Any measure that lessens the probability (frequency) of loss but does not

eliminate it


Reduction - ANSWER✔✔-Any effort that lessens the size (severity) of losses that do occur


Avoidance - ANSWER✔✔-Marking decisions with the intention of eliminating either (1) some existing

potential for loss, or (2) a future potential for loss from a new venture. In essence, these are lost

opportunities




P(loss) = 0


Premium = - ANSWER✔✔-E(loss) + E(expenses) + Risk Charge + Profit - investment returns


What are Premium Loadings? - ANSWER✔✔-costs in excess of E(loss) before considering investments


When is it not worthwhile to pay this excess in Premium Loadings? - ANSWER✔✔--Value of insurer

services less than the cost of those services

Copyright ©Stuvia International BV 2010-2024 Page 1/24

, Copyright © OLIVIAWEST2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED


-For low severity events


-for high frequency events


-when estimation risk exists: correlated events and/or estimation uncertainity


Moral Hazard - ANSWER✔✔-Behavior that increases the frequency of bad outcomes


Adverse Selection - ANSWER✔✔--Definition: the tendency of buyers with higher than average expected

losses to buy more coverage than buyers with lower than average expected losses when charged the

premium


-Generally present when: potential insureds have differing distributions of expected losses and also

possess greater knowledge ("asymmetric information") about their expected losses than the insurer


-Effect of adverse selection: insurer unable to charge sufficient premiums for sustainable business;

insurance market falls apart


What should you do in an event that is low frequency and high severity? - ANSWER✔✔-Transfer




-loss reduction


What should you do in an event that is low frequency and low severity? - ANSWER✔✔-Retain!


What should you do in an event that is high frequency and high severity? - ANSWER✔✔-Avoidance




-transfer will be difficult because premiums will be very high


What should you do in an event that is high frequency and low severity? - ANSWER✔✔-Retain



Copyright ©Stuvia International BV 2010-2024 Page 2/24

, Copyright © OLIVIAWEST2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED




-Loss prevention


What Insurance Policy provision should be in place for a low frequency and high severity event? -

ANSWER✔✔-Limits


What Insurance Policy provision should be in place for a low-frequency and low severity event? -

ANSWER✔✔-Deductible


What Insurance Policy provision should be in place for a High-frequency and low severity event? -

ANSWER✔✔-Deductible


What Insurance Policy provision should be in place for a High-frequency and high severity event? -

ANSWER✔✔-Exclusions




For a flood


What are some Common Assumptions about decisions? - ANSWER✔✔--Decisions are consistent


-Generally we are aware of what we know and we do not know


-Decisions are improved with more information


-Generally we are risk averse


What are the 4 biases that may cause difficulty? - ANSWER✔✔--Framing


-Retrievability/Availability


-Anchoring



Copyright ©Stuvia International BV 2010-2024 Page 3/24

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller OliviaWest. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $12.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

77254 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$12.49
  • (0)
  Add to cart