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RMIN 4000 Brown UGA Test 1 Questions and Answers Fully Solved
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RMIN 4000 Brown UGA Test 1
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RMIN 4000 Brown UGA Test 1Frequency - answer 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 - answer How much does it cost when a loss does occur?
The dollar amount of loss for a specific peril (fire, theft, collision)
Peril - answer cause of a loss
Ex. fire, tornado, collision, burglary
hazard - answer condition that creates or increases the frequency and/or severity of a
loss
physical hazard - answer a physical condition that increases the frequency and/or
severity of a loss
moral hazard - answerdishonesty 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 - answercarelessness or indifference to a loss, which increases the
frequency and/or severity of a loss
ex. leaving keys in an unlocked car
personal risk - answerdirectly 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 - answercost to repair or replace property damaged by a peril
indirect loss - answerfinancial 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 - answerprocess that identifies loss exposures faced by an
organization and selects the most appropriate techniques for treating such exposures
loss exposure - answerany situation or circumstance in which a loss is possible,
regardless of whether a loss actually occurs
maximum possible loss - answerworst loss that could happen to a firm during its lifetime
probable maximum loss - answerthe worst loss that is likely to happen
risk control - answertechniques that reduce the frequency or severity of losses
avoidance - answera 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 - answermeasures that reduce the frequency of a particular loss
does not completely eliminate risk
ex. airport security
loss reduction - answermeasures that reduce the severity of a loss
no effect on frequency of a loss
ex. fire sprinklers
duplication - answerhaving backups or copies of important documents or property
available in case a loss occurs
separation - answerdividing assets exposed to loss to minimize the harm from a single
event
ex. firewalls in buildings
companies with multiple warehouses
retention - answera firm or individual retains all or part of losses that can occur from a
given risk
active- deliberately retaining risk
passive- unknowingly retaining risk
when should this be used:
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