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RMIN Test 2 Daniel Brown UGA Questions and Answers | Latest Update | 2024/2025 | 100% Pass Why is risk control essential in risk management, beyond just buying insurance? Risk control reduces the frequency and severity of losses, making it easier to manage and transfer risks effectively...

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  • September 11, 2024
  • 21
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • rmin test 2 daniel brown uga questions and answer

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RMIN Test 2 Daniel Brown UGA
Questions and Answers | Latest Update |
2024/2025 | 100% Pass

Why is risk control essential in risk management, beyond just buying insurance?


✔✔ Risk control reduces the frequency and severity of losses, making it easier to manage and

transfer risks effectively.




How does the law of large numbers benefit insurance companies?


✔✔ The law of large numbers helps insurance companies predict losses more accurately by

pooling a large number of similar risks.




Why might an insurer require coinsurance in a policy?


✔✔ Coinsurance encourages the policyholder to insure property for its full value, reducing

underinsurance and ensuring shared risk between the insured and insurer.




How do contractual provisions in an insurance policy limit the insured's ability to file a claim?


✔✔ Provisions like time limits, exclusions, and warranties define the circumstances under which

a claim can be made, protecting the insurer from undue risk.



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,How do insurance companies manage their exposure to catastrophic losses?


✔✔ Insurers use reinsurance and diversification of risk portfolios to spread potential losses

across multiple insurers and regions.




What is the role of an insurance agent versus an insurance broker in risk management?


✔✔ An insurance agent represents the insurer and sells policies, while a broker represents the

insured and helps find the best policy options.




Why is underwriting critical for insurance companies?


✔✔ Underwriting ensures that insurance companies assess risk accurately, set appropriate

premiums, and avoid taking on excessively risky clients.




What role does risk retention play in a self-insurance strategy?


✔✔ Risk retention in self-insurance involves setting aside funds to cover potential losses instead

of transferring them to an insurer.




How does adverse selection threaten the profitability of an insurance pool?




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, ✔✔ Adverse selection can lead to higher-than-expected claims if riskier individuals are more

likely to purchase insurance without adequate premiums to cover the risk.




Why is utmost good faith more important in insurance contracts than in other contracts?


✔✔ Insurance contracts rely on the full and honest disclosure of information because the insurer

cannot verify all risks before agreeing to provide coverage.




What is the purpose of a retrocession in the reinsurance market?


✔✔ A retrocession allows a reinsurer to transfer some of the risks it assumes to another

reinsurer, further spreading and managing the risk.




How do insurance companies determine whether to offer coverage for new and emerging risks?


✔✔ Insurers assess historical data, market conditions, and emerging trends to decide whether

coverage for new risks is feasible and profitable.




What is the importance of claims reserves in an insurer's financial stability?


✔✔ Claims reserves are funds set aside to cover future claims, ensuring that the insurer can meet

its obligations without financial strain.




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