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RMIN 4000 UGA- Brown- exam 1 Questions and Answers 100% Verified.
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RMIN 4000 UGA- Brown- exam 1 Questions and Answers 100- Verified.
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RMIN 4000 UGA- Brown- exam 1 Questions and Answers100% Verified
definition of risk - (correct answer) -A calculated possibility of a negative outcome
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calculated possibility - (correct answer) -probabilistic outcome, ranges from 0-1 (0-100%)
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negative outcome - (correct answer) -loss, must be quantifiable ($)
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frequency - (correct answer) --"how often does a loss occur?"
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-number of losses in a certain time period
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-probability of a loss io io io
Severity - (correct answer) --"how much does it cost when a loss occurs?"
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- dollar amount
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how to calculate frequency - (correct answer) -# of losses/# of exposures
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how to calculate severity - (correct answer) -total losses ($)/# number of losses
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peril - (correct answer) -cause of loss (ex: fire)
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hazard - (correct answer) -condition that creates or increases frequency of a loss. 4 types: physical,
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moral, morale (attitudinal), legal
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physical hazard - (correct answer) -a physical condition that increases the frequency or severity of loss
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moral hazard - (correct answer) -the presence of insurance changes the behavior of the insured (ex:
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faking damages or exaggerating value of insured property)
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Morale (attitudinal) hazard - (correct answer) -carelessness or indifference to a loss because of the
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existence of insurance, increases frequency and severity (ex: leaving keys in car, ignoring limbs)
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legal hazard - (correct answer) -characteristics of the legal system or regulatory environment that
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increase the frequency or severity of losses (ex: different juries in different areas, diminution in value
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laws)
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pure risk - (correct answer) -loss or no loss (no gain), insurable (ex: fire or cancer)
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, speculative risk - (correct answer) -A chance of loss, no loss, or gain. (ex: gambling or investing), not
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always insurable
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diversifiable risk - (correct answer) --affects only small groups not whole economy
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-can be reduced/eliminated thru diversification
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-risks aren't correlated (fire, theft, collision)
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nondiversifiable risk - (correct answer) --affects entire economy io io io io io io io
-cannot be reduced thru diversififcation
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-gov. assistance may be needed to insure
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-risks are correlated (inflation, unemployment)
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-ex: flood, earthquake
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enterprise risk - (correct answer) -encompasses all major risks faced by a business: pure, speculative,
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operational, and financial
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systemic risk - (correct answer) --risk collapse of an entire system or entire market due to a failure of a
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single entity or group of entities that can result in a breakdown of the entire financial system
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-instability in the financial system due to interdependency between the players and the market
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types of pure risks - (correct answer) --personal
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-property
-liability
-loss of business income
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-cyber security io
personal risk - (correct answer) --directly affects individual or family, involves a possibility of loss of
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income, extra expenses, or depletion of financial assets
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-perils maybe involved: death, unemployment, disability/injury/poor health, inadequate retirement
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income
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property risk - (correct answer) --possibility of losses associated with the destruction of property
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-direct loss: cost to replace damaged property
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-indirect loss: financial loss resulting as a consequence of the direct loss (ex: having to pay to live
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somewhere while home is being repaired from fire damages)
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