Risk Management and Insurance Quiz

What does risk avoidance mean?

• Accepting the risk and its consequences

• Never acquiring a certain loss exposure

• Reducing the frequency of a loss

• Transferring the risk to another party

Which of the following is a loss prevention measure?

• Installing a burglar alarm system

• Driver training programs

• Building on high ground

• Limiting cash on premises

What is active risk retention?

• Transferring risk through contracts

• Ignoring potential losses

• Avoiding risk altogether

• Consciously deciding to retain part of the loss

Which technique involves transferring risk without insurance?

• Retention

• Risk avoidance

• Noninsurance transfer

• Loss reduction

What is a key factor in selecting an insurer?

• The number of policies they offer

• The location of the insurer's headquarters

• The insurer's advertising budget

• The financial strength of the insurer

What does a deductible refer to in insurance?

• The amount subtracted from a loss payment

• The premium paid for the policy

• The insurer's profit margin

• The total amount of coverage

In a hard market condition, what typically happens?

• Profitability improves

• Insurance becomes easier to obtain

• Underwriting standards tighten

• Premiums decrease

What is the purpose of a risk management manual?

• To describe the risk management program and train employees

• To outline the company's financial goals

• To manage employee benefits

• To provide legal advice on contracts

What is an example of loss reduction?

• Not producing a risky product

• Installing an automatic sprinkler system

• Transferring risk through a lease

• Building on high ground

What is the primary advantage of using insurance?

• It is always inexpensive

• It provides indemnification for losses

• It eliminates all risks

• It requires no management effort