MCQs on Risk Management and Insurance

What is the primary role of insurance in risk management?

• To eliminate all risks

• To generate profit for businesses

• To transfer and share risk

• To prevent accidents

What was the key takeaway from the Society Insurance apartment water loss case?

• Delay filing claims to save money

• Claims should be filed only if losses are high

• Prompt claim reporting reduces loss and stress

• Insurance is only for individuals

Risk is best defined as:

• A guaranteed loss

• A possible profit

• The possibility of an adverse outcome

• Something you can always control

Which of the following is a pure risk?

• Gambling

• Business investment

• Illness

• Starting a company

Which technique is NOT a method of controlling risk?

• Risk avoidance

• Risk reduction

• Risk transfer

• Risk gambling

What does 'Risk Retention' mean in insurance terms?

• Transferring the risk to another party

• Ignoring the risk

• Accepting and managing the risk internally

• Eliminating the risk completely

Which document must be filled to initiate an insurance contract?

• Endorsement

• Cover Note

• Proposal Form

• Premium Receipt

Which principle ensures that a policyholder will only be compensated for actual loss?

• Indemnity

• Utmost good faith

• Subrogation

• Contribution

Which term refers to the insurance company's legal right to pursue a third party responsible for the loss?

• Indemnity

• Subrogation

• Endorsement

• Utmost good faith

The Law of Large Numbers helps insurance companies to:

• Increase premiums

• Predict individual losses

• Spread and predict risk accurately

• Avoid claims