Risk Management Quiz

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Questions and Answers

What is a key definition of liability loss exposure?

The financial impact of a key employee leaving an organization.

The potential loss of personal property such as furniture or equipment.

The legal responsibility for injury or damage suffered by another party. (correct)

The potential revenue loss from a product not meeting quality standards.

Which of the following represents a personnel loss exposure?

The resignation of a key manager critical to operations. (correct)

Injuries caused by faulty machinery in a workplace.

A product being recalled due to safety issues.

A factory building being damaged in a storm.

What is NOT a benefit of risk management?

Reducing operational costs

Increasing capital

Maximizing employee turnover (correct)

Complying with regulations

Which step comes first in the risk management process?

Identifying loss exposures Signup and view all the answers

What type of loss is associated with real property like buildings or land?

Property loss exposure Signup and view all the answers

What describes the outcome of promoting intelligent risk-taking?

Improving decision-making processes and profitability. Signup and view all the answers

Which of the following best describes the analysis of loss exposures?

Evaluating the potential financial impact of identified risks. Signup and view all the answers

What is the first step in establishing an audit process?

Plan, establish, implement, and maintain an audit program Signup and view all the answers

Which insurance type covers low probability, high-cost events?

Catastrophe insurance Signup and view all the answers

What does vicarious liability entail?

Assigning liability for injuries to a person with a legal relationship to the individual who acted negligently Signup and view all the answers

Who is primarily responsible for conducting an incident investigation?

The front-line supervisor Signup and view all the answers

What is the first step in the Hierarchy of Controls?

Elimination Signup and view all the answers

What is the primary role of underwriters in the insurance process?

To select and monitor accounts for satisfactory results. Signup and view all the answers

What type of condition is defined as increasing the frequency or severity of a loss?

Hazard Signup and view all the answers

Which of the following describes the function of expert systems in underwriting?

They facilitate decision-making by ensuring no information is overlooked. Signup and view all the answers

What does a premium audit involve?

An examination of a policyholder's records and operations to determine actual exposure and premium. Signup and view all the answers

What is the primary purpose of predictive modeling in the context of underwriting?

To analyze historical data and forecast future outcomes. Signup and view all the answers

Which technology uses wireless communication and GPS tracking for data transmission?

Telematics Signup and view all the answers

What is a catastrophe model primarily used for?

To estimate potential losses from catastrophic future events. Signup and view all the answers

What defines a rating plan in insurance?

A guideline specifying criteria for premiums based on exposure and risk. Signup and view all the answers

How do underwriters monitor their decisions effectively?

Through the observation of claims activity and policy change requests. Signup and view all the answers

Which factors are considered in personal auto underwriting?

Driver records Signup and view all the answers

What does the term 'moral hazard' refer to in underwriting?

A person's tendency to cause or exaggerate a loss Signup and view all the answers

What are some considerations in commercial auto liability underwriting?

Special industry classifications Signup and view all the answers

Which of the following is NOT part of the information provided in a property application?

Political affiliation Signup and view all the answers

What does a loss run report detail?

An insured's history of claims over a specific period Signup and view all the answers

Which information is evaluated from supplemental sources by underwriters?

Property-valuation guides Signup and view all the answers

Which of the following is NOT a commercial auto physical damage underwriting consideration?

Driver education level Signup and view all the answers

What encompasses the term 'rating' in the underwriting process?

Applying a rate to determine the policy premium Signup and view all the answers

Which vehicle-related factors are considered in commercial auto underwriting?

Vehicle size and weight Signup and view all the answers

What is the purpose of telematics in vehicles?

To collect data on vehicle usage and tracking Signup and view all the answers

What is the role of underwriters in evaluating fire-related risks?

To analyze the loss exposures from neighboring properties Signup and view all the answers

What defines a fire division within a structure?

A fireproof section preventing fire spread between areas Signup and view all the answers

What is included in public fire protection services?

Governmental fire protection equipment available to all properties Signup and view all the answers

What is the primary purpose of private fire protection measures?

To safeguard individual properties from fire hazards Signup and view all the answers

Why do underwriters evaluate residential loss exposures?

To identify hazards that increase liability risks for invited guests Signup and view all the answers

What factors are usually assessed in occupational loss exposure applications?

The type of business operated from home or activities performed Signup and view all the answers

What types of activities contribute to personal activity loss exposures?

All forms of recreational and sports activities Signup and view all the answers

What additional liabilities might special personal liability loss exposures include?

Unique liabilities unrelated to standard residential exposures Signup and view all the answers

How can personal liability loss exposures be identified?

Through supplemental applications or questionnaires Signup and view all the answers

What common risk factors do underwriters assess when evaluating residential properties?

Potential safety hazards like poor maintenance Signup and view all the answers

Study Notes

Risk Management

Risk is the possibility of loss or injury.
Risk Management is the systematic process of managing risks to achieve objectives.
Insurable Risk is risk that meets the criteria of an insurance company for coverage.
Insurance is paid protection against loss from injury or property damage.
Uninsurable Risk is risk that is not coverable by insurance.
Controllable Risk is risk that can be controlled.
Uncontrollable Risk is risk that cannot be controlled.
Pure Risk is a threat of loss with no chance of a gain.
Economic Risk is risk of harm that may result in financial loss.
Human Risk is risk from mistakes, dishonesty, or other human factors.
Natural Risk is risk of harm from natural disasters (floods, tornadoes, earthquakes, droughts).
Premium is the price paid for insurance coverage.
Peril is anything that may cause loss.
Hazard is a factor that increases the likelihood of loss.
Policy is a contract between a person and an insurance company.

Actual Cash Value

The value of an automobile when it was new minus depreciation.

Depreciation

The decline in value of an asset over time.

Financial Responsibility Law

A law that requires drivers to compensate for injuries in an accident.

Compulsory Insurance Law

A law mandating minimum car insurance.

No-Fault Insurance

A mandatory insurance coverage where drivers can claim from their own coverage regardless of fault.

Claim

A request for payment from an insurer.

Deductible

The amount of damages a policyholder pays before insurance coverage is triggered.

Real Property

Property attached to the land (houses, buildings).

Personal Property

Movable assets (furniture, jewelry, electronics).

Renters Insurance

Covers damage to personal belongings for renters.

Standard Fire Policy

Covers damage from a fire.

Extended Coverage

Additional insurance coverage (beyond basic coverage).

Homeowners Policy

Covers damage to property and personal belongings. Includes liability coverage.

Rider

An addition to an insurance policy that covers specific property or damages.

Replacement Value

The full cost to repair or replace damaged property, disregarding depreciation.

Life Insurance

Insurance paid to designated beneficiaries upon the insured's death.

Proceeds

The face value of a life insurance policy (amount paid).

Beneficiary

The person or entity receiving the insurance policy funds.

Cash Value Insurance

Permanent insurance, combines savings and death benefits.

Term Insurance

Temporary insurance coverage for a specified period.

Coinsurance

The percentage of medical expenses a policyholder pays beyond the deductible.

Copayment

The fee for each service use.

Pre-Existing Condition

A health issue diagnosed before coverage is acquired.

Health Maintenance Organization (HMO)

A health care organization that provides care at its own centers for fixed fees.

Preferred Provider Organization (PPO)

A group of doctors and/or hospitals agreeing to provide specific medical services at pre-arranged fees.

Medicare

A federal government health insurance program for seniors.

Medicaid

A federal government health insurance program for low-income people and children.

Risk Management (Domain 3)

Risk is a measurement of probability and severity of adverse effects.
Risk assessments are methods of determining risk.
Hazard Analysis involves categorizing risks (environmental, inherent property/material risks, people/material failures).
Primary methods to reduce costs include prevention (loss control) and financial (cost reduction).
Behavioral based safety programs use antecedent-behavior-consequence analysis to identify root causes of an incident and adjust subsequent actions.
Hazard Analysis is the systematic examination of a planned or existing process/operation to identify hazards to personnel or equipment.
USTs must be a percentage underground.
Management Oversight and Risk Tree assesses oversight omissions and risk analysis strengths.
Define Project Scope is used to break down project deliverables into more manageable pieces.
Define Work Breakdown Structure divides an entire project into smaller parts to assess risk more clearly.
PERT is Program Evaluation and Review Technique to calculate predicted time to complete projects.
Pure risk is a chance of loss with no opportunity of gain.

Other Risk Management Terminology (Domain 3)

Qualitative vs Quantitative: Qualitative risk assessments use descriptions, while quantitative risk assessments use numerical measurements.
Generic vs. Specific: Generic assessments apply to broad categories, while specific assessments are tailored to a specific incident.
Dynamic Risk Assessment: Ongoing and constantly changing risk assessments.
Hierarchy of Controls: A ranking system for controlling incidents, starting with complete elimination (best), substitution, engineering controls, warnings, and personal protective equipment (PPE).
Hazard Analysis Categories: Categories of potential hazards (environmental issues, inherent properties that create hazards, failures of people and materials).
Layers of Protection Analysis (LOPA): A methodology used for evaluating risk from major accidents in processes and industries.
Fault Tree Analysis (FTA): A deductive method to evaluate how potential events can lead to a negative outcome or undesired event.
Failure Modes & Effects Analysis (FMEA): A bottom-up technique used to evaluate potential problems in a product/process to prevent possible failures.
Common Cause Failure Analysis: an analysis technique used to evaluate multiple failures resulting from a single cause.
Event Tree Analysis (ETA): An inductive technique that evaluates different outcomes related to a problem or undesired event.
Naked Man: Primitive, unprotected system that is a visual aid for problem-solving to identify controls and address hazards.
THERP (Technique for Human Error Rate Prediction): A 6-step technique to predict and analyze human errors.
Change Analysis: A structured method for formally documenting and providing feedback on changes in processes.
Sneak Circuit Analysis: A technique for determining unintended energy routes that can lead to undesirable occurrences.
Monte Carlo Method: A mathematical simulation technique using random numbers to evaluate the probability of events or relationships in complex processes.
Critical Incident Technique: Analysis of incident reports to gain insights into errors, risky behaviors, and unsafe conditions to identify issues within a specific population.
SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis: Broad evaluation tool for identifying risk factors in a general business context.
Job Safety Analysis (JSA): Analysis of work tasks and processes to assign risk factors to specific parts of a work task.

General Risk Management Concepts (Domain 3)

Cost-Benefit Analysis: Evaluating actions/processes to determine if the benefits outweigh the costs or expenses.
Safety Benchmarking: Measuring a company's safety program success against that of similar or better-performing organizations.
Risk Matrix: A table/matrix tool used in risk assessment; different levels of risk are identified and categorized based on likelihood/severity.
Tangible Costs: Directly measurable costs.
Intangible Costs: Costs that are difficult to quantify (emotional or quality of life costs).
Risk: Measurement of combined probability and severity of potential harms or adverse effects (to resources).
Risk Homeostasis: Human behavior to maintain a level of risk.
Safety and Health Benchmarking: Comparing safety & health performance to similar organizations.
Causal Analysis: Technique focused on identifying root causes of problems rather than evaluating symptoms.

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Description

Test your knowledge of key concepts in risk management with this engaging quiz. Answer questions about liability loss exposure, personnel loss exposure, and the risk management process. Perfect for students and professionals looking to reinforce their understanding of risk principles.