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Exam 24: Managing Risk

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Question 71

Multiple Choice

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Organizations spend about __________ percent of gross domestic product on insurance premiums.

A) 2
B) 5
C) 10
D) 20

E) A) and C)
F) B) and C)

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Question 72

Multiple Choice

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Two desirable features of _______ are that members do not receive bills and do not have to fill out claim forms.

A) traditional health insurance organizations
B) preferred provider organizations PPOs)
C) health care accommodation companies HCACs)
D) health maintenance organizations HMOs)

E) All of the above
F) A) and B)

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Question 73

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John has decided that his neighbor Sam is quite careless and is in danger of burning his own house down.John tried to buy a fire insurance policy on Sam's house so that he could collect the payment when Sam inevitably burned down his own house.The insurance company would not allow John to purchase the policy because he did not have an insurable interest in the property.

A well-designed and implemented risk-prevention program can eliminate the potential of loss.

Southern Deliveries has decided to manage risk by requiring drivers to wear seat belts,have a commercial driver's license,monitor any moving violations each driver obtains,and to be sure that this information is kept in the employee records.Furthermore Southern has decided to carry an insurance policy with a very large deductible,preferring to pay for small damages to its trucks out-of-pocket.Southern has built enterprise risk management into their organization.

One benefit of Preferred Provider Organizations PPOs) compared to Health Maintenance Organizations HMOs) is that PPOs:

Harold owns several gas stations.He realizes that among the several risks associated with this type of business is the risk of minor damage to cars from dirty or contaminated fuel.He also knows that there is a small chance of a major loss if a fire occurred at one of his gas stations.Harold wants to control his insurance costs while still maintaining a reasonable risk management program.He is considering self-insurance.If he decides to use this approach,he will probably:

The type of risk that is of most concern to businesspeople is speculative risk.

__________ is the armor individuals,businesses,and nonprofit organizations use to protect themselves from various financial risks.

Risks such as global warming are the concern of businesses and governments primarily in the U.S.

The law of large numbers states that if a large number of people are exposed to the same risk,a predictable number of losses will occur during a given period of time.

Typically,Health Maintenance Organizations HMOs)offer members more flexibility in the choice of doctors and health care than other forms of health insurance providers.

Green Gardens Sprinkler Systems Company experienced increasing sales for several years.The firm expanded its product offerings,and now serves both commercial and residential customers.Which of the following situations would be considered an uninsurable risk for Green Gardens?

________ insurance guarantees payment of wages,medical care,and rehabilitation services for employees who are injured on the job.

Explain the difference between speculative risk and pure risk.Which type of risk is of more concern to businesspeople?

Alberto is worried about the risk of potential flooding to his restaurant.He decides to buy insurance to cover this ________ risk.

Doctors obtain ________ insurance to cover claims from patients who have been injured as a result of the doctor's carelessness.

Sasha has a small jewelry business with only four employees.He started his business month before last and so far he makes just enough to pay his bills each week.Yesterday,just before the end of his first quarter in business,he received a notice from the government indicating that he needed to provide evidence of workers' compensation insurance.Sasha:

Businesses can often reduce the risk to which they are exposed.

Risk management now includes the evaluation of: