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Exam 23: Managing Risk

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Question 31

True/False

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It's good advice for doctors and lawyers to carry malpractice insurance.

A) True
B) False

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Question 32

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A mutual insurance company is owned by its policyholders.

A) True
B) False

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Question 33

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If a pure risk occurs, a company loses money. However, if the events do not occur, the company gains nothing.

John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer.

An insurance company would not be willing to insure a risk if it

A mutual insurance company is a nonprofit organization.

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

Any risk is insurable as long as you can pay the premium.

Insurance companies make predictions such as how recent health trends will affect the number of heart attacks that men in the United States over the age of 45 will suffer.

Simon 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. Simon 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

An insurance premium is the fee charged by the insurance company in return for their promise to pay for all or part of a loss.

Insurance companies will provide coverage only for losses that are accidental.

Some companies are avoiding risk through the use of product recalls.

The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is

Explain the four ways of managing risk.

The beginning of an effective risk management strategy is a good loss-prevention program.

________ risk involves the threat of loss with no chance for profit.

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

Sadly, during a war many civilians watch as everything they have is destroyed. Insurance companies will view this type of loss as

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