RMIN 5100 Test 1

  1. 5 Steps of the Risk Management Process
    • 1. Identify risks (loss exposures)
    • 2. Evaluate Risk (frequency v. severity)
    • 3. Select the best techniques (not just insurance, but a variety)
    • 4. Implement the techniques
    • 5. Monitor the risk management program
  2. 5 Components of the Cost of Risk
    • 1. Expected loss
    • 2. Cost of loss financing
    • 3. Cost of loss control
    • 4. Internal risk reduction (diversification)
    • 5. Residual uncertainty
  3. Physical Hazard
    a hazard in which a physical condition (such as speeding) can increase the severity or probability of a loss
  4. Ex-ante Moral hazard
    (aka morale hazard)
    action or attitudinal change occurs before the loss; refers to the (lack of) incentive for insureds to reduce activity that affects the likelihood of insurance claims
  5. Ex-post Moral Hazard
    action or attitudinal change occurs after a loss; refers to the incentive for insureds to choose actions that affect the size of an insurance claim, given that the loss has already occurred
  6. Moral Hazard
    attitude or behavioral change; refers to the situation where an insurance policy affects an insured’s incentive to reduce insurable losses
  7. Ways to Manage Hazards
    • Use of Premiums
    • Deductibles
    • Conditional Clauses
    • Accident Investigators
Card Set
RMIN 5100 Test 1
Cards for test 1