1. What method is generally the most cost-effective means for dealing with pure

Question

1. What method is generally the most cost-effective means for dealing with pure risks involving the possibility of high-frequency, low-severity losses?

2. When measuring health-related data or statistics, the term used for measuring death rates is:

3. When measuring health-related data or statistics, the term used for measuring rates for which people suffer illness, sickness, and disease is:

4. If you have a family history of major chronic conditions and early deaths and you decide to purchase a very large life insurance policy, this is an example of a. Adverse selection b. Attitudinal hazard c. Opportunity cost d. Risk avoidance

5. You have a dental insurance plan that has a maximum benefit of $1,000/yr. You just realized that the end of the plan year is approaching and you haven’t used your dental plan. You go to the dentist and say, give me all the dental work you can up to $1,000 before my benefits run out. This is an example of: a. moral hazard b. attitudinal hazard c. physical hazard d. peril

6. _____________________ are tangible conditions which exist which involve place, structure, or surrounding conditions. Examples would include faulty wiring, slick sidewalks, and poor construction. In the realm of sickness a physical hazard could include any pre-existing medical condition which could increase the chance of a medical claim.

7._____________________ aims to reduce the frequency of a loss while ______________________ seeks to reduce the severity of a loss.

8. What are the four steps in the risk management process?

9. Name two characteristics of an insurable risk and explain why these two characteristics are important to insurers.

Explanation / Answer

1. Retention with loss control that is 'Risk Reduction'
2. Mortality Rate
3. Prevalence
4. d. Risk Avoidance
5. b. Attitudinal hazard
6. Hazard
7. Prevention, Exposure
8. (i) Identify the risk- Organize the risks into basic categories
(ii) Analyze the risk- Consider all the risks, before treatment is possible.
(iii) Treat the risk - Modify the risks in order to achieve acceptable risk levels
(iv) Monitor and Review the risk - Monitor, track and review risks from time to time.

9. (i) Affordable - Premiums are economically feasible to the insurer.
(ii)  Pure risk - Only pure risk that pose a threat are considered, not the speculative.

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