FIN 424 KU Assignment 4

Private insurers are reluctant to provide windstorm insurance on coastal properties. This is because the loss exposures fail to meet the criterion that ideally insurable exposures must be

Independent and not catastrophic.

Internet of Things (IoT) devices, sensors, wearables, and telematics devices have had the greatest impact on which one of the following risk treatment techniques?

Risk modification

Risk Treatment

The selection and Implementation of actions to help manage or mitigate a risk

Risk Transfer

The shifting of risk from one individual or organization to another

Telematics

The use of technological devices in vehicles with wireless communication and GPS tracking that transmit data to businesses or government agencies; some return information for the driver

Avoidance

A risk control technique that involves ceasing or never undertaking an activity so that the possibility of a future loss occurring from that activity is eliminated.

Loss Prevention

A risk control technique that reduces the frequency of a particular loss.

Loss Reduction

A risk control technique that reduces the severity of a particular loss.

Diversification

A risk control technique that spreads loss exposures over numerous projects, products, markets, or regions

Retention

A risk financing technique that involves assumption of risk in which gains and losses are retained within the organization.

Insurance

A risk management technique that transfers the potential financial consequences of certain specified loss exposures from the insured to the insurer.

An exculpatory clause is

A contractual provision that relieves one party from liability resulting from a negligent or wrongful act.

Internet of Things

A network of objects that transmit data to computers

Exculpatory clause

A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.

Hold-Harmless argeement

A contractual provision that obligates one of the parties to assume the legal liability of another party

Hedging

A financial transaction in which one asset is held to offset the risk associated with another asset.

An excess liability insurance policy that covers a claim in excess of the underlying limits only if the loss is covered by the underlying policy is called

A following-form excess policy.

Blithe Drug Manufacturing has developed a drug that cures obesity. However, the side effects are significant and potentially fatal. Blithe decides not to manufacture and sell the drug. This is an example of

Avoidance

Ideally insurable loss exposures are subject to losses that

Are definite in time, cause, and location

Which one of the following technologies can provide the infrastructure upon which smart contracts are built and implemented?

Blockchain

Advancements in machine learning and Artificial Intelligence have helped insurers do all of the following, EXCEPT

Completely Prevent Customers' Risk

Commercial general liability insurance policies written on an occurrence basis apply to bodily injury and property damage that occurs during the policy period. This provision supports the principle that insurable loss exposures must ideally be

Definite

Ivanhoe Corporation purchases stock in a bank and in a pharmaceutical manufacturer. Because these are unrelated industries, Ivanhoe hope that any losses in one stock will be more than offset by profits in another. Ivanhoe is using which one of the following risk management techniques?

Diversification

Maxwell Company has just invested a large sum in new, highly sophisticated computer equipment and building renovations. Maxwell arranged to lease identical equipment at another location so that it could use the equipment in the event of a disaster at its location. Maxwell's lease of identical equipment at another location is an example of

Duplication

The control technique that uses backups, spares, or copies of critical property, information, or capabilities and keeps them in reserve is which one of the following risk management techniques?

Duplication

"The contractor agrees to indemnify and hold harmless the owner against claims, damages, bodily injury, or property damage arising out of the contractor's work and caused by any act of omission of the contractor, his agents, and his employees." This is an example of which one of the following forms of a hold-harmless agreement?

Limited Form

Which one of the following is a risk control technique that reduces the frequency of a particular loss?

Loss prevention

A local shopping center reduced its net income loss after a fire by incurring additional expenses to shorten the time it takes to repair the damage and reopen the shopping center. Bob, the owner of the center, hired a contractor to work around the clock until repairs were completed. This reduced Bob's net income loss because he was able to repair the shops sooner. Bob's action is an example of which one of the following risk management techniques?

Loss reduction

Emerald Industries has just invested a large sum in new, highly-sophisticated computer equipment and building renovations. Emerald installed state-of-the-art smoke detection devices throughout the facility. Emerald's state-of-the-art smoke detection devices are an example of

Loss reduction

Large deductible plans

Lower an organization's cost of risk

Concerning fundamental guidelines of contractual risk transfer management, it is wise to

Require a certificate of insurance for contractual liability before contract operations begin

A large deductible is similar to a self-insured retention (SIR) in that both

Require the insured organization to retain a relatively large amount of loss.

Which one of the following is a major benefit that smart insurance contracts can provide to insurance customers?

Smart contracts can dramatically increase the speed of loss payments

Waiver

The intentional relinquishment of a known right

Residual Risk

The level of risk remaining after actions are taken to alter the level of risk.

Risk financing

a risk management technique that includes steps to pay for or transfer the cost of losses

Machine Learning

artificial intelligence in which computers continually teach themselves to make better decisions based on previous results and new data

Derivative

financial instrument whose value is derived from the value of an underlying asset, which can be an index, an asset, yield on an asset, weather conditions, inflation, loans, bonds, and insurance risk, or other items