Risk Management Test 1

A trucking firm has the following probability distribution for severity due to trucking accidents. Which answer belowbest defines the maximum possible loss?Dollar Loss per Accident Probability of Dollar Loss1,000 0.503,000 0.305,000 0.1510,000 0.05 A) Cannot determine from given information. B) A 50% chance that losses are ≤than $5,000. C) $10,000 .D) An 80% chance that losses are ≤$3,000.

C) 10000

According to the law of large numbers, as the number of exposure units or the number of trials in an experiment orthe amount of past experience is increased:(I) The probability of the loss decreases.(II) The probability of the loss increases.(III) The relative accuracy of predictions about future losses increases.(IV) The relative accuracy of predictions about future losses decreases. A) II B) I C) III D) IV E) B, C, and D. F) A and B. G) B and C. H) All of the above. I) None of the above.

C) 3

Assume the insurance market has hardened. Which of the following is now true of the insurance market relative towhen you last made your decision? A) Insurers are very picky, prices are lower. B) Insurers want to sell, prices are higher. C) Insurers are very picky, prices are higher. D) Insurers want to sell, prices are lower.

C) Insurers are very picky, prices are higher.

Tom is a business owner and he has a number of employees. He decides to purchase a group health insurance policy forhis employees, which will help attract and retain talent. However, he doesn't communicate the cost sharing with his employeesand they become less motivated to stay healthy or shop around for the best medical care, because they feel like the companywill cover most of the costs. This is an example of what?Sophie is a renter and she has just moved into a new apartment. She decides not to purchase renter's insurance because shebelieves that her landlord's insurance will cover any losses in case of fire, theft or natural disaster. This is an example ofwhat? A) Adverse selection; Adverse selection B) Moral hazard; Adverse selection C) Moral hazard; Moral hazard D) Adverse selection; Moral hazard

C) Moral hazard; Moral hazard

What is a fixed or simple life annuity? A) An investment in long-term bonds B) A strategy for investing in short-term bonds C) A fixed amount of money paid out by an insurance company every year for as long as you live after you retire D) A lump sum saved up on day one of retirement that you have to manage E) C and D. F) B and C. G) A, B, and D. H) All of the above. I) None of the above.

C) a fixed amount of money paid out by an insurance company every year for as long as you live after you retire

What is an example of moral hazard in the context of insurance? A) An insurer denying a claim because the policyholder failed to disclose a pre-existing condition B) An insurer charging a lower premium for policyholders who have completed a driver safety course C) A policyholder neglecting to install a burglar alarm because they know they're insured against theft D) A policyholder taking extra precautions to prevent damage to their property because they have a high deductible E) B and C. F) A, C, and D. G) C and D. H) All of the above. I) None of the above.

C) a policy holder neglecting to install a burglar alarm because they know they're insured against it

What is the central limit theorem? A) A way to find the max (or limit) of a dataset B) A method to determine the average C) A reason why normal distributions are common in nature D) A calculation used to find range E) A and D. F) B and C. G) C and D. H) All of the above. I) None of the above.

C) a reason why normal distributions are common in nature

Which of the following explains an adverse selection death spiral in the context of insurance? A) A situation where individuals with higher risks are less likely to purchase insurance, which leads to higher premiumsand prices low-risk individuals out of the market. B) A situation where insurance companies lose money due to low demand for insurance policies C) A situation where individuals with higher risks are more likely to purchase insurance, which leads to higher premiumsand prices low-risk individuals out of the market. D) A situation where insurance companies experience high losses due to unpredictable risks

C) a situation where individuals with higher risks are more likely to purchase insurance, which leads to higher premiums and prices low risk individuals out of the market

Which job involves determining the likelihood of an event occurring and its potential impact on an insurance com-pany? A) Loss control specialist B) Risk manager C) Actuary D) Underwriter

C) actuary

How does experience rating address the problem of moral hazard? A) By charging more correct initial rates. B) By denying coverage to high-risk policyholders C) By encouraging policyholders to be more careful to avoid claims

C) by encouraging policyholders to be more careful to avoid claims

hile you are in class, your cat, Simon knocks over a bottle of cooking sherry and it breaks all over the floor. Whenyou come home, your friend Lisa lights a cigarette and it accidentally falls into the sherry, lighting a fire. You run away becauseyou do not have a fire extinguisher, and as you run you scream "Oh No!! The was the hazard and the was theperil!" A) Lack of renter's insurance, cat Simon. B) Cat Simon, cooking sherry. C) Cooking sherry, fire. D) Fire, cooking sherry.

C) cooking sherry, fire

Barbara's computer crashed and she lost some important files. She has no hardcopy and no backup. What risk controltechnique should she have used in this situation? A) Passive retention .B) Cyber insurance. C) Duplication of exposure units. D) Diversification. E) B and C. F) A and D. G) C and D. H) All of the above. I) None of the above.

C) duplication of exposure units

hiker is trekking through a remote mountain range. The trail is steep and rocky, and the hiker is carrying a heavybackpack. As he navigates a particularly treacherous section of the trail, the straps on his backpack suddenly break, causinghim to lose his balance and fall. The hiker tumbles down the mountain, suffering multiple injuries. The broken backpack strapswere the A) Loss. B) Peril. C) Hazard. D) A and B. E) A and C. F) B and C. G) All of the above .H) None of the above.

C) hazard

Past data on losses is blank useful for Dynamic Risks vs. Static risks. A) Equally as B) More. C) Less.

C) less

A company has implemented a policy of separating duties among employees to prevent fraud. What kind of risk controlmethod is being used? A) Post-loss loss reduction B) Proactive avoidanc C) Loss prevention D) Separation

C) loss prevention

Suppose you instead decide to include the peanuts, hope for the best, and lawyer up to reduce the damages in case youget sued. This is an example of:A) Loss Prevention. B) Separation of exposure units. C) Loss Reduction. D) Proactive avoidance .E) A, B, and D. F) A, B, and C. G) A and C. H) All of the above. I) None of the above.

C) loss reduction

past data on losses is useful for Static Risks vs. Dynamic risks. A) Equally as B) Less. C) More.

C) more

What is the main benefit of owning an annuity? A) A high risk strategy for retirement B) High interest rates on bonds C) Predictable income for every year you live D) A way to invest in stocks E) A and C. F) B and C. G) B, C, and D. H) All of the above. I) None of the above.

C) predictable income for every year you live

Lederle Pharmaceutical discovers that the cholesterol-lowering drug they are developing has severe side effects. Theymake the decision to stop producing the drug. What risk control strategy is illustrated here? A) Loss prevention. B) Retention. C) Proactive avoidance. D) Reactive avoidance.

C) proactive avoidance

A small business owner purchases supplies in small quantities from multiple vendors to reduce the risk of supply chaindisruptions. What is the risk control method being used? What is the cost associated with this method? A) Duplication; Loss of economies of scale B) Duplication; Cost of additional supplies C) Separation; Loss of economies of scale D) Separation; Cost of additional supplies

C) seperation; loss of economies of scale

The distance of a private home to the nearest fire station or fire house could be considered a physical hazardbecause: A) Frequency of the loss could be increased. B) Dynamic risk is higher. C) Severity of the loss could be increased. D) The probability of the loss is higher. E) A, C, and D. F) B, C, and D .G) B and C. H) All of the above. I) None of the above.

C) severity of the loss could be increased

What is a histogram mainly used to represent in statistics? A) The minimum and maximum value of a set of data B) The average value of a set of data C) The distribution of a set of data D) The number of occurrences in a set of data E) C and D. F) A and D. G) B and C. H) All of the above. I) None of the above.

C) the distribution of a set of data

Consider a dice roll with probability of getting a 6 being p = 0.1667 and probability of getting any other numberbeing q = 0.8333. If it is 6, you win $1. What is the coefficient of variation for this probability distribution? Pick the closestanswer. A) 0.14 B) 2.24 C) 0.83 D) 2.94

B) 2.24

Can insurance increase the frequency or severity of a loss? A) Frequency B) Both. C) Neither. D) Severity

B) Both

Suppose you are comparing the degree of risk for the two firms, Cameron Inc. and Meghan Enterprises. From theirrespective loss frequency distributions, we have the following information concerning "inventory shrinkage" per month.For CAMERON INC. the mean is equal to 5 and the variance is equal to 9.For MEGHAN ENTERPRISES the mean is equal to 10 and the variance is equal to 16.Which company faces more risk and why? A) Cameron Inc. because their variance is higher than Meghan. B) Cameron Inc. because their coefficient of variation is higher than Meghan. C) Cameron Inc. because their mean is higher than Meghan D) Meghan Enterprises because their coefficient of variation is higher than Cameron.

B) Cameron because their coefficient of variation is higher than Meghan

What is the most important step in the risk management process A) ID possible RM techniques B) ID of the loss exposure C) Periodically re-evaluate chosen strategies D) All are equally important

B) ID of the loss exposure

Which of the following would result in an increased pure premium for an insurance firm who is selling auto insurance?[other things equal]? A) The insurer put more resources toward an expensive advertisement campaign. B) A rival insurer develops a telematics device and becomes better able to estimate risk .C) The insurer decides to only insure drivers who have excellent driving records. D) The insurer has less confidence in their estimate of expected loss .E) B and D. F) A, B, and C. G) B, C, and D. H) All of the above. I) None of the above.

B) a rival insurer develops a telematics device and becomes better able to estimate risk

Individuals who know that they have chronic, costly medical conditions that are not apparent or known to theinsurer may not disclose this to the insurer and therefore may be able to purchase health insurance for a lower premium thanif they were to disclose this information to the insurer. This is an example of: A) A loss which is not significant to the insured. B) Adverse selection due to asymmetric information. C) Moral hazard due to asymmetric information. D) Adverse selection that is a result of moral hazard.

B) adverse selection due to assymetric information

How is a histogram created? A) By finding the minimum and maximum value of a set of data B) By dividing a set of data into bins and counting the number of data points in each bin C) By calculating the average of a set of data D) By counting the number of occurrences in a set of data E) B and D. F) B, C, and D. G) A and B. H) All of the above. I) None of the above.

B) by adding a set of data into bins and counting the number of data points in each bin

How did the Alpine farmers in the 16th century handle risk? A) By insuring their farms B) By forming mutual aid societies C) By analyzing and trading risk D) By using government subsidies E) A, C, and D. F) A and C. G) B and C. H) All of the above. I) None of the above.

B) by forming mutual aid societies

What did the coffee house patrons at Lloyd's Coffee House in London famously enjoy doing? A) Offering Loans B) Gambling on ships' voyages C) Discussing politics D) A and B. E) A and C. F) B and C. G) All of the above .H) None of the above.

B) gambling on the ships voyages

Consider a weighted coin flip with probability of heads being p = 0.8 and probability of tails being q = 0.2. If it isheads, you win $10, if it tails you win nothing. What is the coefficient of variation for this probability distribution? Pick theclosest answer. A) 2 B) 16 C) 8 D) 0.5

D) .5

Find the expected value for this distribution:Loss Probability$0 0.3$100 0.3$200 0.4 A) 0 B) 200 C) 100 D) 110

D) 110

ow many of the steps of the risk management process are quantitative? A) 2 B) 1 C) 4 D) 3

D) 3

Loss Probability$0 0.4$500 0.6Given the above probability distribution table for a random variable Y, what is the expected value of Y? A) 0 B) 500 C) 200 D) 300

D) 300

Removal of an insurance mandate will likely lead to which of following? A) Higher cost of insurance. B) Fewer people will buy insurance. C) Lowered cost of insurance. D) A and B.E) A and C. F) B and C. G) All of the above. H) None of the above.

D) A and B

Which of the following characteristics of an exposure are associated with a higher risk charge? A) High maximum possible loss. B) Small number of potential contracts. C) High expected frequency. D) Limited ability to pool risks. E) B, C, and D. F) B and D. G) A and D. H) All of the above. I) None of the above.

D) A and D

Suppose you are comparing the degree of risk for the two firms, Cameron Inc. and Meghan Enterprises. From theirrespective loss frequency distributions, we have the following information concerning "inventory shrinkage" per month.For CAMERON INC. the mean is equal to 5 and the variance is equal to 9.For MEGHAN ENTERPRISES the mean is equal to 10 and the variance is equal to 16.Which company faces LESS RISK and why A) Cameron Inc. because their variance is higher than Meghan. B) Cameron Inc. because their mean is higher than Meghan C) Cameron Inc. because their coefficient of variation is higher than Meghan. D) Meghan Enterprises because their coefficient of variation is lower than Cameron.

D) Meghan Enterprises because their coefficient of variation is lower than Cameron

Which of the following is(are) example(s) of loss prevention? A) Performing background checks on new employees B) Providing employee training on cyber security best practices C) Implementing a disaster recovery plan for IT systems D) Installing visible security cameras in high-risk areas E) A and D. F) A, B, and D. G) A and C .H) All of the above. I) None of the above.

F) A B and D

Which of the following are examples of pre-loss loss reduction? Select all that apply. A) Having a backup generator in case of a power outage B) Providing compensation to customers affected by a product recall C) Regularly testing fire extinguishers to ensure they are functional D) Installing security cameras to deter theft E) B and C .F) A, C, and D. G) A, B, and D. H) All of the above. I) None of the above.

F) A C and D

Which of the following incorrectly explains an adverse selection death spiral in the context of insurance? A) A situation where low risk individuals are more likely to purchase insurance which leads to lower premiums andencourages high risk individuals to purchase insurance. B) A situation where insurance companies experience high profits due to low demand for insurance policies. C) A situation where individuals with higher risks are more likely to purchase insurance, which leads to higher premiumsand prices. D) A situation where premiums increase and quantity decreases. E) A, C, and D. F) A and B. G) B, C, and D. H) All of the above. I) None of the above.

F) A and B

Which of the following is an issue that insurance companies face when the risk is not definite? A) Conducting fraud investigations B) Moral hazard C) Underwriting bias D) Adverse selection E) B and C. F) A and B. G) A, B, and D. H) All of the above. I) None of the above.

F) A and B

Andrew Garfield enters a building that has had it's floor removed but didn't have up any warning signs. He falls severalstories and injures himself. In addition to medical costs, this prevents him from playing the role of Secretariat in a movie. Whichof the following is the loss? A) Andrew's injuries. B) The fall. C) Him missing out on the movie. D) The lack of warning signs. E) C and D .F) A and C. G) A and D. H) All of the above. I) None of the above.

F) A and C

The more that an individual tolerates risk: A) The lower will be their worry value. B) The higher will be their worry value. C) The lower will be their PMAX. D) The higher will be their PMAX. E) A and B. F) A and C. G) C and D. H) All of the above. I) None of the above.

F) A and C

Consider the possibility of providing property insurance contracts which would cover losses due to terrorism. In general,this loss exposure is not an ideally insurable risk because of which of the following? A) The insurer would have a very high risk charge. B) The loss is not significant to the insured. C) The loss is not definite in nature. D) The loss is potentially catastrophic to the insurer. E) A, C, and D. F) A and D. G) A, B, and D. H) All of the above. I) None of the above.

F) A and D

How can insurers mitigate the effects of moral hazard? A) By updating premiums to reflect past experience B) By charging different premiums based on the level of risk C) By increasing the policyholder's deductibles D) By offering incentives for policyholders to take preventative measures E) A, B, and D. F) A, C, and D. G) A and C. H) All of the above. I) None of the above.

F) A, C, and D

Certain insurance regulations do not permit insurance companies to underwrite the members of their risk pool. Thelaw mandates that they must charge the same premium price to the various members of the pool. What is the likely effectof this type of regulation on the insurance market?(I) Insurance is less expensive because the risk pools are larger(II) Insurers are subject to adverse selection(III) Over time, insurance has become more expensive because low risks drop out of the risk pool A) I B) III C) II D) A and B. E) A and C. F) B and C. G) All of the above. H) None of the above.

F) B and C

Which of the following is an example of an objective risk measurement? A) The level of safety of a car, as determined by crash test results B) The danger of a new product, as determined by customer reviews C) The risk of heart disease, as determined by a study of genetic factors and lifestyle choices D) The risk of a flood in a particular area, as determined by meteorological data and historical records E) B, C, and D. F) C and D. G) A, C, and D. H) All of the above. I) None of the above.

G) A, C, and D

Why is moral hazard in lending bad? A) It creates a disincentive for borrowers to repay loans. B) It makes the market more efficient. C) It increases the likelihood of risky behavior. D) It results in higher costs for borrowers. E) A, B, and C. F) B and D. G) A, C, and D. H) All of the above. I) None of the above.

G) A, C and D

Which of the following is(are) example(s) of post-loss loss reduction?A) Implementing security measures to prevent future losses B) Providing medical treatment to employees injured on the job C) Offering compensation to customers affected by a product recall D) Repairing property damage caused by a fire E) A, B, and C. F) A, C, and D. G) B and C. H) All of the above. I) None of the above.

G) B and C

Which of the following accurately describes moral hazard:(I) It always involves an illegal act, most often insurance fraud. (II) It always involves some form of insurance such as life, health, or auto. (III) It always leads to increased frequency and/or severity. A) III B) I C) II D) A and B. E) A and C. F) B and C. G) All of the above. H) None of the above.

A) 3

Loss Probability$0 0.7$200 0.3Given the above probability distribution table for a random variable X, what is the expected value of X? A) 60 B) 0 C) 200 D) 140

A) 60

Which of the following is NOT an example of moral hazard? A) Dave is a bad, careless driver. He texts while driving. He does not have insurance on his car. B) John can no longer afford his car payment so he sets his car on fire to collect the insurance money. C) Studies show people with health insurance use twice as many prescription drugs than people without insurance despitethe same medical history. D) Joan likes to deep fry her thanksgiving turkey even though it is dangerous because she knows she has fire insurance. E) B, C, and D. F) A, B, and C. G) A and B. H) All of the above. I) None of the above.

A) Dave is a bad, careless driver. He texts while drlivvine and does not have insurance on his car

What should an insurer do in the event that they face the possibility of damage to a large number of buildings in agiven geographic region as the result of an earthquake? A) Purchase reinsurance. B) Sell contracts that provide an unlimited coverage limit. C) Increase market share in that geographic region to form a larger risk pool. D) Write insurance contracts containing deductibles. E) A, B, and D. F) A and D. G) A, B, and C. H) All of the above. I) None of the above.

A) purchase reinsurance

What is a basic annuity? A) A form of insurance that pays in regular installments until the recipient dies B) A loan that pays in regular installments until it expires C) A savings plan for retirement D) A form of mutual aid society

A) a form of insurance that pays in regular installments until the recipient dies

John is a retired man, he knows that he is more likely to need long-term care services in the future. He decides topurchase a long-term care insurance policy, which will cover the cost of a nursing home or assisted living facility. This is anexample of what?Lena is a young woman and she is aware that she has a family history of breast cancer. She decides to purchase a critical illnessinsurance policy, which will pay her a lump sum in case she is diagnosed with breast cancer. This is an example of what? A) Adverse selection; Adverse selection B) Adverse selection; Moral hazard C) Moral hazard; Adverse selection D) Moral hazard; Moral hazard

A) adverse selection, moral hazard

Mark has a brand new sports car and he is aware that he has a tendency to drive fast and recklessly. He refuses topurchase a usage-based auto insurance policy, which will track his driving habits and adjust his rates accordingly. This is anexample of what?Julie is a healthy non-smoker, she knows that her risk of incurring significant medical expenses is low. She decides to purchasea high-deductible health insurance plan with lower monthly premiums. This is an example of what?A) Adverse selection; Adverse selection B) Moral hazard; Moral hazard C) Moral hazard; Adverse selection D) Adverse selection; Moral hazard

A) adverse selection; adverse selection

ow did Chinese merchants spread their risks in ancient times? A) By forming mutual aid societies B) By swapping goods between ships C) By insuring their ships D) By borrowing money for voyages with the understanding that the loan would not need to be repaid if the ship sank

A) by swapping goods between ships

Accoriding to the author of An Economist Walks into a Brothel. How do interest rates affect annuity prices?A) The lower the interest rates, the more income you get from an insurance company B) It is impossible to know how interest rates will affect annuity prices C) The higher the interest rates, the more income you get from an insurance company D) Interest rates have no effect on annuity prices E) B and D. F) A, B, and C. G) B and C. H) All of the above. I) None of the above.

A) lower the interest rates, the more income you get from an insurance company

You are up all night studying in the for your first FIN 3400 exam from Dr. E. You have heard that the class isvery difficult, but you are determined to rise to the challenge. At some point in the evening, you take a study break to go toStarbucks and you simply forget to take your brand new iPhone 7 with you because you are tired and stressed out a bit. Youknow you have insurance that will cover the loss if it is stolen, so you wait until after your Starbucks trip to go back andcheck for it. This behavior is an example of which of the following? A) Moral Hazard. B) Property Loss Exposure. C) Net Income Loss Exposure. D) Physical Hazard.

A) moral hazard

Moral hazard and adverse selection are different because? A) Moral Hazard is caused by the Insurance contract; adverse selection causes the insurance contract choice. B) Moral hazard occurs before insurance is purchased; adverse selection occurs after insurance is purchased. C) Moral hazard is a violation of homogeneity in a risk pool; adverse selection is a violation of fortuitous losses. D) Moral hazard is a violation of definite and determinable; adverse selection is a violation of fortuitous losses.

A) moral hazard is caused by the insurance contract; adverse selection causes the insurance contract choice

hiker is trekking through a remote mountain range. The trail is steep and rocky, and the hiker is carrying a heavybackpack. As he navigates a particularly treacherous section of the trail, the straps on his backpack suddenly break, causing himto lose his balance and fall. The hiker tumbles down the mountain, suffering multiple injuries. The fall was the . A) Peril. B) Hazard. C) Loss. D) A and B. E) A and C .F) B and C. G) All of the above. H) None of the above.

A) peril

Dell computer has the famous Just in time (JIT) supply chain management. Toensure JIT works, Dell currently uses more than 30 suppliers in the Austin area for a key part,their motherboards. By having so many suppliers, Dell is applying which of thefollowing loss control techniques A) Separation B) Post-loss control C) Frequency reduction D) Duplication E) C and D. F) A and D. G) B, C, and D. H) All of the above. I) None of the above.

A) seperation

hiker is trekking through a remote mountain range. The trail is steep and rocky, and the hiker is carrying a heavybackpack. He didn't check the weather forecast and not prepared for the current snowstorm that hit the area. As he navigates aparticularly treacherous section of the trail, the hiker slips on the snow and falls, suffering a broken leg. What is the peril? A) The slip on the snow. B) The hiker's heavy backpack. C) The snowstorm. D) The hiker's lack of preparation. E) B, C, and D. F) A and D. G) B and C. H) All of the above. I) None of the above.

A) slip on the snow

Andrew Garfield enters a building that has had it's floor removed but didn't have up any warning signs. He falls severalstories and injures himself. In addition to medical costs, this prevents him from playing the role of Secretariat in a movie. Whichof the following is the peril? A) The fall .B) The lack of warning signs. C) Andrew's injuries. D) Him missing out on the movie .E) B, C, and D. F) A, C, and D .G) A and D. H) All of the above. I) None of the above.

A) the fall

Which of the following would cause a decrease in worry value for a company owner? A) The value of the company increases (holding potential loss constant). B) The frequency of losses for the firm becomes more difficult to estimate. C) The size of the maximum possible loss increases. D) The probability of the maximum possible loss increases. E) C and D. F) B and C. G) A, B, and D. H) All of the above. I) None of the above.

A) the value of the company increases

What is an actuarially fair value in the context of insurance? A) The value of an insurance policy that is equal to the expected value of its claims B) The value of an insurance policy that is equal to the cost of the benefits it provides C) The value of an insurance policy that is equal to the sum of its claims and administrative costs D) The value of an insurance policy that is equal to the sum of its premiums E) A, B, and C. F) C and D. G) B, C, and D. H) All of the above. I) None of the above.

A) the value of the insurance policy that is equal to the expected value of its claims

What is the purpose of purchasing a fixed or simple life annuity? A) To provide a predictable income for every year of retirement B) To protect against market changes during retirement C) To invest in long-term bonds D) To provide a lump sum of savings on the day of retirement E) A, B, and D. F) B, C, and D. G) A and C. H) All of the above. I) None of the above.

A) to provide a predictable income for every year of retirement

How many of the steps of the risk management process are "brainstorming" steps?A) 2 B) 1 C) 3 D) 4

A)2

hiker is trekking through a remote mountain range. The trail is steep and rocky, and the hiker is carrying a heavybackpack. As he navigates a particularly treacherous section of the trail, the straps on his backpack suddenly break, causinghim to lose his balance and fall. The hiker tumbles down the mountain, suffering multiple injuries. The multiple injuries arethe A) Peril. B) Loss. C) Hazard. D) A and B .E) A and C .F) B and C. G) All of the above .H) None of the above.

B) loss

nsurance reduces the frequency or severity of a loss? A) Severity B) Neither .C) Both .D) Frequency

B) neither

Consider a weighted coin flip with probability of heads being p = 0.8 and probability of tails being q = 0.2. If it isheads, you win $10, if it tails you win nothing. What is the coefficient of variation for this probability distribution? A) $2 B) None of these C) $0.5 D) $16

B) none of these

Suppose you decide to just play it safe and never include peanuts in the recipe (or any of your other recipes producedin the same facility) to begin with. This is an example of: A) Loss Reduction. B) Proactive avoidance. C) Separation of exposure units. D) Reactive avoidance. E) A and D. F) A, B, and C. G) A, C, and D. H) All of the above. I) None of the above.

B) proactive avoidance

After being sued for causing severe health risks, the makers of an athletic enhancement formulation stop making theproduct and also successfully removes 100% of existing vaccines from the market. What risk management strategy is illustratedhere? A) Loss reduction. B) Reactive avoidance. C) Loss prevention. D) Proactive avoidance.

B) reactive avoidance

Suppose that Person B also purchases insurance for an actuarially fair premium and joins Person A in the insurer'srisk pool. Note that the risk pool now contains Person A and Person B only. Which of the following statements is TRUE aboutthis arrangement? A) The amount of risk faced by the insurer is $4. B) The amount of risk faced by the insurer is about 0.7 .C) The amount of risk faced by the insurer is $2. D) The amount of risk faced by the insurer by adding Person B remains unchanged.

B) the amount of risk faced by the insurers is about .7

ssuming the market can be profitable. What will insurance premiums be determined by if the insurer has monopolypower and can perfectly price discriminate? A) The consumer's E(L). B) The consumer's PMAX. C) The risk charge. D) The consumer's Worry Value .E) B, C, and D. F) C and D. G) A, B, and D. H) All of the above. I) None of the above.

B) the consumers PMAX

Why is jumping off a 1-story building riskier than jumping off a 50-story building?\A) Jumping off a 1-story building has a higher chance of injury B) There is more uncertainty in jumping off a 1-story building C) Jumping off a 1-story building is more physically challenging D) There is more danger in jumping off a 1-story building E) B, C, and D. F) A and B. G) C and D. H) All of the above. I) None of the above.

B) there is more uncertainty in jumping off a 1 story building

What is the difference between the financial goals of trust funders and average people? A) Trust funders want to build a fortune that lasts for generations, while average people want to save as much as possibleand spend a certain percentage each year once retired B) Trust funders want to maintain and grow wealth for things like trust funds and large endowments, while averagepeople want to save when they are young and spend when they are old C) Trust funders want to achieve financial stability, while average people want to achieve financial independence D) Trust funders want to invest in short-term government bonds or cash, while average people want to invest in stocks E) A, C, and D. F) A and D. G) A and B. H) All of the above. I) None of the above.

B) trust funders want to maintain and grow wealth for things like trust funds and large endowments, while people want to save when they are young and spend when they are old

Find the expected value for this distribution:Loss Probability$0 0.2$150 0.4$300 0.4 A) 0 B) 180 C) 150 D) 300

B)180

Which of the following would result in an lower pure premium for an insurance firm who is selling auto insurance? [otherthings equal]? A) A rival insurer develops a telematics device and becomes better able to estimate risk. B) The insurer has less confidence in their estimate of expected loss .C) The insurer decides to only insure drivers who have excellent driving records. D) The insurer has more confidence in their estimate of expected loss. E) B and D. F) A, C, and D. G) A and B. H) All of the above. I) None of the above.

C) the insurer decides to only insure drivers who have excellent driving records

Which of the following is an example of an objective risk measurement? A) The level of danger of a new hobby, as determined by personal experience B) The risk of a chemical spill, as determined by an opinion panel of experts C) The risk of an economic recession, as determined by data on GDP and unemployment rates D) The danger of a new food, as determined by customer reviews E) C and D. F) A, B, and C. G) B, C, and D. H) All of the above. I) None of the above.

C) the risk of an economic recession, as determined by data on GDP and unemployment rates

Which of the following is TRUE for risk-neutral people / firms? A) They hate to gamble. B) Their cost of worry positive. C) Their cost of credit does fluctuate with their risk. D) They will never purchase full insurance .E) A and D. F) A and C. G) A, B, and C. H) All of the above. I) None of the above.

C) their cost of credit does not fluctuate with their risk

Which of the following is TRUE for risk-neutral people / firms? A) Their cost of credit does not fluctuate with their risk. B) They love to gamble. C) Their cost of worry is zero. D) They will always purchase full insurance. E) B, C, and D. F) C and D. G) A, B, and C. H) All of the above. I) None of the above.

C) their cost of worry is zero

How did the mutual aid societies of the Alpine farmers differ from other forms of insurance during the 16th century? A) They were only available in the Alps region. B) They were only available to wealthy farmers C) They focused on sharing risk rather than analyzing and trading it D) They were only for farmers

C) they focused on sharing risk rather than analyzing and trading it

Which job involves determining the appropriate premium for an insurance policy? A) Loss control specialist B) Risk manager C) Underwriter D) Actuary

C) underwriter

Find the expected value for this distribution: Loss Probability$0 0.6$50 0.3$100 0 A) 100 B) 50 C) 0 D) 25

D

What is the difference between the way underwriters of Lloyds viewed risk and the way mutual aid societies of the Alpsviewed risk? A) Both underwriters and mutual aid societies viewed risk as something to be shared B) Underwriters viewed risk as something to be shared, while mutual aid societies viewed risk as something to be analyzedand traded C) Both underwriters and mutual aid societies viewed risk as something to be analyzed and traded D) Underwriters viewed risk as something to be analyzed and traded, while mutual aid societies viewed risk as somethingto be shared

D) Underwriters viewed risk as something to be analyzed and traded, while mutual aid societies viewed risk as somethingto be shared

Meghan purchased long-term care insurance because she knew that she has inherited the ApoE4 gene, which increasesthe risk of developing Alzheimer's disease. Long-term care insurance would partially cover the cost of a nursing home. This isan example of what?.Moira did not purchase flood insurance offered by NFIP because she knew that might be able to rely on taxpayer-funded disasterrelief to recover any losses from flood damage. This is an example of what?. A) Moral hazard; Moral hazard B) Moral hazard; Adverse selection C) Adverse selection; Adverse selection D) Adverse selection; Moral hazard

D) adverse selection, moral hazard

What type of measurement is used when selecting from potential RM techniques? A) Objective cost-benefit analysis. B) Subjective risk measure of the key decision maker. C) Neither. D) Both.

D) both

The use of pooling in insurance functions best when the loss exposures being pooled are: A) Correlated. B) Mutually exclusive. C) Skewed D) Independent. E) A, B, and C. F) A and C. G) A and B. H) All of the above. I) None of the above.

D) independent

What is the problem with the strategy of investing in short-term government bonds or cash as a risk-free retirementstrategy? A) It does not account for inflation B) It does not account for market fluctuations C) It does not provide a predictable income stream D) It does not return enough. E) C and D. F) A, B, and C. G) A, C, and D. H) All of the above. I) None of the above.

D) it does not return enough

What is a necessary condition for the Law of Large Numbers to apply? A) A small number of independent trials B) The trials must be identically distributed C) The trials must be independent D) A large number of trials E) B and C. F) B, C, and D. G) A and B. H) All of the above. I) None of the above.

D) large number of trials

uppose that Person C also purchases insurance and joins Person A in the insurer's risk pool. Note that the risk poolnow contains Person A and Person C only. The insurer charges both person A and person C a premium of $3. Which ofthe following statements is FALSE? A) Person A may leave the risk pool depending on their PMAX .B) The expected loss faced by the insurer increases. C) Person C will probably enter the risk pool depending on their PMAX. D) Person C is charged his/her actuarially fair premium. E) B and D. F) C and D. G) B, C, and D. H) All of the above. I) None of the above.

D) person C is charged their actuarially fair premium

A company has offered compensation to customers affected by a product recall. What kind of risk control method isbeing used? A) Separation B) Pre-loss loss reduction C) Reactive avoidance D) Post-loss loss reduction E) A and D. F) B and D. G) B and C. H) All of the above. I) None of the above.

D) post loss loss reduction

A company has installed an alarm system that will automatically phone the police if it detects theft. No one outsideof management knows about it. What kind of risk control method is being used? A) Post-loss loss reduction B) Loss prevention C) Separation D) Pre-loss loss reduction E) A and C. F) A and B. G) A, B, and C. H) All of the above .I) None of the above.

D) pre loss loss reduction

The following is an excerpt from: 'Most Small Businesses Lack Disaster Recovery Plan, Survey Finds,'Columbus Dispatch, 3.1.17.Local information technology company R. Dorsey & Co. Inc. was hit by fire in 2009 at the building where it operated inGrandview Heights. Owner Bob Dorsey said the company was prepared by having data stored offsite, so it was able to resumeoperations quickly. But, still, insurance didn't cover all the losses, he said. What risk control option is illustrated hereand what loss exposure is the risk control method addressing?A) Avoidance, property loss exposure. B) Separation of exposure units, property loss exposure. C) Loss prevention, net income loss exposure. D) Separation of exposure units, net income loss exposure.

D) seperation of exposure units, net income loss exposure

Andrew Garfield enters a building that has had it's floor removed but didn't have up any warning signs. He falls severalstories and injures himself. In addition to medical costs, this prevents him from playing the role of Secretariat in a movie. Whichof the following is the hazard? A) Andrew's injuries .B) The fall. C) Him missing out on the movie. D) The lack of warning signs. E) A and B. F) A, B, and C. G) B, C, and D. H) All of the above .I) None of the above

D) the lack of warning signs

What does the height of a bar in a histogram represent? A) The distribution of a specific set of the data B) The standard deviation of a specifc set of the data C) The average value of a specifc set of the data D) The number of occurrences in a specifc set of the data E) A and B. F) B, C, and D. G) B and C. H) All of the above. I) None of the above.

D) the number of occurrences in a specific set of the data

What is the width of the normal curve defined by? A) The average measurement B) The relative probability of observing someone with a specific height C) The central limit theorem D) The standard deviation of the measurements E) C and D .F) B, C, and D. G) B and D. H) All of the above. I) None of the above.

D) the standard deviation of the measurements

How did ancient law codes like the Code of Hammurabi handle the concept of maritime insurance? A) They banned it B) They did not mention it C) They regulated it but did not actively promote it D) They included clauses devoted to it E) A and B. F) B, C, and D. G) B and D. H) All of the above. I) None of the above.

D) they included clauses devoted to it

Which of the following is(are) example(s) of pre-loss loss reduction?A) Developing a plan for natural disaster response B) Creating a backup plan in case of power outages C) Providing safety training for employees D) Purchasing insurance coverage to protect against financial losses E) A, B, and C .F) A and B. G) A, C, and D. H) All of the above. I) None of the above.

E) A B and C

Heather's car is stolen. When she files a claim with her insurer, Heather claims that she had purchased a new set ofexpensive golf clubs for her boyfriend and that these golf clubs were in the trunk of the car and thus were stolen as well. She istherefore attempting to claim a loss from her insurer of the car and the golf clubs. However, Heather does not have a boyfriendand did not purchase any golf clubs. This is an example of? A) Moral Hazard .B) Insurance Fraud. C) A catastrophic loss. D) Legal Activity. E) A and B. F) B and C. G) A and D. H) All of the above. I) None of the above.

E) A and B

Which of the following is TRUE for risk-neutral people / firms? A) Their cost of credit does fluctuate with their risk. B) Their cost of worry is zero. C) They will always purchase full insurance. D) They love to gamble. E) A and B .F) A, B, and C. G) B and C .H) All of the above. I) None of the above.

E) A and B

How can moral hazard be addressed? A) By increasing regulation and oversight of financial institutions. B) By providing government subsidies to companies in certain industries. C) Including cost-sharing in insurance contracts. D) By increasing premiums .E) A and C. F) B and D. G) B and C .H) All of the above. I) None of the above.

E) A and C

How is an actuarially fair value determined for an insurance policy? A) By calculating the frequency and severity of claims B) By calculating the sum of its premiums C) By calculating the expected value of its claims D) By calculating the cost of the benefits it provides E) A and C. F) A, B, and D. G) A, B, and C. H) All of the above. I) None of the above.

E) A and C

What is a better question to ask when discussing financial planning with a financial planner? A) What is your time horizon for retirement? B) What is your investment strategy? C) How much income will you need in retirement? D) A and B. E) A and C. F) B and C. G) All of the above. H) None of the above.

E) A and C

Suppose the risk pool does contain Person A and Person C. In this case, the risk pool is characterized by an incomeor wealth transfer between? A) Low risk individuals to high risk individuals. B) Those who have a loss to those who do not have a loss. C) High risk individuals to low risk individuals. D) Those who do not have a loss to those who do have a loss. E) A and D. F) A, B, and D. G) A, C, and D. H) All of the above. I) None of the above.

E) A and D

Which of the following is an example of a definite risk? A) An individual purchasing a life insurance policy. B) A driver with a history of accidents purchasing car insurance C) A business purchasing insurance against losses due to theft D) A homeowner purchasing insurance against fire damage to their property E) A, B, and D. F) A and D. G) B, C, and D. H) All of the above. I) None of the above.

E) A, B, and D

Which of the following is(are) example(s) of separation? A) Separating duties among different employees to prevent fraud B) Segregating hazardous materials to prevent cross-contamination C) Keeping computer servers in a separate, secure location D) Having multiple suppliers in case one fails. E) B, C, and D. F) B and C. G) C and D. H) All of the above. I) None of the above.

E) B C and D

A company has conducted safety training sessions for employees to both prevent workplace accidents and to limit thecost of an accident if one occurs. What kind of risk control method is being used? A) Proactive avoidance B) Pre-loss loss reduction C) Loss prevention .D) Post-loss loss reduction E) B and C. F) A and C. G) C and D. H) All of the above. I) None of the above.

E) B and C

How does the Law of Large Numbers apply to insurance? A) The number of policyholders will be close to the expected number of policyholders in a given time period B) The total cost of claims will be close to the expected cost of claims in a given time period C) The number of claims from policyholders will be close to the expected number of claims in a given time period D) The total premium income will be close to the expected premium income in a given time period E) B and C. F) A and B .G) C and D .H) All of the above. I) None of the above.

E) B and C

What is the shape of a normal distribution? A) Asymmetrical B) Bell-shaped C) Symmetrical D) Flat E) B and C. F) B and D. G) C and D. H) All of the above. I) None of the above.

E) B and C

Which of the following is(are) example(s) of loss prevention? A) Storing important documents in a fireproof safe B) Implementing cybersecurity measures to reduce the likelihood of data breaches C) Performing regular maintenance on equipment to reduce the likelihood of breakdowns D) Providing training to employees so that they know how to respond to a fire. E) B and C. F) A, B, and C. G) B, C, and D. H) All of the above. I) None of the above.

E) B and C

What is bottomry in the Code of Hammurabi? A) A type of agricultural insurance B) A type of maritime insurance C) A gambling game D) A form of loan E) B and D. F) A and C. G) A, B, and D. H) All of the above. I) None of the above.

E) B and D

Which of the following is an example of moral hazard? A) A consumer that buys a more expensive car because they expect the price of gas to remain low. B) A worker that takes fewer safety precautions because they are wearing personal protective equipment .C) A company that hires more employees because it expects demand for its products to increase. D) A bank that takes on additional risk because it knows it will be bailed out if the investments fail. E) B and D. F) A, B, and D. G) A, B, and C. H) All of the above. I) None of the above.

E) B and D

What is experience rating in the context of insurance? A) The process of denying coverage to high-risk policyholders B) The process of adjusting insurance premiums based on a policyholder's past claims history C) The process of charging higher rates to policyholders who have had multiple claims D) The process of providing discounts to policyholders who have had no claims E) B, C, and D. F) A and C. G) B and D. H) All of the above. I) None of the above.

E) B, C, and D

You are on the final step of the RM process. Previously you choose insurance as a way to finance property risk (toyour factory in Florida) as the market was very soft. What is an example of an event that may have caused the market toharden? A) Wild fires erupting in California B) Law changes regarding medical mal-practice C) A worldwide financial crisis D) A major hurricane making landfall in Florida E) C and D. F) B and C. G) A and C. H) All of the above. I) None of the above.

E) C and D

Meghan has a job located right next to her house and only drives about 10 miles for groceries and doggy daycareevery week and always drives under the speed limit. On the other hand, her brother Sean has to drive on the highway for about30 miles every day to get to work and always drives significantly above the speed limit. Currently, Meghan and Sean pay thesame rate for auto insurance through State Farm. If they are both offered a usage based auto plan, which of the followingstatement(s) is (are) TRUE? A) Sean would be willing to install the In-Drive device. B) Meghan would be willing to install the In-Drive device. C) The In-Drive device can reduce the degree of asymmetric information for State Farm. D) A and B. E) A and C. F) B and C. G) All of the above. H) None of the above.

F) B and C

The more that an individual does not like risk: A) The lower will be their worry value. B) The higher will be their PMAX. C) The higher will be their worry value. D) The lower will be their PMAX. E) A, C, and D. F) B and C. G) A and C. H) All of the above. I) None of the above.

F) B and C

Which of the following is(are) example(s)s of separation? A) Duplicating critical data to ensure it is not lost B) Keeping cash in a safe separate from other valuables C) Storing hazardous materials in a separate room or area D) Separating duties between employees to prevent fraud E) C and D. F) B and C. G) A and C. H) All of the above. I) None of the above.

F) B and C

What are the necessary factors for drawing a normal distribution curve? A) Range B) Average C) Skew D) Standard deviation E) A and D. F) B and D. G) A and C. H) All of the above. I) None of the above.

F) B and D

What is the Law of Large Numbers? A) The probability that the product of a large number of independent trials will be close to the expected value of thetrials B) The probability that the average of a large number of independent trials will be close to the expected value of thetrials C) The probability that the difference of a large number of independent trials will be close to the expected value of thetrials D) The probability that the sum of a large number of independent trials will be close to the expected value of the trialsmultiplied by the number of trials E) A, B, and D. F) B and D. G) C and D. H) All of the above. I) None of the above.

F) B and D

single earthquake damages a large number of buildings in a given geographic region. This simultaneous loss to alarge number of buildings insured by a single insurer illustrates? A) The Law of Large Numbers. B) Losses which are correlated. C) Pooling of independent loss exposures. D) A reason for reinsurance. E) A and B. F) B and D. G) A, C, and D. H) All of the above. I) None of the above.

F) B and D

A company has installed a backup generator to ensure power is not lost during an outage. What kind of risk controlmethod is being used? A) Post-loss loss reduction B) Separation C) Pre-loss loss reduction D) Duplication E) A and C. F) C and D. G) B and D. H) All of the above. I) None of the above.

F) C and D

Heather's car is stolen. When she files a claim with her insurer, Heather claims that she had purchased a new set ofexpensive golf clubs for her boyfriend and that these golf clubs were in the trunk of the car and thus were stolen as well. She istherefore attempting to claim a loss from her insurer of the car and the golf clubs. However, Heather does not have a boyfriendand did not purchase any golf clubs. This is an example of? A) A loss which is not significant to the insured. B) A catastrophic loss. C) Moral Hazard. D) A loss which is not definite in nature. E) A and D. F) C and D. G) A, C, and D. H) All of the above. I) None of the above.

F) C and D

Suppose Person A purchases full insurance for an actuarially fair premium and Person A is the ONLY person in theinsurer's risk pool. Which of the following statements is (are) TRUE about this arrangement? A) The actuarially fair premium for Person A is $4. B) The amount of risk the insurer faces with Person A being their only customer is 2. C) The amount of risk the insurer faces with Person A being their only customer is 1. D) The actuarially fair premium for Person A is $2. E) A and C. F) C and D. G) B and D. H) All of the above. I) None of the above.

F) C and D

Suppose you include the peanuts, but also create a subsidiaries to handle sales in each state. This has the effect ofcapping any single potential liability claim because that subsidiary can declare bankruptcy. A) Loss Prevention. B) Proactive avoidance. C) Separation of exposure units. D) Loss Reduction. E) A and D. F) C and D .G) A, B, and D. H) All of the above. I) None of the above.

F) C and D

Suppose you include the peanuts, but also include a warning label on the package that notifies the consumer the bar"may contain peanuts." This leads to fewer (but not zero) people with peanut allergies consuming your snack bar as well aslimiting (again, not to zero) the amount of legal liability you are subject to for those who due get sick and sue you. This is anexample of:A) Loss Prevention. B) Loss Reduction. C) Separation of exposure units .D) Proactive avoidance. E) A and C. F) B and D. G) A and B. H) All of the above. I) None of the above.

G) A and B

Which of the following is an example of a subjective risk measurement? A) The danger of a new medication, as determined by Joe Rogan B) The level of danger of a horror movie, as determined by personal opinion C) The risk of a plane crash, as determined by data on past incidents and safety regulations D) The risk of a volcanic eruption, as determined by geological data and monitoring E) C and D .F) B and C. G) A and B. H) All of the above. I) None of the above.

G) A and B

Which of the following is an example of an objective risk measurement? A) The likelihood of a stock market crash, as determined by historical data and economic analysis B) The risk of getting a cold, as determined by a medical study of infection rates C) The level of danger of a haunted house, as determined by personal experience D) The perceived danger of a new roller coaster, as determined by a survey of people's opinions E) B, C, and D. F) A and D. G) A and B. H) All of the above. I) None of the above.

G) A and B

A company has two servers in different locations in case of a system failure. What kind of risk control method is beingused? A) Pre-loss loss reduction B) Duplication C) Separation D) Post-loss loss reduction E) B and D. F) A and B. G) A and C. H) All of the above .I) None of the above.

G) A and C

What is an example of experience rating in practice? A) A business owner who has had no claims in the past, will get a discount on their liability insurance policy .B) A young adult who is a non-smoker, healthy and has no prior medical conditions will be charged lower rates for healthinsurance. C) A construction company who has had a high number of workers' compensation claims in the past will be chargedhigher rates for the insurance. D) A driver who has had multiple traffic accidents will be denied coverage by the auto insurance company. E) A and B. F) B and D. G) A and C. H) All of the above. I) None of the above.

G) A and C

What is the conventional wisdom in the financial industry for retirement planning? A) A combination of low-risk and high-risk investments B) Invest only in short-term government bonds or cash C) Build up as much wealth as possible and then spend a certain percent, say 4 percent, each year once you retire D) Invest only in stocks and other high-risk investments E) C and D. F) B, C, and D. G) A and C. H) All of the above. I) None of the above.

G) A and C

Which of the following is NOT considered to be an example of moral hazard in insurance? A) An insurer denying a claim due to a policyholder's actions that contributed to the loss B) An insurer charging different premiums based on the level of risk C) A policyholder taking unnecessary risks because they know they are insured D) A policyholder failing to disclose relevant information to the insure E) A, C, and D. F) B and C. G) A, B, and D. H) All of the above. I) None of the above.

G) A, B, and D

After Hurricane Katrina, Wal-Mart experienced very little interruption in their operations because [among otherreasons] they had multiple distribution centers for products that were all in use. Which of the following statements is[are] TRUE concerning this? A) This is an example of reducing frequency of loss. B) This is an example of reducing severity of loss. C) This is an example of duplication of exposure units. D) This is an example of separation of exposure units. E) A, B, and C. F) A, B, and D. G) B and D. H) All of the above. I) None of the above.

G) B and D

What was the initial reason for governments getting into the insurance business A) Support the growth of small businesses B)To provide support for their citizens C) To make money D) To fund wars E) A and B F) A and C G) C and D H) all of the above G) none of the above

G) C and D

A Risk Manager decides to begin a fire safety program that instructs staff to identify and reduce hazards thatcould cause a fire or make a fire worse. With respect to the loss in question, this decision would decrease which of thefollowing? A) Expected loss. B) Severity. C) Frequency. D) A and B. E) A and C .F) B and C. G) All of the above .H) None of the above.

G) all of the above

Consider the concept of moral hazard. Which of the following statements are an example of moral hazard in healthinsurance? A) Individuals with health insurance engage in careless behavior causing them to get sick .B) Individuals with health insurance use more health care goods and services than those without health insurance. C) Individuals file false claims and commit insurance fraud with health insurance. D) A and B. E) A and C. F) B and C. G) All of the above. H) None of the above.

G) all of the above

Which of the following statement(s) is(are) TRUE about the loss control technique, Separation? A) In separation, loss exposures are spread over numerous projects, products, markets or regions. B) Separation can result in increased loss frequency. C) In separation, the exposure units are utilized in the company's day-to-day operations. D) A and B. E) A and C. F) B and C. G) All of the above. H) None of the above.

G) all of the above

For which of the following risks does the US (federal or state governments) have an insurance 'mandate' of someform? A) Flood Risk. B) Worker's Compensation C) Auto Liability. D) Unemployment. E) B and C. F) A and B. G) A and C. H) All of the above. I) None of the above.

H) all of the above

Consider the concept of moral hazard. Which of the following statements are NOT an example of moral hazard inhealth insurance? A) Individuals with health insurance engage in careless behavior causing them to get sick. B) Individuals with health insurance use more health care goods and services than those without health insurance. C) Individuals file false claims and commit insurance fraud with health insurance. D) A and B. E) A and C. F) B and C. G) All of the above .H) None of the above.

H) none of the above

A company invests in an insurance policy to protect against potential losses. What kind of risk control method is beingused? A) Separation B) Post-loss loss reduction C) Proactive avoidance. D) Loss prevention E) A and B. F) B, C, and D. G) C and D. H) All of the above. I) None of the above.

I) none of the above

Which of the following is TRUE for risk-neutral people / firms? A) They love to gamble. B) Their cost of credit does not fluctuate with their risk. C) They will always purchase full insurance. D) Their cost of worry is negative. E) A, B, and D. F) A, B, and C. G) B, C, and D. H) All of the above. I) None of the above.

I) none of the above

Which of the following is(are) example(s) of proactive avoidance? A) Purchasing insurance to cover fire damage B) Evacuating a building during a fire C) Installing fire alarms in a building D) Conducting regular safety inspections of equipment and machinery E) B, C, and D. F) A and B. G) A and D. H) All of the above. I) None of the above.

I) none of the above

Which of the following is(are) example(s) of reactive avoidance? A) Offering compensation to customers after a data breach has occurred B) Hiring additional security guards after a break-in has occurred C) Implementing a fire suppression system after a fire has occurred D) Conducting a safety audit after a workplace accident has occurred E) B, C, and D. F) A and D. G) A, B, and D. H) All of the above. I) None of the above.

I) none of the above

Which of the following would result in an increased pure premium for an insurance firm who is selling auto insurance?[other things equal]? A) The insurer has more confidence in their estimate of expected loss .B) The insurer has less confidence in their estimate of expected loss. C) The insurer put more resources toward an expensive advertisement campaign. D) The insurer decides to only insure drivers who have excellent driving records. E) B and C. F) A, C, and D. G) A and C. H) All of the above. I) None of the above.

I) none of the above