Questions and Answers of Principles Of Risk Management

What is the function of an actuary?
a. Explain the meaning of enterprise risk management (ERM).b. What types of risks are included in ERM?c. Explain what is meant by property risks and liability risk.
Sarah works in a small local company. She owns a small apartment on the third floor and has several goods in her apartment (clothes, computer, tablet, smartphone, TV set, etc.) worth €20,000. She
Explain the meaning of personal risk and list the major types of personal risks.
Differentiate between risk control and risk financing.
There are many instances of insurance fraud. For example, Gloria Eun Hye Lee, 36, owned the Prince and Princess Pet Boutique in Las Vegas. Lee and her husband were facing huge financial problems and
The Bus4School Company provides school bus transportation to public schools in London. The company owns 50 buses that are garaged in four different boroughs and it provides school bus services to
James and Emily are married and own a city fringe three-bedroom apartment in Sydney, Australia. Their son, Jacob, attends college in London and lives in a student residence near campus. Their
Jenny is contemplating taking comprehensive life insurance coverage for herself, but she is unsure whom she can approach to get the best advice. Explore the various insurance intermediaries that
What are the characteristics of a typical mass merchandising plan?
Delta Insurance is a property insurer that entered into a surplus-share reinsurance treaty with Eversafe Re. Delta has a retention limit of $200,000 on any single building, and up to nine lines of
A major French insurer is in a position to take over an Irish-based insurance company called FarmInsure Ltd. FarmInsure has a particular focus on agricultural insurance which may complement the
What is the basis for current state regulation of insurance? Explain
Explain the difference between indemnity value and replacement value.
John owns a house. He insured it for £150,000 with the clause of replacement cost insurance. The house is 10 years old and has a useful life of 100 years. Its market fair value is £140,000. How
George has a big house on an island on a small lake. There is no bridge connecting his island with the land; thus, the only way to reach his house is by using a boat or helicopter. He owns a boat
a. What are the basic parts of an insurance contract?b. Which part is considered “the heart” of an insurance contract? Why?
Tom has a bookstore near a river, which is insured for €120,000 under a commercial property insurance policy.The policy contains a 75 percent coinsurance clause. Tom's bookstore suffered a loss
a. What is the meaning of “insuring agreement?”b. There are two basic forms of insuring agreement in property insurance. List them and describe briefly.
Angelique has a small plane. Its replacement cost is £150,000. She wants to insure it in a local company (Insurer A), as she owns some stocks in this company. However, this insurer covers planes
Explain the rationale of co-insurance in a property insurance contract.
Explain how a section of definitions influence on insurance policy.
a. What is the purpose of other-insurance provisions?b. Give an example of the pro-rata liability clause.
a. Under the needs approach, when is the dependency period of a surviving spouse assumed to end?b. What is the period during which a surviving spouse is ineligible for Social Security benefits
Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at
Scott and Allison are married and file a joint tax return. Scott is a graduate student who works part time and earned $15,000 in 2015. He is not eligible to participate in his employer's retirement
What is the fundamental purpose of a variable annuity?
Travis, age 25, graduated from college and obtained a position as a tax accountant. He is ineligible to participate in his employer’s retirement plan for one year.a. Assume that Travis has a
Briefly explain the income tax deduction of traditional IRA contribution.
Simon is Head of Strategy with Great Health, a private health insurer that is considering expanding into new European markets. They are considering opportunities in Ireland and the UK and the CEO is
Explain the following renewal provisions that may appear in individual health insurance policies:a. Guaranteed renewableb. Noncancelablec. Conditionally renewabled. Nonrenewablee. Guaranteed issue
Countries adopt a number of approaches to funding healthcare costs. Outline each of the following methods that may be used to fund healthcare internationally: Taxation, Social health insurance and
Megan is president of an accounting firm that has 10 employees. The only employee benefit provided by the firm is a paid 2-week vacation for employees with one or more years of service. The firm's
What are the characteristics of a health maintenance organization (HMO)?
Compare between short-term plans and long-term plans with respect to each of following:a. The coverageb. The elimination periodc. The length of benefit periodd. The amount of disability income
Richard, age 40, is the owner of Auto Repair, Inc. In addition to Richard, the company has five employees. Richard wants to establish a retirement plan for his employees. He is considering two plans:
Briefly explain the basic characteristics of a SIMPLE retirement plan.
Alexander, age 42, and Susan, age 39, are married and live in small house. They have three children-2-year old Sam, 10-year old Alan, and 20-year-old Jane. Alexander is employed as an engineer with
Determine the similarities and the differences between social security and private insurance.
Adam Smith is 48 years old IT consultant. He has a 47 years old wife Lisa, and three sons, Michael 24 years old, John is 22 years old and Alan 5 years old. John works as teacher and has his own
Distinguish between OASDI programs and workers compensation programs.
Michael went deer hunting with Nate. After seeing bushes move, Michael quickly fired his rifle at what he thought was a deer. However, Nate had caused the movement in the bushes and was seriously
What is the meaning of an intentional tort?
Malcolm was involved in an auto accident. He was judged to be 20 percent at fault in the accident, and the other party was judged to be 80 percent at fault. Malcolm's actual damages were $40,000.
What is the intent of the family purpose doctrine?
What are the requirements that must be met to satisfy the doctrine of res ipsa loquitur?
Tanya, age 20, is a college student who recently purchased her first car from a friend who had financial problems. The vehicle is a high-mileage, 2004 Toyota Corolla with a current market value of
What is the purpose of the extended non-owned liability coverage endorsement to the PAP?
Paige, age 26, has purchased a new Ford sedan. She has a clean driving record. Collision coverage on the car in a small midwestern city where she lives would cost approximately $650 every 6 months
David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a
Who are the people included in the persons insured under Section I of the Homeowners 3 policy?
Ted purchased a home. To finance the purchase, he borrowed $140,000 from ABC Bank, pledging the home as collateral for the loan. Shortly after purchasing the home, Ted lost his job. He could not find
Located in the United Kingdom, BestHomeInsurance has expanded to provide homeowners insurance in a number of European jurisdictions. Charles was previously a senior underwriter and now Head of
What are the coverages provided by an unendorsed ISO Dwelling Program form?
What are some of the reasons an insured might add a scheduled personal property endorsement to a homeowners policy?
Why are buildings in flood plains difficult for private insurers to insure?
a. List causes-of-loss that fall under1. Basic form2. Broad formb. Explain the difference between causes-of-loss in basic and special form.
Outline the following coverages for business income losses:a. Business Income and Extra Expenseb. Business Inco$#!#$me from Dependent Properties
Outline the following coverages for business income losses:a. Business Income and Extra Expenseb. Business Income from Dependent Properties
Classify the following coverages as “Ocean marine” or “Inland marine” and describe the insurable interests reflected by each of them:a. Freight Insuranceb. Account receivable coverage formc.
Jillian operates a sporting goods store in a rented location at a shopping mall. She is insured under a CGL policy with the following limits:A propane tank in the store exploded. Indicate the dollar
Classify the following coverages as “Ocean marine” or “Inland marine” and describe the insurable interests reflected by each of them:a. Hull Insurance valuable papers and records coverage
Briefly describe the Bodily Injury and Property Damage Liability coverage in a commercial general liability (CGL) policy.
Kathy owns a large retail electrical store that sells light fixtures, lamps, and electrical equipment. The firm is not insured for employee theft. A risk management consultant recommended adding an
Martin, 58, is widowed and lives with his friend Amanda, 50. Martin works as a taxi driver. His monthly income is around $1,300, though it varies across months. He owns an apartment with a current
Explain the factor(s) that can be ignored when deterring the cost of life insurance.
a. Explain the two principal types of interest-adjusted cost indexes.b. What are the factors that should be considered when using interest-adjusted cost data to compare insurance policies?
a. Sunrise Travel Ltd has fidelity guarantee insurance to cover any fraudulent acts of its staff and agents for a period of one year starting on January 1, 2012. A credit note was issued to a
When developing rates and premiums for a class of business, insurers need to take account of a range of internal factors, such as expenses and contingency loading. Outline how an underwriter must
AOL Company is an oil and gas company operating in Southeast Asia. The management decided to expand its commodity-based business to countries in Asia and Europe. What types of risk may be faced by
The chance of loss could be increased or decreased by different conditions, called hazards. For each of the following, identify the type of hazard.a. The presence of ice on the road.b. A motorist
There are several techniques of managing risk. Give an example of how each of the following risk-control methods can be implemented.a. Avoidance: the risk of sinking (by human).b. Loss prevention:
Alice lives in a house on the bank of a river. In the last 10 years, the river has flooded the surrounding areas six times, leaving Alice’s house partially damaged. As Alice lives in a flood-prone
Every company faces a variety of pure risks that can have serious financial consequences if a loss occurs. For each of the following threats, identify the category of risk. Explain your answer.a.
a. What is the definition of insurance?b. From the definition, identify four basic characteristics of insurance.
Imagine a situation where all students in your class decide to insure against the risk of failing a quiz in the form of a remedial class funded by premiums collected from the rest of the class.
a. Explain how society benefits from indemnification for loss. Give examples.b. Explain how conducting business in insurance costs society. Give examples.
While numerous government insurance programs are in operation across the world, social insurance is usually treated as a part of social policy, with each country having different solutions. List the
Explain the term social insurance.
Give at least four examples of fraudulent claims.
a. Explain how insurance can provide benefits to the community.b. Explain how insurance can be costly to society.
Why does nonlife insurance typically use the term “property and casualty insurance” rather than “property and liability insurance”?
a. Explain how a society benefits from loss prevention.b. Give at least three examples of loss-prevention programs supported by insurance companies.
Kind Sicherheit is a manufacturer of childcare safety products, primarily car seats and strollers. The products are sold directly to independent retailers in Europe. The company’s risk manager
Explain the difference between risk management and insurance management.
The Silver Drive company is a taxi operator in Singapore, which owns a fleet of 5,000 cars. The risk manager is considering a partial retention program for physical losses to company cars.a. Identify
a. What are the steps in the risk management process?b. Among all the steps in the risk management process, which is considered the most critical or important
Loss prevention and loss reduction are risk-control techniques that can be effectively used by an organization to manage risk exposure.a. Give an example of a company’s loss exposure where the
a. What is the meaning of value at risk (VAR)?b. To what type of asset is VAR applied?
What are the advantages of the direct response system for marketing life insurance?
Why are some mutual insurers referred to as “assessment mutuals”?
Describe the major categories of potential loss exposures that a risk manager should consider and identify.
The head of the risk management department at a car manufacturing company has identified the following crucial loss exposures: (1) defective product with slight probability and significant loss
Explain the advantages and disadvantages of retention as a risk-financing technique.
a. What are the reasons for creating a captive insurer?b. What is the difference between a single parent captive and a group captive?
a. What is self-insurance?b. What is a risk retention group?
Enterprise risk management programs differ from traditional risk management programs. What additional expertise, aside from knowledge of hazard risks, must a Chief Risk Officer possess?
Use a risk management matrix to illustrate how to choose risk management techniques depending on loss exposures.
Why might members of an organization resist the implementation of an enterprise risk management program? How can this resistance be overcome?
What are the steps in the enterprise risk management process?

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