Part II: Multiple choice (5 marks, 1 each) (ILOs: A1, C1)

1. Fraudulent insurance claims are considered a(n)

a. Attitudinal hazard

b. Physical hazard

c. Moral hazard

d. Legal hazard

2. AML Bank provides easy and fast personal finance and personal loans access to meet various personal financial needs. Before accepting loan applications, the bank preforms an extensive background credit check on the applicants to assess the likelihood of a loan default. This treatment represents:

a. Avoidance

b. Loss reduction

c. Loss prevention

d. Non-insurance transfers

3. A newly qualified doctor is concerned that he might commit a few errors in his early days due to his lack of experience in surgery and wants to manage that risk. Which type of insurance is he seeking?

a. Professional liability insurance

b. Workers compensation insurance

c. Product liability insurance

d. Group health insurance

4. Maryam would like to buy a house by borrowing from a mortgage lender. The lender required Maryam to purchase property insurance on the home so that the collateral supporting the loan will be protected. This scenario illustrates which of the following benefits of insurance to society?

a. Enhancement of credit

b. Source of investment funds

c. Incentives for loss prevention

d. Indemnification

5. An agriculture company is mainly involved in growing and harvesting cotton as a raw material for export. At the end of each harvest, the price could decrease or increase based on the global supply and demand for cotton. Possible adverse changes in the price of cotton is a(n)

a. Financial risk

b. Strategic risk

c. Operational risk

d. Compliance risk