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RMIN 4000 Exam 1 Brown Questions and Answers 2024
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RMIN 4000 Exam 1 Brown
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RMIN 4000 Exam 1 BrownTextbook definition of RISK - answer Uncertainty concerning the occurrence of a loss
Better definition of RISK - answer A calculated possibility of a negative outcome
Calculated Possibility - answer0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome - answer Loss
Losses must be __________? - answer Quantifiable
Pure Risk States - answer Loss
or
No Loss
Examples of Pure Risks - answerFire, Cancer, Dog bites a visitor
Speculative Risk States - answerLoss
No Loss/No Gain
Gain
Examples of speculative risks - answerInvestment, Gambling, Drinking
Frequency answers what question? - answerHow often does a loss occur
The number of losses that occur in a specified time period
Probability of a loss - answerFrequency
Severity answers what question? - answerHow much does it cost when a loss does
occur?
The dollar amount for a loss of a specific peril
, Peril - answerCause of a loss
Hazard - answerCondition that creates or increases the frequency and/or severity of a
loss
DOES NOT CAUSE A LOSS
Examples of Peril - answerFire, Tornado, Collision, Burglary
Types of Hazard - answerPhysical
Moral
Morale (Attitudinal)
Legal
Physical Hazard - answerA physical condition that increases the frequency and/or
severity of a loss
Book Definition of Moral Hazard - answerDishonesty or character defects in an
individual that increase the frequency and/or severity of a loss
Better Definition of Moral Hazard - answerThe presence of insurance changes the
behavior of the insured
Examples of Moral Hazard - answerUsing a hammer to create "hail" damage to a roof
Exaggerating the value of insured property
Morale (Attitudinal) Hazard - answerCarelessness or indifference to a loss, which
increases increases the frequency and/or severity of a loss
Examples of Morale Hazard - answerLeaving car keys in an unlocked car
Neglecting a tree limb growing over your roof
Legal Hazard - answerCharacteristics of a legal system or regulatory environment that
increase the frequency and/or severity of a loss
Examples of a Legal Hazard - answerJuries in some areas are more sympathetic than
in other areas
Georgia now requiring Diminution in Value to be paid on property losses
Diversifiable Risk - answerAffects only individuals or small groups, not the entire
economy
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