Caib 3 - Chapter 6

Front 1

describe 4 advantages brokers realize when using risk management in their sales process

Back 1

- clients are more knowledgeable about their insurance

- clients will be more likely to renew

- clients will be more likely to refer new clients to brokerage

- clients will be more satisfied with their claims process

Front 2

describe the process of :

identification of loss exposures

Back 2

recognizes the types of losses that may occur

Front 3

Descibe the process of :

analysis of loss exposures

Back 3

estimates how much a loss will cost, and how it will impact

Front 4

what are 3 criteria used when classifying loss exposures

Back 4

-identifying type of value exposed to losses

-identifying perils causing losses

-identifying financial impact of losses

Front 5

what are 4 values exposed to loss

Back 5

-property value

-net income values

-liability loss

-personnel loss

Front 6

what are 2 types of property values exposed to loss

Back 6

- tangible property

-intangible property

Front 7

explain the following property loss exposure:

debris removal

Back 7

expenses incurred removing debris after losses

Front 8

explain the following property loss exposure:

demolition expense

Back 8

expenses incurred demolishing undamaged portion of a building after a loss

Front 9

explain the following property loss exposure:

undamaged property

Back 9

loss in value of property occurring after losses to related structures (drop in value of silo after barn is lost to fire)

Front 10

explain the following property loss exposure:

increased cost of construction

Back 10

expenses incurred bringing buildings up to current code while repairing damage after a loss

Front 11

explain the following property loss exposure:

pair or set value

Back 11

decrease in value of remaining item in a pair or set after loss to other portion of pair or set

Front 12

explain the following property loss exposure:

going concern value

Back 12

difference in value of property that must be sold after losses and value of operating business

Front 13

what are 4 intangible properties exposed to loss?

Back 13

-securities

-trademarks

-right to collect accounts

-copyrights

Front 14

what are 2 factors that impact on net income

Back 14

- decrease in revenues

- increase in expenses

Front 15

state 5 loss exposures that will result in decreases in revenues

Back 15

-business interruption

-contingent business interruption

-loss of profits on finished goods

-reduced rental income

-decreased collection of accounts receivable

Front 16

state 3 loss exposures that will result in increase in expenses

Back 16

- increase in accounts receivable

- increase in rental expenses

- expediting expenses

Front 17

when assesing liability loss exposures what are 2 factors to consider

Back 17

-entity to whom duty is owed

-source of legal duty

Front 18

what are 3 expenses court actions may cause

Back 18

-cost to investigate and defend

- payment of an award for damages or cost of corrective actions

-amounts of out of court settlements

Front 19

identify 3 peril categories

Back 19

-natural perils

-human perils

-economic perils

Front 20

give an example of natrual perils

Back 20

cave in collapse drought

Front 21

give an example of human perils

Back 21

arson change of tempurature chemical leakage

Front 22

give an example of economic perils

Back 22

war currency fluctuations depression

Front 23

which peril category is beyond control

Back 23

natural perils

Front 24

when assessing financial impact of losses what factors will impact this assesment

Back 24

-loss frequecny

- loss severity

Front 25

when reviewing loss frequency what categories have been established

Back 25

-almost nil

- slight

-moderate

-definite

Front 26

describe and give example of

almost nil

(when reviewing loss frequency)

Back 26

almost no possibility/ very unlikely

meteorite impact

Front 27

describe and give example of

slight

(when reviewing loss frequency)

Back 27

it may happen , but hasn't

loss from uncontrolled wildfire

Front 28

describe and give example of

moderate

(when reviewing loss frequency)

Back 28

it occurs from time to time

windstorm or hail storm

Front 29

describe and give example of

definite

(when reviewing loss frequency)

Back 29

it occurs regularly

theft/shoplifting

Front 30

when reviewing loss severity what categories are assessed

Back 30

slight

significant

sever

Front 31

describe and give example of

slight

(when reviewing loss severity)

Back 31

organization can easily pay for loss

paper damaged during printer jam

Front 32

describe and give example of

significant

(when reviewing loss severity)

Back 32

organization cannot pay for entire loss, part must be transferred

damage caused by summer hailstorm

Front 33

describe and give example of

severe

(when reviewing loss severity)

Back 33

organization must transfer loss or risk failure

major loss due to fire

Front 34

describe the inverse relationship between loss frequency and severity

Back 34

when loss severity goes down frequency goes up,

when loss frequency goes down severity goes up

Front 35

state 5 tools used by risk managers to identify and analyze loss exposures

Back 35

-standard surveys and questionnaires

-financial statements and underlying records

-other records and documents

-flowcharts

-personal inspections

Front 36

identify an advantage & disadvantage

standardized surveys

Back 36

advantage - easy to complete

disadvantage - no requirement to go beyond questions asked

Front 37

identify an advantage & disadvantage

balance sheets

Back 37

advantage - helps identify existence of assets

disadvantage - values will be inaccurate

Front 38

identify an advantage & disadvantage

other records and documents

Back 38

advantage - helps identify future changes in organization

disadvantage - all documents are not available

Front 39

identify an advantage & disadvantage

flowcharts

Back 39

advantage - identifying bottlenecks in production

disadvantage - does not indicate probability of losses

Front 40

What is the best method to identify and analyze loss exposures?

Back 40

personal inspections cannot be replaced with other methods

Front 41

what are 2 ways to avoid loss exposures

Back 41

-completely avoiding the exposure

-eliminating the exposure

Front 42

what is a weakness to avoiding and eliminating loss exposures

Back 42

avoiding or eliminating one exposure will usually create another

Front 43

what is the purpose of loss prevention techniques

Back 43

addresses the frequency of losses

Front 44

what is the purpose of loss reduction techniques

Back 44

address severity of losses

Front 45

describe pre-loss, loss reduction measures and provide an example when reviewing property loss exposure

Back 45

pre-loss, loss reduction measures attempt to reduce amount of loss prior to losses occurring.

would include placing all flammable liquids in flammable liquid storage cabinets

Front 46

describe post-loss, loss reduction measures and provide an example when reviewing property loss exposures

Back 46

post-loss, loss reduction measures the attempt reduce amount of loss by halting its progress

would include installation of sprinkler systems for when a fire occurs

Front 47

what 2 methods may be used when using segregation of exposure units

Back 47

-separation

-duplication

Front 48

describe separation and provide and example when reviewing property loss exposures

Back 48

when organizations split a single asset or function in 2 or more locations.

occurs when organizations store merchandise in more than 1 warehouse

Front 49

describe duplication and provide an example when reviewing property loss exposures

Back 49

when complete asset or structure is held in reserve to replace damaged assets or structures

have a spare tire for when you get a flat

Front 50

what is a weakness of separation

Back 50

may interrupt normal operation of business

Front 51

what is a weakness of duplication

Back 51

can be very expensive

Front 52

describe contractual transfer and provide an example when reviewing property loss exposures

Back 52

occurs when business transfer liability for losses to some other organization or person

Front 53

what is accomplished with risk financing

Back 53

provides funding for losses that occur

Front 54

describe 2 risk financing techniques available to risk managers

Back 54

-retention is using money from within organizations to pay for losses

-contractual transfer uses money from outside the organization to pay for losses

Front 55

state 2 examples when forced retention may be imposed upon organizations

Back 55

-losses from occurrences that cannot be insured (war)

-money required to pay required deductible

Front 56

state 2 examples when optional retention may be used by organizations

Back 56

-when losses are small and are within business's financial ability (broken windows)

-when loses are small and expected therefore budgeted (shoplifting)

Front 57

what are 2 ways businesses may transfer losses in contract

Back 57

-non insurance transfer

-commercial insurance

Front 58

describe 1 type of non insurance contractual transfer

Back 58

hold harmless agreements are contracts when one organization agrees to hold harmless another organization (landlord held harmless by tenant in lease agreement)

Front 59

when should insurance be recommended

Back 59

when no other risk financing technique or loss control technique is sufficient

Front 60

what are 3 problems that could still occur when using insurance as the transfer technique

Back 60

-insurer may declare bankruptcy

-loss may not be insured when client expected coverage or amount of settlement is less than client expected

-amount of coverage may be insufficient for losses incurred

Front 61

what are the 3 forecasts risk managers must use when selecting risk management techniques

Back 61

-forecast frequency and severity of potential losses

- forecast effect risk control or risk financing methods will have on potential losses

forecast expenses of methods under consideration