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52 Cards in this Set
- Front
- Back
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Describe 4 advantages brokers realize when using risk management in their sales process
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2. Clients will be more likely to renew coverage's 3. Clients will be more likely to refer others to brokerage 4. Clients will be more satisfied with claims process |
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Describe the process of: Identification of loss exposures: Analysis of loss exposure |
1. Identification of loss exposure: The process recognizes losses that may occur 2. Analysis of loss exposure: This process estimates impact losses may have |
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What are 3 criteria's used when classifying loss exposures?
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1.Identifying type of value exposed to losses 2. Identifying perils causing losses 3.Identifying financial impact losses |
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What are four values exposed to loss?
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1. Property Values 2. Net Income 3. Liability Loss 4. Personal Loss |
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What are 2 types of property values exposed to loss?
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1.Tangible Property 2. Intangible property |
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Explain the following property loss exposure? Debris removal: |
expenses incurred removing debris after |
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Explain the following property loss exposure? Demolition expense: |
expenses incurred demolishing undamaged portion of building after losses |
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Explain the following property loss exposure? Undamaged property |
Loss in value property occurring after losses to related structures (drop in value of silo after barn is lost to fire) |
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Explain the following property loss exposure? Increases cost of construction |
expenses incurred bringing buildings up to code while repairing damage after losses |
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Explain the following property loss exposure? Pair or set value? |
decrease in value of remaining item in a pair or set after loss to other portion of pair or set
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Explain the following property loss exposure? Going concern value |
Difference in value of property that must be sold after losses and value of operating business |
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What are 4 intangible properties exposed to loss?
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2. Trademarks 3. Right to collect accounts 4. Copyrights |
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What are 2 factors that impact on net income?
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2. Increase in expenses |
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State 5 loss exposures that will result in decreases in revenues
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2. Contingent business interruption 3. Loss of profits on finished goods 4. Reduced rental income 5. Decreased collection of accounts receivable |
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State 3 loss exposures that will result in increase in expenses.
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1. Increase in accounts receivable 2. Increased in rental expenses 3. Expediting expenses |
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When assessing liability loss exposure, what are 2 factors to consider?
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2. Source of legal duty |
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What are 3 expenses court actions may cause?
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2. Payment of an award for damages or costs of corrective actions 3. Amounts of out of court settlements |
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Identify 3 peril categories and provide 3 examples in each |
Cave in, collapse, drought 2. Human Perils Arson, change of temperature, chemical leakage 3. Economic Perils War, currency fluctuations, depression |
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Which peril category is beyond human control
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Natural Perils |
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Identify which peril categoty the following loss exposures belong, Natural, Human or Economic 1. Cave in 2. Depression 3. Arson 4.Fungi |
2. Economic 3. Human 4. Natural |
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Identify which peril categoty the following loss exposures belong, Natural, Human or Economic 1. Water hammer 2. Earthquake 3. War 4. Embezzlement |
1. Human 2. Natual 3. Economic 4. Human |
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When assessing financial impact losses, what factors will impact this assessment
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1. Loss frequency 2. Loss severity |
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When reviewing loss frequency, what categories have been established? Also describe and provide an example of each (4)
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1. Almost Nil Description- almost no possibility, very unlikely Example- Meteorite impact 2. Slight Description: It may happen but hasn't Example loss from uncontrolled wildfire 3. Moderate Description- It occurs from time to time Example- windstorm or hail storm 4.Definite Description: It occurs regularly Example: Shoplifting |
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When reviewing loss severity, what categories are assessed? Also describe and provide an example of each 3 S's - Slight, Significant, Severe |
Description: Organization can easily pay for loss Example: Paper damaged during printer jam Category: Significant Description: Organization cannot pay for entire loss, part must be transferred Example: Damage caused by summer hailstorm Category: Severe Description: Organization must transfer loss or risk failure Example: Major loss due to fire |
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State if you would treat the following loss exposures Frequency = definite Severity = Slight |
no |
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State if you would treat the following loss exposures Frequency = slight Severity = Significant |
yes
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Describe the inverse relationship between loss frequency and severity
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When loss frequency goes down, severity goes up |
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State 5 tools used by risk managers to identify and analyze loss exposure
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2. Financial statements and underlying records 3. Other records & documents 4. Flowcharts 5. Personal inspections |
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Identify an advantage and disadvantage of each of the following Standardized Surveys |
Disadvantage - No requirement to go beyond questions asked |
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Identify an advantage and disadvantage of each of the following Balance sheets |
Advantage: Helps identify existence of assets Disadvantage: Values will be inaccurate |
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Identify an advantage and disadvantage of each of the following Other Records & documents |
Advantage: Helps in identifying future changes in organization Disadvantage: All documents not available |
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Identify an advantage and disadvantage of each of the following Flow charts |
Advantage: Identifying bottlenecks in production Disadvantage: Does not indicate probability of losses |
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What is the best method to identify and analyze loss exposures?
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Personal inspections cannot be replaced with other methods |
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What are 2 ways to avoid loss exposure and provide a weakness of this method?
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2. Eliminating exposure Weakness: Avoiding on exposure, usually creates another exposure |
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What is the purpose of loss prevention techniques
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Loss prevention techniques addresses frequency of losses
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What is the purpose of loss reduction techniques?
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Loss reduction techniques address severity of losses |
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Describe pre-loss, loss reduction measures, and provide an example when reviewing property loss exposure
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Pre loss, loss reduction measures the attempt to reduce amount of loss by halting its progress. These measure would include installation of sprinkler systems
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What 2 methods may be used when using segregation of exposure units?
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1. Separation 2. Duplication |
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Describe separation and provide an example when reviewing property loss exposures.
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Separation occurs when organizations split a single asset or function into two or more locations. Separation of property values occurs when organizations store merchandise in more than one warehouse.
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What is a weakness of separation?
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Although separation sounds good on paper, separation may interrupt normal operations of business |
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Describe duplication and provide an example when reviewing property loss exposures.
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Duplication occurs when complete asset or structure is held in reserve to replace damaged assets or structures |
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What is a weakness of duplication?
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Duplication can be a very expensive method of loss control |
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Describe contractual transfer and provide an example when reviewing property loss exposures
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Contractual transfer occurs when business transfer liability for losses to someone other organization or person
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What is accomplished with risk financing?
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Risk financing provides funding for losses that occur |
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Describe 2 risk financing techniques available to risk managers?
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2. Contractual transfer uses money from outside organizations to pay for losses |
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State 2 examples when forced retention may be imposed upon organizations
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2.Money required to pay required deductibles |
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State 2 examples when optional retention may be used by organizations
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2.When losses are small and expected, therefore budgeted (ie shoplifting) |
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What are 2 ways businesses may transfer losses in contract?
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2. commercial insurance |
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Describe one type of non-insurance contractual transfer.
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Hold harmless agreements are contracts when one organization agrees to hold harmless another organization. (ie landlord held harmless by tenant in lease agreement) |
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when should insurance be recommended?
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When no other risk financing technique or loss control technique is sufficient |
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What are 3 problems that could occur when using insurance as the transfer technique?
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2. Loss may not be insured when client expected coverage or amount of settlement is less than client expected 3. Amount of coverage may be insufficient for losses incurred |
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What are the 3 forecasts risk managers must use when selecting risk management techniques?
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1. Forecast frequency and severity of potential losses 2. Forecast effect risk control or risk financing methods will have on potential losses 3. Forecast expenses of methods under consideration |
