Hs 311 Insurance, Ch 2--T/f

Front 1

T/F
Risk management is a systematic process for dealing with risks, usually pure risks.

Back 1

True

Front 2

T/F
A weakness of using the risk management process is that only insurance products are considered for treating risks.

Back 2

False. The risk management process considers all the alternatives for treating risks.

Front 3

T/F
While loss prevention involves reducing the probability of frequency of loss, loss reduction involves lessening its severity.

Back 3

True

Front 4

T/F
Deductibles are a form of partial risk retention that can often be used to handle high-frequency, low-severity losses efficiently.

Back 4

True

Front 5

T/F
Self-insurance is an especially appropriate technique for small businesses and families to use in dealing with risks.

Back 5

False. Self-insurance is generally appropriate only for large businesses that can act like an insurance company for their own risks

Front 6

T/F
Although a variety of noninsurance risk transfer methods are available, insurance is the only risk transfer technique that can be used to handle pure risks.

Back 6

False. Other noninsurance risk transfer methods also can be used to handle pure risks-for example, extended warranties and hold-harmless agreements.

Front 7

T/F
For an insurance business to operate in the long run, premiums must equal losses, expenses, and profits.

Back 7

False. Premiums plus investment earnings plus other income must equal losses, expenses, and profits.

Front 8

T/F
The law of large numbers states that as the number of independent events increases, there is a greater chance that the actual results will be close to the expected results.

Back 8

True

Front 9

T/F
The first step in the risk management process is risk measurement.

Back 9

False. The first step is risk identification.

Front 10

T/F
In risk management, each risk can be measured in terms of frequency, severity, and variation.

Back 10

True

Front 11

T/F
Risk management involves, among other things, a careful evaluation of the suitability and cost of various alternative methods to treat pure risks, and the choice of the method or combination of methods that provides the most desirable result.

Back 11

True

Front 12

T/F
Personal insurance planning begins with a sound individual insurance program, supplemented by group insurance and any available social insurance.

Back 12

False. Social insurance provides the foundation of a personal insurance program, followed by employer-sponsored insurance and, finally, individual insurance.