Question 1

Mini-Case
The Bookworm is a bookstore and café located on a busy downtown main street in Denver.The owner,Waata Reader prides himself on the vast selection of books available in the shop.The store has three stories,with both stairs and an elevator to each level.In the back of the first floor is the café,which serves sweets and coffee drinks.Many times customers will linger there over a cup of coffee,deciding which book to purchase.Waata has expanded several times and now he has 22 people on the staff of the current,larger store.
-One of Waata's staff members had been out on sick leave because she had an emergency appendectomy.She brought the hospital bills in to Waata for his opinion.It seems she had been covered by two health insurance policies for some time and now she thinks she may be able to collect from both companies in payment for the operation.Watta assured his employee that:

Accepted Answer

A)  she could look forward to a check from both companies once they had paid the medical bills.
B)  because of the rule of indemnity she would not be able to profit from her operation.
C)  because of the law of large numbers both insurance companies would pay her directly.
D)  because her risk was insurable,she would be able to collect from both insurance policies.E) A) and D)
F) All of the above

Question 2

A firm that chooses to self-insure and cover losses out of its budget is said to:

Accepted Answer

A)  fly blind.
B)  roll boxcars.
C)  go bare.
D)  internalize risk.E) A) and B)
F) A) and C)

Question 3

The law of large numbers states that if a large number of people are exposed to the same risk,a predictable number of losses will occur during a given period of time.

Accepted Answer

A) True 
 B)False

Question 4

The chances of dying when young are much higher than the chances of becoming disabled when young.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a goal of enterprise risk management?

Accepted Answer

A)  Defining which risks the program will manage
B)  Deciding how to petition the government for financial help
C)  Assigning risk management to a lobbyist in Washington
D)  Refining the business plan for risk managementE) A) and B)
F) None of the above

Question 6

________ risk involves a chance of either profit or loss.

Accepted Answer

A)  Insurable
B)  Managed
C)  Speculative
D)  PureE) All of the above
F) A) and C)

Question 7

Kuhlman Appliances produces all of its products in one gigantic production facility near an earthquake fault line.Kuhlman is the classic example of a firm that should use self-insurance to manage its risks.

Accepted Answer

A) True 
 B)False

Question 8

Explain the four ways of managing risk.

Accepted Answer

The four ways of managing risk include (...

Question 9

There are two different kinds of risk: passive and active.

Accepted Answer

A) True 
 B)False

Question 10

________ insurance replaces part of your income if you become unable to work for an extended period of time.

Accepted Answer

A)  Product liability
B)  Workers' compensation
C)  Professional liability
D)  DisabilityE) None of the above
F) A) and C)

Question 11

A mutual insurance company is a nonprofit organization.

Accepted Answer

A) True 
 B)False

Question 12

There have been a series of large judgments in product liability cases against companies producing hairdryers.If this trend continues,insurance companies will respond by ________ the premiums charged for liability insurance for hairdryer manufacturers.

Accepted Answer

A)  lowering
B)  canceling
C)  increasing
D)  underwritingE) None of the above
F) All of the above

Question 13

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements best reflects the concept behind the rule of indemnity?

Accepted Answer

A)  If a large number of people are exposed to the same risk,a predictable number of losses will occur during a given period of time.
B)  If a written contract exists between the insured and an insurance company,the insured is entitled to receive the maximum amount stated in the contract in the event of a loss.
C)  If an insurance company's premiums generate excess funds,these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums.
D)  An insured person cannot collect more than the actual loss from an insurable risk.E) All of the above
F) A) and D)

Question 15

The best strategy for a profit-seeking insurance company would be to specialize in providing protection to people in a specific geographical area.

Accepted Answer

A) True 
 B)False

Question 16

To save money,HMOs usually must approve treatment before it is given.

Accepted Answer

A) True 
 B)False

Question 17

Property insurance covers losses from fires,accidents,or theft.

Accepted Answer

A) True 
 B)False

Question 18

Pure risk involves the chance of either a profit or a loss.

Accepted Answer

A) True 
 B)False

Question 19

A fidelity bond covers losses resulting from a second party's failure to fulfill a contract.

Accepted Answer

A) True 
 B)False

Question 20

In order to save money,health maintenance organizations (HMOs) usually require their members to:

Accepted Answer

A)  enroll in a stress reduction and management class.
B)  obtain the HMO's approval before medical treatment is provided.
C)  quit smoking and exercise regularly to obtain coverage.
D)  pay a high deductible before the HMO will pay any bills.E) A) and B)
F) A) and D)

Exam 22: Bonus B: Managing Risk

There have been a series of large judgments in product liability cases against companies producing hairdryers.If this trend continues,insurance companies will respond by ________ the premiums charged for liability insurance for hairdryer manufacturers.

Correct Answer
verified

Explain the four ways of managing risk.

Correct Answer
verified
The four ways of managing risk include (...
View Answer

In order to save money,health maintenance organizations (HMOs) usually require their members to:

Correct Answer
verified

Which of the following is a goal of enterprise risk management?

Correct Answer
verified

Correct Answer
verified

The law of large numbers states that if a large number of people are exposed to the same risk,a predictable number of losses will occur during a given period of time.

Correct Answer
verified

A mutual insurance company is a nonprofit organization.

Correct Answer
verified

________ risk involves a chance of either profit or loss.

Correct Answer
verified

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

Correct Answer
verified

Pure risk involves the chance of either a profit or a loss.

Correct Answer
verified

The chances of dying when young are much higher than the chances of becoming disabled when young.

Correct Answer
verified

Property insurance covers losses from fires,accidents,or theft.

Correct Answer
verified

The best strategy for a profit-seeking insurance company would be to specialize in providing protection to people in a specific geographical area.

Correct Answer
verified

Which of the following statements best reflects the concept behind the rule of indemnity?

Correct Answer
verified

Kuhlman Appliances produces all of its products in one gigantic production facility near an earthquake fault line.Kuhlman is the classic example of a firm that should use self-insurance to manage its risks.

Correct Answer
verified

________ insurance replaces part of your income if you become unable to work for an extended period of time.

Correct Answer
verified

A fidelity bond covers losses resulting from a second party's failure to fulfill a contract.

Correct Answer
verified

A firm that chooses to self-insure and cover losses out of its budget is said to:

Correct Answer
verified

To save money,HMOs usually must approve treatment before it is given.

Correct Answer
verified

There are two different kinds of risk: passive and active.

Correct Answer
verified

Exam 22: Bonus B: Managing Risk

There have been a series of large judgments in product liability cases against companies producing hairdryers.If this trend continues,insurance companies will respond by ________ the premiums charged for liability insurance for hairdryer manufacturers.

Correct AnswerverifiedShow Answer

Explain the four ways of managing risk.

Correct AnswerverifiedThe four ways of managing risk include (...View AnswerShow Answer

In order to save money,health maintenance organizations (HMOs) usually require their members to:

Correct AnswerverifiedShow Answer

Which of the following is a goal of enterprise risk management?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The law of large numbers states that if a large number of people are exposed to the same risk,a predictable number of losses will occur during a given period of time.

Correct AnswerverifiedShow Answer

A mutual insurance company is a nonprofit organization.

Correct AnswerverifiedShow Answer

________ risk involves a chance of either profit or loss.

Correct AnswerverifiedShow Answer

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

Correct AnswerverifiedShow Answer

Pure risk involves the chance of either a profit or a loss.

Correct AnswerverifiedShow Answer

The chances of dying when young are much higher than the chances of becoming disabled when young.

Correct AnswerverifiedShow Answer

Property insurance covers losses from fires,accidents,or theft.

Correct AnswerverifiedShow Answer

The best strategy for a profit-seeking insurance company would be to specialize in providing protection to people in a specific geographical area.

Correct AnswerverifiedShow Answer

Which of the following statements best reflects the concept behind the rule of indemnity?

Correct AnswerverifiedShow Answer

Kuhlman Appliances produces all of its products in one gigantic production facility near an earthquake fault line.Kuhlman is the classic example of a firm that should use self-insurance to manage its risks.

Correct AnswerverifiedShow Answer

________ insurance replaces part of your income if you become unable to work for an extended period of time.

Correct AnswerverifiedShow Answer

A fidelity bond covers losses resulting from a second party's failure to fulfill a contract.

Correct AnswerverifiedShow Answer

A firm that chooses to self-insure and cover losses out of its budget is said to:

Correct AnswerverifiedShow Answer

To save money,HMOs usually must approve treatment before it is given.

Correct AnswerverifiedShow Answer

There are two different kinds of risk: passive and active.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The four ways of managing risk include (...
View Answer

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