Chapter $3$:

Application Questions

Scaffold Equipment manufactures and sells scaffolds and ladders that are used by construction firms. The products are sold directly to independent retailers in the United States. The company's risk manager knows that the company could be sued if a scaffold or ladder is defective, and someone is injured. Because the cost of products liability insurance has increased, the risk manager is considering other techniques to treat the company's loss exposures.

a$.$ Describe the steps in the risk management process.

b$.$ For each of the following risk management techniques, describe a specific action using that technique that might be helpful in dealing with the company's products liability exposure.

Avoidance

Loss prevention

Loss reduction

Noninsurance transfers

The Swift Corporation has $5,000$ sales representatives and employees in the United States who drive company cars. The company's risk manager has recommended to the firm's management that the company should implement a partial retention program for physical damage losses to company cars.

a$.$ Explain the advantages and disadvantages of a partial retention program to the Switt Corporation.

b$.$ Identify the factors that the Swift Corporation should consider before it adopts a partial retention program for physical damage losses to company cars.

c$.$ If a partial retention program is adopted, what are the various methods the Swift Corporation can use to pay for physical damage losses to company cars?

d$.$ Identify two risk$-$control measures that could be used in the company's partial retention program for physical damage losses.