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Part I: True or False: (5 marks, 1 each) (ILOs: A1, A2) The loss exposure resulting from a major storm is a diversifiable risk. (

Part I: True or False: (5 marks, 1 each) (ILOs: A1, A2)

  1. The loss exposure resulting from a major storm is a diversifiable risk.

( T / F )

  1. In the process of pooling, the actual loss of an exposure unit is substituted with the average loss of the group.

( T / F )

  1. Adverse selection can result from people with pre-existing health problems who obtain health insurance at standard rates.

( T / F )

  1. Social security benefits are provided by private insurers.

( T / F )

  1. Estimating the chance of loss associated with house fires in a year is an objective probability.

( T / F )

Part II: Multiple choice (5 marks, 1 each) (ILOs: A1, C1)

  1. Dense fog that reduces visibility while driving is a(n)
    1. Attitudinal hazard
    2. Physical hazard
    3. Moral hazard
    4. Legal hazard

  1. Due to the risk of electrical power cuts, hospitals need to install backup generators to make sure lifesaving machines continue operating. This treatment is considered:
    1. Avoidance
    2. Duplication
    3. Separation
    4. Non-insurance transfers

  1. A newly qualified doctor is concerned that he might commit a few errors in his early days due to his lack of experience in surgery and wants to manage that risk. Which type of insurance is he seeking?
    1. Professional liability insurance
    2. Workers compensation insurance
    3. Product liability insurance
    4. Group health insurance

  1. Maryam would like to buy a house by borrowing from a mortgage lender. The lender required Maryam to purchase property insurance on the home so that the collateral supporting the loan will be protected. This scenario illustrates which of the following benefits of insurance to society?
  1. Enhancement of credit
  2. Source of investment funds
  3. Incentives for loss prevention
  4. Indemnification

  1. Which of the following is a diversifiable risk?
  1. Coronavirus
  2. Economic recession
  3. Earthquake
  4. Premature death

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