Risk control refers to various techniques that reduce the frequency and severity of losses. Methods of risk control include all of the following, EXCEPT:

Loss inspection.

Loss prevention.

Avoidance.

Loss reduction.

Which is the best risk management technique to manage a risk with high potential severity that occurs infrequently?

Self-retention.

Avoidance.

Transfer via purchase of insurance.

None of the above.

A non-insurance transfer is a method other than insurance by which a pure risk and its potential financial consequences are transferred to another party. Examples of non-insurance transfers include all of the following, EXCEPT:

Inland-Marine Policy.

Purchase and Sale Agreement.

Hold-Harmless Agreement.

Commercial Real Estate Lease.

Advantages to non-insurance risk transfers include:

Non-insurance risk transfers can result in transferring the risk to another party more capable of controlling losses.

Non-insurable risk exposures can be transferred to another party.

Non-insurance risk transfer methods are sometimes more cost-effective than purchasing an insurance policy.

All of the above.

Advantages of purchasing insurance coverage as method for managing commercial risk exposures include all of the following, EXCEPT:

The risk manager may become lax in exercising loss control after the purchase of insurance.

Uncertainty is reduced by the purchase of appropriate insurance coverage.

Insurers may provide other risk management services above and beyond the insurance coverage purchased.

Insurance premiums are tax-deductible to a business entity.

Risk exposures with high frequency and low severity should be avoided, not retained.

Group of answer choices

True

False

Which of the following statements concerning the risk management technique of retention is/are true?

I. Risk retention is a risk management technique wherein a firm retains some or all aspects of a loss exposure.

II. Retention is an appropriate risk management technique when no other method to treat a loss exposure is available.

I only.

II only.

Both I & II.

Neither I nor II.

Loss prevention refers to measures intended to reduce the frequency of a particular loss. Which of the following is an example of a measure intended to reduce loss frequency?

Installing an automatic sprinkler system in a factory.

Installing airbags in an automobile.

Installing a safety guard on a circular saw.

Installing seat belts in an automobile.

Which of the following statements concerning the risk management technique of avoidance is/are true?

I. Avoidance is a risk management technique appropriate for any loss exposure that occurs infrequently and with great severity.

II. Avoidance means a certain loss exposure is never acquired, or an existing loss exposure is abandoned. Avoidance reduces the chance of loss to zero.

I only.

II only.

Both I & II.

Neither I nor II.

Which of the following statements concerning risk management techniques is/are true?

I. The deductible expense incurred by an individual or business when a loss is covered by insurance is an example of the risk management method of retention.

II. Avoidance is the most effective risk management technique because it's always a practical risk management option.

I only.

II only.

Both I & II.

Neither I nor II.