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61 Cards in this Set
- Front
- Back
describe 4 advantages brokers realize when using risk management in their sales process |
- clients are more knowledgeable about their insurance - clients will be more likely to renew - clients will be more likely to refer new clients to brokerage - clients will be more satisfied with their claims process |
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describe the process of : identification of loss exposures |
recognizes the types of losses that may occur |
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Descibe the process of : analysis of loss exposures |
estimates how much a loss will cost, and how it will impact |
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what are 3 criteria used when classifying loss exposures |
-identifying type of value exposed to losses -identifying perils causing losses -identifying financial impact of losses |
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what are 4 values exposed to loss |
-property value -net income values -liability loss -personnel loss |
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what are 2 types of property values exposed to loss |
- tangible property -intangible property |
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explain the following property loss exposure: debris removal |
expenses incurred removing debris after losses |
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explain the following property loss exposure: demolition expense |
expenses incurred demolishing undamaged portion of a building after a loss |
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explain the following property loss exposure: undamaged property |
loss in value of property occurring after losses to related structures (drop in value of silo after barn is lost to fire) |
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explain the following property loss exposure: increased cost of construction |
expenses incurred bringing buildings up to current code while repairing damage after a loss |
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explain the following property loss exposure: pair or set value |
decrease in value of remaining item in a pair or set after loss to other portion of pair or set |
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explain the following property loss exposure: going concern value |
difference in value of property that must be sold after losses and value of operating business |
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what are 4 intangible properties exposed to loss? |
-securities -trademarks -right to collect accounts -copyrights |
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what are 2 factors that impact on net income |
- decrease in revenues - increase in expenses |
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state 5 loss exposures that will result in decreases in revenues |
-business interruption -contingent business interruption -loss of profits on finished goods -reduced rental income -decreased collection of accounts receivable |
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state 3 loss exposures that will result in increase in expenses |
- increase in accounts receivable - increase in rental expenses - expediting expenses |
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when assesing liability loss exposures what are 2 factors to consider |
-entity to whom duty is owed -source of legal duty |
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what are 3 expenses court actions may cause |
-cost to investigate and defend - payment of an award for damages or cost of corrective actions -amounts of out of court settlements |
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identify 3 peril categories |
-natural perils -human perils -economic perils |
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give an example of natrual perils |
cave in collapse drought |
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give an example of human perils |
arson change of tempurature chemical leakage |
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give an example of economic perils |
war currency fluctuations depression |
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which peril category is beyond control |
natural perils |
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when assessing financial impact of losses what factors will impact this assesment
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-loss frequecny - loss severity |
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when reviewing loss frequency what categories have been established |
-almost nil - slight -moderate -definite |
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describe and give example of almost nil (when reviewing loss frequency) |
almost no possibility/ very unlikely meteorite impact |
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describe and give example of slight (when reviewing loss frequency) |
it may happen , but hasn't loss from uncontrolled wildfire |
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describe and give example of moderate (when reviewing loss frequency) |
it occurs from time to time windstorm or hail storm |
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describe and give example of definite (when reviewing loss frequency) |
it occurs regularly theft/shoplifting |
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when reviewing loss severity what categories are assessed |
slight significant sever |
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describe and give example of slight (when reviewing loss severity) |
organization can easily pay for loss paper damaged during printer jam |
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describe and give example of significant (when reviewing loss severity) |
organization cannot pay for entire loss, part must be transferred damage caused by summer hailstorm |
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describe and give example of severe (when reviewing loss severity) |
organization must transfer loss or risk failure major loss due to fire |
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describe the inverse relationship between loss frequency and severity |
when loss severity goes down frequency goes up, when loss frequency goes down severity goes up |
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state 5 tools used by risk managers to identify and analyze loss exposures |
-standard surveys and questionnaires -financial statements and underlying records -other records and documents -flowcharts -personal inspections |
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identify an advantage & disadvantage standardized surveys |
advantage - easy to complete disadvantage - no requirement to go beyond questions asked |
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identify an advantage & disadvantage balance sheets |
advantage - helps identify existence of assets disadvantage - values will be inaccurate |
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identify an advantage & disadvantage other records and documents |
advantage - helps identify future changes in organization disadvantage - all documents are not available |
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identify an advantage & disadvantage flowcharts |
advantage - identifying bottlenecks in production disadvantage - does not indicate probability of losses |
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What is the best method to identify and analyze loss exposures? |
personal inspections cannot be replaced with other methods |
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what are 2 ways to avoid loss exposures |
-completely avoiding the exposure -eliminating the exposure |
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what is a weakness to avoiding and eliminating loss exposures |
avoiding or eliminating one exposure will usually create another |
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what is the purpose of loss prevention techniques |
addresses the frequency of losses |
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what is the purpose of loss reduction techniques |
address severity of losses |
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describe pre-loss, loss reduction measures and provide an example when reviewing property loss exposure |
pre-loss, loss reduction measures attempt to reduce amount of loss prior to losses occurring. would include placing all flammable liquids in flammable liquid storage cabinets |
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describe post-loss, loss reduction measures and provide an example when reviewing property loss exposures |
post-loss, loss reduction measures the attempt reduce amount of loss by halting its progress would include installation of sprinkler systems for when a fire occurs |
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what 2 methods may be used when using segregation of exposure units |
-separation -duplication |
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describe separation and provide and example when reviewing property loss exposures |
when organizations split a single asset or function in 2 or more locations. occurs when organizations store merchandise in more than 1 warehouse |
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describe duplication and provide an example when reviewing property loss exposures |
when complete asset or structure is held in reserve to replace damaged assets or structures have a spare tire for when you get a flat |
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what is a weakness of separation |
may interrupt normal operation of business |
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what is a weakness of duplication |
can be very expensive |
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describe contractual transfer and provide an example when reviewing property loss exposures |
occurs when business transfer liability for losses to some other organization or person |
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what is accomplished with risk financing |
provides funding for losses that occur |
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describe 2 risk financing techniques available to risk managers |
-retention is using money from within organizations to pay for losses -contractual transfer uses money from outside the organization to pay for losses |
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state 2 examples when forced retention may be imposed upon organizations |
-losses from occurrences that cannot be insured (war) -money required to pay required deductible |
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state 2 examples when optional retention may be used by organizations |
-when losses are small and are within business's financial ability (broken windows) -when loses are small and expected therefore budgeted (shoplifting) |
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what are 2 ways businesses may transfer losses in contract |
-non insurance transfer -commercial insurance |
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describe 1 type of non insurance contractual transfer |
hold harmless agreements are contracts when one organization agrees to hold harmless another organization (landlord held harmless by tenant in lease agreement) |
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when should insurance be recommended |
when no other risk financing technique or loss control technique is sufficient |
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what are 3 problems that could still occur when using insurance as the transfer technique |
-insurer may declare bankruptcy -loss may not be insured when client expected coverage or amount of settlement is less than client expected -amount of coverage may be insufficient for losses incurred |
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what are the 3 forecasts risk managers must use when selecting risk management techniques |
-forecast frequency and severity of potential losses - forecast effect risk control or risk financing methods will have on potential losses forecast expenses of methods under consideration |