Chapter 3 Hazard Risk

Question 1

Define frequency

Answer 1

Frequency is one of the measures of traditionally used for hazard risk exposure and identifies the number of losses

Question 2

Define severity

Answer 2

Severities one of the measures that traditionally is used for hazard risk exposure is and identifies the size of losses

Question 3

Define avoidance

Answer 3

Avoidance is a technique that involves ceasing or never undertaking an activity so that the possibility of future gains or losses occurring from that activity is eliminated

Question 4

Define separation

Answer 4

Separation is a risk control technique that isolates loss exposures from one another to minimize the adverse effect of a single losa

Question 5

Define duplication

Answer 5

Duplication is a risk control technique that uses back ups Spares or copies of critical property information or capabilities and keeps them in reverse

Question 6

Define diversification

Answer 6

Diversification arrest control technique that spreads loss exposures over numerous projects product markets or regions

Question 7

Define insurance

Answer 7

Risk management techniques for transfers the potential financial consequences of certain specified loss exposures from the insured to the insurer

Question 8

Describe the three major categories of hazard risk

Answer 8

Every loss exposure has three elements and I thought exposed to loss. Cause of loss also called peril. Financial consequence of that loss. These three elements can be described for each of these four basic types of loss exposures property loss exposures liability loss exposures and personnel loss exposures and net income loss exposures because hazard risk is pure risk risk analysis focus solely on exposure to los this type of risk is generally insurable

Question 9

Contrast net income losses associated with property and liability losses

Answer 9

Property loss can tangible or intangible property. liability loss exposure is any condition or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party. And net income loss exposure is a condition that presents the possibility of loss caused by a reduction in net income. These losses are considered to be indirect losses. Net income losses with respect to property typically are something that property insurance policies cover. Whereas some liability losses are exposures that are normally focussed on by risk management. However both cases there is a financial consequence to the net income loss.

Question 10

Identify the two measures that are traditionally used for hazard risk exposure

Answer 10

Hazard risk exposure is are measured by frequency and severity

Question 11

Define loss exposure

Answer 11

Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs.

Question 12

Define hazard

Answer 12

Hazard is a condition that increases the frequency or severity of a loss

Question 13

Define moral hazard

Answer 13

Moral hazard is a condition that increases the likelihood that a person will intentionally cause or exaggerate a loss

Question 14

Define morale hazard

Answer 14

Morale hazard is a condition of carelessness or indifference that increases the frequency or severity of loss

Question 15

Define physical hazard

Answer 15

Physical hazard is a tangible characteristic of property, person, or operations that tends to increase the frequency or severity of lost

Question 16

Define legal hazard

Answer 16

Legal hazard is a condition of the legal environment that increases the lost frequency or severity

Question 17

What is property loss exposure

Answer 17

Property loss exposure is a condition that presents the possibility that a person or an organization will sustain a loss resulting from the damage including destruction, taking, or loss of use or property in which the person or organization has a financial interest

Question 18

What is tangible property

Answer 18

Tangible property is property that has a physical form

Question 19

What is real property (realty)

Answer 19

Tangible property consisting of land all structures permanently attached to the land and whatever is growing on the land

Question 20

Personal property is

Answer 20

All tangible or intangible property that is not real property

Question 21

Intangible property is

Answer 21

Property that has no physical form

Question 22

What is liability loss exposure

Answer 22

Any condition or situation that presents the possibility of a claim alleging legal responsibility of a person or business for injury or damage suffered by another party

Question 23

What is personnel loss exposure

Answer 23

A condition that presents the possibility of loss caused by a person’s death disability retirement or resignation that deprives an organization of the person special skill or knowledge that the organization cannot readily replace

Question 24

Personal loss exposure is

Answer 24

Any condition or situation that presents the possibility of a financial loss to an individual or family by such cause of death sickness injury or unemployment

Question 25

What is net income loss exposure

Answer 25

A condition that presents the possibility of loss caused by a reduction in income

Question 26

What is property casualty insurance

Answer 26

One of the two main sectors of the insurance industry, encompassing numerous types of insurance, most of which cover the financial consequences of damage to one’s own property or legal liability to others

Question 27

Property is

Answer 27

The real estate, buildings, objects or articles, intangible assets, or rights with exchangeable value of which someone may claim legal ownership

Question 28

Liability is

Answer 28

A legal responsibility for the consequences of an act or omission

Question 29

Line of business is

Answer 29

A general classification of insurance, such as commercial property, commercial general liability, commercial crime, or commercial auto

Question 30

Commercial property insurance is

Answer 30

Insurance that covers commercial buildings and their contents against various types of property loss

Question 31

Monoline policy is

Answer 31

Policy that covers only one line of business

Question 32

Package policy is

Answer 32

Policy that covers two or more lines of business

Question 33

Direct physical loss is

Answer 33

A loss that is physical (not just financial) and results immediately from the occurrence

Question 34

Named peril

Answer 34

A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing named perils

Question 35

All risk policy is

Answer 35

And insurance policy that covers any risk of physical loss and less the policy specifically excludes it

Question 36

Bailees customer policy

Answer 36

Is a policy that covers damage to customers good well in the possession of the insured regardless of whether the insured is legally liable for the damage

Question 37

Replacement cost is

Answer 37

The cost to repair or replace property using new materials of like kind and quality with no deduction for depreciation

Question 38

Actual cash is

Answer 38

A method in valuing property that is calculated as the cost to replace or repair property minus depreciation, the fair market value, or valuation determined by the broad evidence rule

Question 39

Insurance to value provision is

Answer 39

A provision and property insurance policies that encourages insurance to purchase an amount of insurance that is equal to you, or close to, the value of the covered property

Question 40

Coinsurance clause is

Answer 40

A clause that requires the insured to carry insurance equal to at least specified percentage of the property’s insured value

Question 41

Business income insurance

Answer 41

Insurance that covers the reduction in an organization’s income when operations are interrupted by damage to property caused by a covered peril

Question 42

Dependent property exposure is

Answer 42

The possibility of an current business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales

Question 43

Principal is

Answer 43

The party to a surety bond who is obligation or performance The surety guarantees

Question 44

Surety is

Answer 44

The party [usually an insurer] to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or la

Question 45

Obligee is

Answer 45

The party to a surety bond that receives the sureties guarantee that the principal will for fill an obligation or perform as promised

Question 46

What is breach of contract

Answer 46

The failure, without legal excuse, to for fill a contractual promise

Question 47

What is tort

Answer 47

A wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right

Question 48

What is insuring agreement

Answer 48

A statement in an insurance policy that the insurer will, under describe circumstances, make a loss payment or provide a service

Question 49

What is occurrence

Answer 49

An accident, including continuous or repeated exposure to substantially the same general harmful conditions

Question 50

What is indemnify

Answer 50

Restore a party who has sustained a loss to the same financial position at the party held before the loss occurred

Question 51

What is claims made coverage form

Answer 51

A coverage form that provides the coverage for bodily injury or property damage that is claim during the policy period

Question 52

Occurrence coverage form is

Answer 52

A coverage form that covers bodily injury or property damage occurring during the policy period

Question 53

Entity coverage

Answer 53

Coverage extension of directors and officers liability policies for claims made directly against a corporation [the entity] for wrongful acts covered by the policy

Question 54

What is claims made coverage trigger

Answer 54

The event that triggers the coverage under a claims made coverage form; the first making of a claim against any insured during either of the policy Or an extended reporting.

Question 55

Fiduciary liability insurance is

Answer 55

Insurance that covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duty’s involving the discretionary judgement

Question 56

What is perils of the sea

Answer 56

Accident causes of loss better peculiar to the sea and other bodies of water