Chapter 6 Flashcards
What are 5 advantages brokers realize when using risk management in their sales process?
Clients are more educated about their insurance.
Clients are more likely to renew- increased retention
Increased referrals
Higher satisfaction with the claims process
Reduction in errors and omissions potential
You are a risk manager for a chain of restaurants. Many of the locations are owned however there are some that are occupying leased spaces. You primarily thrive on dine in experience but have recently expanded into delivery services and catering large events. 70 employees.
As a risk manager, what is the first step in the risk management process?
Step 1 identify and analyze loss exposure- classified according to type of value exposed,perils exposed and financial consequences
Property values - tangible property, plus debris removal, demolition expenses, bylaws expenses, going concern, intangible properties,
Net income values - decrease in revenue, increase in expenses
Liability loss- all duties of care owed
Personnel loss- extent of loss is measured by the value of employees service and the costs of providing benefits
Identify three peril categories and provide examples
Natural perils- fire,drought, collapse
Human perils - theft
Economic perils - fluctuations of currency
Categories to review loss frequency have been established. Identify.
Almost nil- very unlikely
Slight- it may happen, but has not happen
Moderate- it happens from time to time
Definite- something that happens often
Categories to review loss severity have been established.
Slight- losses can be readily absorbed by the organization
Significant- organization cannot pay for entire amount of loss. Part of the exposure must be transferred (hail damage)
Severe - if risk is not transferred, the business may risk failure
Identify 3 tools you may use as a Risk Manager to identify and analyze loss exposure
Standardized surveys and questionnaires
Financial statements and underlying records
Other records and documents- drawings and Blue prints
Flowcharts - process and procedures
Personal inspection
Developing a Risk Management Program
Step 1’ identify and Analyze Exposures
Step 2- Examine Alternative Risk Management
Step 3- Select Risk Management Techniques
Step 4- Implement Techniques
Step 5- Monitor Results
Risk Management Techniques. What are the 5 areas Risk Control?
Exposure avoidance
Loss prevention- proper maintenance
Loss reduction- pre and post - sprinkler systems, hail proof siding - to reduce severity
Segregation of exposure units
Contractual transfer
Risk financing techniques are required as risk control is not 100% effective.
Identify 3 retention techniques.
Provide examples when forced retention may be imposed upon organizations.
- Current expensing of losses - pay as they arise
Unfunded reserves- losses expected but no money put aside
Funded reserves- money put aside
Borrowed funds- use of loans
Captives- self insurance - Uninsured losses
Deductible on policies
What are 3 potential problems that could still occur when using insurance as a transfer technique.
Insurer may become insolvent
Loss may fall within a policy exclusion that the client was not expecting
Limits of insurance may be insufficient
When selecting the risk management techniques to implement.
What 3 items should a risk manager forecast when making a decision?
What 2 criteria will the risk manager make their final decision based on?
- Frequency and severity of potential losses.
The effects risk control and risk financing techniques will have.
The costs of the techniques - Effectiveness and economy
