Study 4 - Identifying Exposures

Question 1

What are different ways that a business can identify risks?

Answer 1

Prouty approach, risk assessment surveys & maps, root cause analysis and SWOT analysis

Question 2

What tools can be used to identify loss exposures?

Answer 2

Surveys, questionnaires, checklists, flow charts, financial statements, contracts and other records

Question 3

What are the two aspects a broker must be aware of in identifying exposures?

Answer 3

• Tools that are available and how to use them properly

- Client/broker relationship building

Question 4

What do business continuity exercises typically help businesses identify?

Answer 4

• Type of exposures that could lead to a net income loss
• The degree to which such a loss would affect operations
• The time required to get back to work

Question 5

What are some questions that can help identify potential risk?

Answer 5

What risks can occur?
Where can they occur?
What aspects of the business can they affect?
How rare are the risks?
How reliable are our risk controls?
What level of loss is likely for each risk?
What is the worst-case scenario for each risk?
What risks can we improve?
How can we improve those risks?

Question 6

What is the Prouty Approach?

Answer 6

Loss projections can be developed or loss exposures prioritized so that an effective allocation of resources can be made to manage risks through retention, transfer or avoidance

Question 7

What are risk assessments used for?

Answer 7

To identify, evaluate and prioritize risks

Question 8

What does a SWOT analysis determine?

Answer 8

Strengths
Weaknesses
Opportunities
Threats

Question 9

What tools are used to review loss exposures?

Answer 9

• Surveys, risk analysis questionnaires, and checklists
• Flow charts
• Financial statements
• Contracts and other records
• Loss histories
• Inspections

Question 10

What is it important to be aware of if using an exposure survey?

Answer 10

• It does not constitute an application although it can resemble one, completion does not guarantee coverage
• Should be appropriate for the type of organization being assessed
• Should be modified to make sure info is relevant, supplementary forms may be needed
• May not provide all facts

Question 11

What are the advantages of a risk analysis questionnaire?

Answer 11

Convenient; preprinted, standardized questions, generally relevant

Readily available online and filled out onscreen

Question 12

What are the main disadvantages of a risk analysis questionnaire?

Answer 12

• They may not be as specific as required to clients industry or operations, therefore may miss key exposures
• Tend to focus on insurable loss exposures only
• If there are multiple locations or divisions, seperate questionnaires may be required
• Insurers typically have their own questionnaires, so if a broker is dealing with many companies, there would be different questionnaires
• Questionnaires don’t tell the whole story

Question 13

What are some examples of expenses after the business closes?

Answer 13

Property taxes, mortgage, interest payments, payroll

Question 14

What does a loss control inspection typically include?

Answer 14

• Overall condition of premises and age with respect to age and housekeeping
• Physical description of buildings & equipment
• External risks by type (occupancy & neighbouring premises)
• Types of protection systems (fire, burglary, etc)

Question 15

Who are the key stakeholders?

Answer 15

Client, broker & underwriter

Question 16

What are the four main areas of exposure?

Answer 16

Property, liability, people & net income