Risk Management Exam Bank
Course Introduction
Risk Management focuses on the identification, assessment, and prioritization of risks in organizations, followed by the coordinated use of resources to minimize, monitor, and control the probability or impact of unforeseen events. This course introduces students to the principles and frameworks of managing various types of risk, including financial, operational, strategic, and compliance risks. Through real-world case studies and practical tools, students learn to develop risk assessment matrices, design mitigation plans, and implement risk management strategies that align with organizational objectives. Emphasis is placed on decision-making under uncertainty, regulatory requirements, and the role of risk culture in achieving sustainable business performance.
Recommended Textbook
Introduction to Risk Management and Insurance 10th Edition by Mark S. Dorfman
Available Study Resources on Quizplus
23 Chapters
1358 Verified Questions
1358 Flashcards
Source URL: https://quizplus.com/study-set/1354 Page 2
Chapter 1: Introduction to Enterprise Risk Management and Insurance
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/27041
Sample Questions
Q1) Which of the following is not a goal of the government, employer or employee in providing employee benefits?
A) Raise tax revenue
B) Provide security for employees
C) Retain, attract and compensate employees
D) Encourage savings for retirement
Answer: A
Q2) Which of the following is not a risk handling technique?
A) Loss control
B) Loss diversification
C) Loss transfer
D) Loss financing
Answer: B
Q3) Insurance companies utilize the law of large numbers to reduce the chance of loss for their insureds.
A)True
B)False
Answer: False
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Risk Identification
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/27042
Sample Questions
Q1) Which of the following is true about pure risks?
A) The risk/return tradeoff is applicable to pure risks.
B) A firm cannot profit from its exposure to pure risk.
C) Risk managers must be tolerant of negative outcomes related to pure risks.
D) Pure risk is not a source of great concern for risk managers.
Answer: B
Q2) The plaintiff in a negligence suit is the party who allegedly injured the defendant.
A)True
B)False
Answer: False
Q3) Losses related to intangible property does <u>not</u> include:
A) patents
B) inventory
C) human capital
D) reputation
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Risk Assessment and Pooling
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/27043
Sample Questions
Q1) Which of the following statements about the standard deviation is correct?
A) The standard deviation measures the expected loss for the firm.
B) The standard deviation is calculated by taking the square root of the variance.
C) The standard deviation is a subjective measure of risk.
D) All of the above are correct.
Answer: B
Q2) When the variance of a probability distribution is $81,000 the risk equals:
A) $900
B) $6,561,000,000
C) $284.61
D) There is not enough information to calculate the risk.
Answer: C
Q3) The Risk Charge represents the error arising from estimating a known variable.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Risk-Handling Techniques: Loss Control, Risk Transfer,
and Loss Financing
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/27044
Sample Questions
Q1) Loss prevention activities, if successful, may increase risk.
A)True
B)False
Q2) It is a fact that supply chains have become increasingly more complicated in the past decade, with products moving across the globe. This means that:
A) loss reduction measures also have become more important
B) there has been a growth of captive insurers
C) duplication as a risk mitigant has also become more important
D) hold-harmless agreements have become less relevant
Q3) Which of the following is not a federal regulation or agency?
A) EUREX
B) OSHA
C) CPSC
D) EPA
Q4) Funded risk assumption:
A) is typically done through a subsidiary on Bermuda or the Cayman Islands
B) increases moral hazard for the firm
C) is when a firm assumes by creating a liquid or near liquid cash reserve
D) is a form of risk transfer
Q5) How do deductibles affect moral hazard?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Risk-Handling Techniques: Diversification and Hedging
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/27045
Sample Questions
Q1) Explain when and why a call option has value.
Q2) Which of the following statements about bearing risk collectively is correct?
A) Bearing risk collectively is not very cost-efficient.
B) Bearing risk collectively only works for small groups.
C) Bearing risk collectively is bearing risk as part of a large group.
D) All of the above are correct.
Q3) Which of the following is <u>not</u> an example of a derivative security?
A) Futures contract
B) Forward contract
C) Hedge
D) Option
Q4) Can risk be completely eliminated?
A) No, never
B) Yes, as long as the exposure units are positively correlated
C) Yes, as long as the exposure units are not correlated and enough are in the pool
D) Yes, as long as the correlation coefficient is 0.1
Q5) The covariance shows the risk of a single variable.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Fundamentals of Insurance
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/27046
Sample Questions
Q1) Discuss the building blocks of an insurance premium.
Q2) By applying the law of large numbers the insurance companies can predict the loading expenses.
A)True
B)False
Q3) The scope of insurance:
A) limits the tax-deductibility of premiums
B) is limited to social insurance
C) is not clearly defined
D) does not include weddings
Q4) The Legal Definition of insurance:
A) is that insurance is a contract in which one party agrees to compensate another party for losses covered by the contract
B) is that insurance is a financial agreement that transfers the risk of insured losses to a risk pool by an insurer
C) differs from state to state
D) originally comes from tort law
Q5) What are considered the benefits and the costs to society of operating an insurance mechanism?
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Insurable Perils and Insuring Organizations
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/27047
Sample Questions
Q1) What is the effect when the most favorably situated exposures leave a (potential) insurance pool?
A) Premiums go down.
B) Nothing
C) The cost of insurance needs to be borne by more policyholders.
D) The cost of insurance needs to be borne by fewer policyholders.
Q2) Mutual insurance companies legally are nonprofit organizations.
A)True
B)False
Q3) Lloyd's of London:
A) is an unincorporated, not-for-profit insurer
B) is partly a mutual company and partly a stock company
C) sells mainly homeowners insurance to residents of London
D) operates in the surplus lines and marine insurance markets
Q4) Earthquake insurance:
A) is provided too cheaply by insurance companies
B) typically costs $1 per $20,000 protection
C) is sold in only a limited number of geographical markets
D) is bought by Californians only
Q5) What is demutualization? What are some reasons companies want to demutualize?
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Insurance Functions
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/27048
Sample Questions
Q1) Which of the following is not a duty of the agent?
A) No self-dealing at principal's expense
B) Forwarding all premiums to the principal
C) Not submitting any type of business the insurer does not want
D) To guarantee the insurance buyer that the insurer will write them a policy at an affordable rate
Q2) One duty of the insurance company actuary is to:
A) handle claims when they involve property exposures and losses in multiple states
B) manage all contract negotiations when the agency agreement is signed by the agent and company
C) determine premium rates and classification schemes for the underwriters to apply
D) eliminate exposures from the pool that are going to have a loss
Q3) Catastrophe reinsurance can be described as a form of excess of loss reinsurance. A)True B)False
Q4) Explain what a direct writer company is. Explain what the independent agency system is.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Insurance Markets: Economics and Issues
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/27049
Sample Questions
Q1) Prior to September 11, 2001, property insurance policies:
A) covered terrorism
B) excluded terrorism from coverage
C) covered war
D) were very expensive
Q2) Insurance companies offer identical and perfectly substitutable products.
A)True
B)False
Q3) Automobile insurance plans, also known as assigned risk plans, are designed to give discounts to good drivers who have had no insurance claims or motor vehicle tickets for at least three years.
A)True
B)False
Q4) Consumers that have done some research to gather insurance information:
A) make the insurance market less efficient
B) probably will get better subsequent information from insurance companies
C) probably will just get "razzle-dazzle" from insurance companies
D) probably wasted their time
Q5) What is the purpose of an automobile insurance plan? How does an auto plan generally work?
11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Insurance Regulation
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/27050
Sample Questions
Q1) IBNR reserves are an estimate of:
A) losses that have been incurred but not reported to the insurer
B) losses that have been incurred and reported to the insurer, but not yet settled
C) unearned premiums the insurer owes policyholders
D) agent commissions owed
Q2) Explain briefly the purpose of the McCarran Act.
Q3) The Merritt Committee Investigation looked into solutions for dealing with:
A) unethical and undesirable behavior by insurance companies
B) effectiveness of state taxation as opposed to insurance regulation
C) states that do not have a state insurance commissioner system in place
D) insurers that violate risk-based capital requirements
Q4) The NAIC is a federal regulatory agency for administering federal insurance programs for armed service personnel.
A)True
B)False
Q5) A legal reserve is a cash asset account maintained by life insurers.
A)True
B)False
Q6) Explain what a policy reserve is. How is a policy reserve calculated?
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Insurance Contracts
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/27051
Sample Questions
Q1) Exclusions are not a basic part of an insurance contract.
A)True
B)False
Q2) Which of the following is correct concerning when insurable interest must exist?
A) In property and liability insurance, it must exist at the inception of the contract.
B) It is seldom required in property insurance unless there are liens on the property.
C) It must exist at the time of death of the insured for the beneficiary to collect in life insurance.
D) In life insurance, it must exist at the inception of the policy but it is not necessary at the time of the loss.
Q3) The principle of utmost good faith:
A) holds the insurer to a higher standard of honesty
B) does not apply in life insurance
C) holds the insured to a higher standard of honesty
D) requires the insurer and insured to enter the contract with utmost good faith
Q4) What are some of the reasons exclusions are found in insurance contracts?
Q5) Explain the principle of subrogation. Provide a mathematical example of its use.
Q6) Describe the purposes of deductibles.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Personal Auto Policy
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/27052
Sample Questions
Q1) If an insured is using his/her own private passenger car under normal circumstances, in what situations can the insured lose legal liability coverage?
Q2) Which of the following is true?
A) Suing an uninsured motorist for damages they cause you to suffer is not a promising source of recovery.
B) If you are struck by an uninsured motorist and want your PAP's Uninsured Motorist coverage to pay for your bodily injuries, you must convince your insurer that the Uninsured Motorist was at-fault in the incident.
C) If you cannot clearly establish that an uninsured motorist was at fault in the accident, you may have to enter the arbitration process to get your insurer to pay for your damages under the PAP's Uninsured Motorist coverage.
D) All of the above
Q3) Does the PAP provide any loss of use (indirect coverage) in the contract? What is it and how does it work (if any)?
Q4) What is the difference between Collision and Other than Collision coverages? Why does the PAP list certain perils in Other than Collision when they can be caused by collision? What happens if the cause of loss is not listed?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Homeowners Insurance
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/27053
Sample Questions
Q1) Which of the following is <u>not</u> an available endorsement to the HO policy?
A) Professional Liability Coverage Endorsement
B) Home Day Care Coverage Endorsement
C) Business Pursuits Endorsement
D) Scheduled Personal Property Endorsement
Q2) Ira is a homeowner covered by an HO-3 policy. He lives with his wife and three teenage children, plus one teenage foster child. Who in the household is not covered for personal liability by the HO policy?
A) Ira's foster child
B) Ira's wife
C) Any of the Ira's three teenage children
D) All of the persons listed above are covered.
Q3) Explain the concept of concurrent causation as it applies to collapse.
Q4) Which of the following is excluded by the HO-3 Form?
A) Additional living expense and rental value
B) Debris removal
C) Loss of trees, shrubs and other plants
D) Loss caused by ordinance or law
Q5) What is meant by "Medical Payments to others"? Why does the coverage exist?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Professional Financial Planning
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/27054
Sample Questions
Q1) The needs-based approach should be used to determine whether life insurance is needed and how much.
A)True
B)False
Q2) Mr. & Mrs. Clinton are in their 80s. They have saved millions of dollars and need to begin taking steps to minimize their estate tax liability. They have asked you for advice, and you tell them, "Give each of your children, grandchildren, and great-grandchildren a cash gift to start spending down your estate." Is this correct?
A) Yes
B) No, because they still will have to pay income taxes on the gifts
C) No, because they will still be subject to the uniform transfer tax
D) No, because there are limits to yearly gifts
Q3) Sound financial planning requires a trade off between:
A) risk and return alternatives
B) gratification and savings
C) investment and saving alternatives
D) fees and returns
Q4) What are the main financial planning problems encountered in the "early adult" years?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Life Insurance Policies
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/27055
Sample Questions
Q1) Which statement about variable universal life insurance is false?
A) Relatively small premiums are collected on a frequent basis.
B) They provide policyowners with more alternatives for investing cash values in their whole life policies.
C) They can duplicate universal life insurance.
D) Individual policies are large since it is purchased for employees by their unions.
Q2) What are the features that distinguish universal life from traditional forms of life insurance?
Q3) Which of the following policies would have the highest premium for a standard risk male age 27?
A) Level term
B) Whole life continuous premium
C) Whole life paid-up at 65
D) 10-pay whole life
Q4) A universal life insurance policy (ULI) is considered to be:
A) term insurance only
B) a form of fixed face, fixed premium whole life insurance
C) a whole life policy where the face amount may be changed at any time
D) providing more flexibility in paying premiums
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Standard Life Insurance Contract Provisions and Options
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/27056
Sample Questions
Q1) The double indemnity option makes good sense for most families since the cost is low, and the option doubles the face amount of insurance for most causes of death other than accident.
A)True
B)False
Q2) Cheryl buys a life insurance policy with a two-year incontestable clause, and dies three years later. When she dies, her insurer discovers that she lied on application for coverage about her diabetes. What will happen?
A) The insurer will pay the claim.
B) The insurer will void the policy and not pay the claim because Cheryl made a material misrepresentation on her application.
C) The insurer will void the policy and not pay the claim based on the principle of indemnity.
D) Both B and C above
Q3) One life insurance nonforfeiture option may result in an insured receiving a new face amount of life insurance.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Annuities
Available Study Resources on Quizplus for this Chatper
41 Verified Questions
41 Flashcards
Source URL: https://quizplus.com/quiz/27057
Sample Questions
Q1) A joint-and-one-half survivor annuity covers two people, but the annuity payments are cut in half at the death of the first annuitant.
A)True
B)False
Q2) Which of the following is correct regarding the federal income taxation of annuities that are purchased with <u>after tax</u> dollars?
A) Tax must be paid annually on the investment income that accrues during the accumulation period.
B) If funds are withdrawn during the accumulation period, they are taxed as ordinary income.
C) Payments received during the liquidation phase are partially exempt from taxation.
D) There is no tax since each payment is considered compensation for a loss (ie., retirement).
Q3) An annuity 5 years certain pays for 5 years or the death of the annuitant, whichever comes first.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Health Insurance and Disability Income
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/27058
Sample Questions
Q1) In 2008 the U.S. spent ________% of GDP on health care.
A) 8.8
B) 10.3
C) 16.4
D) 22
Q2) Jean's health insurance policy has a 70/30 participation deductible. The policy has no other deductible provisions, nor does it have an annual out-of-pocket maximum limit. If Jean has brain transplant surgery that results in medical bills of $300,000, how much of the medical bills will her insurer pay?
A) $210,000
B) $90,000
C) $300,000
D) cannot be determined from the given information
Q3) What is the difference between an HMO and a PPO in providing health care?
Q4) The participation provision is generally associated with major medical insurance. A)True B)False
Q5) Explain how a typical major medical contract works.
Q6) Distinguish between cost shifting and cost containment in health care.
Page 20
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Employee Benefits
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/27059
Sample Questions
Q1) The primary purpose of a 401(k) plan is to:
A) save for retirement on a tax-deferred basis
B) save for retirement on a tax-free basis
C) save for retirement and have your employer match your contributions, all on a tax-free basis
D) have a forced savings plan for emergencies
Q2) In the year 2012, what is the maximum amount you can contribute to a 401(k) plan per year?
A) 10% of your salary
B) $10,000
C) 12.4% of your salary, or, $11,000 (whichever is greater)
D) $17,000
Q3) When you are "100% vested" in a pension plan, what does that mean?
A) You own 100% of your contributions, but you do not own the employer's contributions to the plan.
B) You own 100% of the employer's contributions, but you do not own your contributions to the plan.
C) You own 100% of your contributions to the plan.
D) You own 100% of the employer's contributions to the plan.
Q4) Explain the difference between a PPO and an HMO.
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Social Security
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/27060
Sample Questions
Q1) The Social Security normal retirement age for a person born in 1970 is 65.
A)True
B)False
Q2) Social Security eligibility is based on how many ________ are earned.
A) years of full-time employment
B) total dollars
C) quarters of coverage
D) units of insurance
Q3) Which one of the following is not a characteristic of Social Security?
A) Benefits are individually selectable by the covered individual.
B) Participation is compulsory.
C) It can operate on a pay-as-you-go basis with no prefunding.
D) Legislative activity may change the benefits.
Q4) A surviving wife's Social Security benefit ends when her youngest child reaches age 16.
A)True
B)False
Q5) Explain what the dramatic shift was in political philosophy leading to the Social Security Act of 1935.
Page 22
Q6) What are the requirements for receiving Social Security disability benefits?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: Unemployment and Workers Compensation Insurance
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/27061
Sample Questions
Q1) The major change established by the passage of workers' compensation laws was to:
A) help lawyers obtain more business
B) substitute the employer's liability without fault for the common law doctrine of negligence
C) enable the employer to effectively defend itself in a liability suit
D) bar the employee from recovery for job related injuries
Q2) Workers' compensation insurance today is primarily a federal, rather than a state, program.
A)True
B)False
Q3) What are the general types of benefits provided under workers' compensation?
Q4) If a state collects unemployment taxes, then federal unemployment taxes are offset by up to:
A) 50%
B) 70%
C) 90%
D) 100%
Page 23
Q5) Explain the economic significance for the existence of unemployment insurance.
Q6) List and explain briefly the purposes of the workers' compensation laws.
To view all questions and flashcards with answers, click on the resource link above.
Page 24
Chapter 22: Commercial Property Insurance
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/27062
Sample Questions
Q1) Which of the following factors would generally <u>not</u> be considered in a class rating scheme?
A) Community firefighting capability
B) Use of the structure
C) External surrounding exposures
D) The existence of sidewalks around the building
Q2) Neither explosion nor smoke damage is covered by a commercial property contract.
A)True
B)False
Q3) A bailees' customer policy is a type of ocean marine insurance.
A)True
B)False
Q4) Which of the following is <u>not</u> a function of the Insurance Services Office (ISO)?
A) Collecting loss data
B) Developing standard insurance policies
C) Coordinating prices between insurance companies
D) Providing public information about insurance
Q5) What is the difference between class rating and schedule rating?
Q6) List and explain the major types of ocean marine loss exposures.
Page 25
To view all questions and flashcards with answers, click on the resource link above.
Chapter 23: Commercial Liability Insurance
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/27063
Sample Questions
Q1) All the following are suggestions for reducing the cost of commercial liability coverage <u>except</u>:
A) statute of limitations on filing suits
B) reduce non-economic injuries
C) end contingency fees for lawyers
D) eliminate state of the art evidence rules
Q2) A claims-made contract pays for claims made in the policy period that stem from occurrences that took place after the retroactive date.
A)True
B)False
Q3) Why are insurance pools used to insure nuclear energy liability, rather than private insurance mechanisms?
A) There is unlimited liability when a nuclear event occurs.
B) It is impossible to measure the loss.
C) Individual insurers cannot replace lost electricity when a nuclear plant shuts down.
D) The loss could be greater than even the largest insurance company could handle.
Q4) Explain the idea behind business liability umbrella policies.
To view all questions and flashcards with answers, click on the resource link above.