1.

Within the realm of Risk Management, insurance is a technique that is often used. When insurance is used it isprimarily attempting to a. Isolate the cost of losses. b. Prevent the cost of losses. c. Reduce the cost of losses. . Transfer the cost of losses. ANSWER D

2. 3. 4. 5. 6.

2 When insurance is used to transfer possible losses to the insurer, the vehicle that accomplishes this transfer is the a. Policy. b. Agent. c. Letter of transfer. d. Broker of record letter. ANSWER A 3 An insurance policy is a contract that states the rights and duties of a. The insured and insurer and agent. b. The insured and the insurer.c . The insured and the agent. d. The insured and other third parties ANSWER B 4 Transferring the costs of losses to an insurer would be unnecessary, if there were no a. Exposures to loss. b. Civil courts. c. Agents. d. Reinsurance. ANSWER A 5 Making a profit for the insurance company is a major objective for which one of the following departments? a. Underwriting department b. Finance department c Marketing department . d. Claims department ANSWER A 6 An insurance company pays for covered losses and, in effect, distributes the costs of losses among all a. Insurers in a state. b. Insureds. C Members of society. d. Claimants. ANSWER B

7 The law of large numbers is a mathematical principle that states that as the number of similar but independentexposure units increases, the relative a. Accuracy of predictions about future outcomes decreases. b. Accuracy of predictions about future outcomes increases. c. Frequency of predictions about future outcomes decreases. d. Frequency of predictions about future outcomes increases. ANSWER B 8 In order for the law of large numbers to operate, insurance companies need to insure A large number of similar exposure units. b. Exposure units that are widely dispersed. c. Exposure units that have not had losses. d. A large number of unique exposure units .ANSWER A 9 What states that as the number of similar but independent units increases, the relative accuracy of predictionsabout future outcomes based on these exposure units also increases? a. The principle of indemnity b. The principle of reciprocal pricing c. Loss trending and forecasting d. The law of large numbers ANSWER D 10 John has worked for Alloto, Inc. for 25 years and is considering retiring within the next two years. John'sretirement is an example of a. A personnel loss exposure for Alloto, Inc. b. A human loss exposure for Alloto, Inc. c. A liability loss exposure for Alloto, Inc. d. A loss transfer loss exposure for Alloto, Inc .ANSWER A 11 Pam operates a home business that requires her clients to come to her house. The possibility of one of Pam'sclients tripping on a step leading to Pam's house and injuring herself is a a. Property loss exposure. b. Liability loss exposure. c. Personnel loss exposure. d. Human loss exposure .ANSWER B