Which of the following is NOT an advantage of a Captive Insurance Company?
A. It helps firms with "hard markets".
B. It provides regulatory and income tax benefits
C. It manages cash flow variability.
D. It provides access to reinsurance markets.
E. It may insure third-party risks
What is C
100
True or False:
When contracted in a lease the tenant may be financially responsible for property losses while occupying the property, the owner is ultimately responsible for ALL losses.
True
100
Which of the following is NOT a goal of risk financing?
A. pay for losses
B. manage the cost of risk
C. manage cash flow variability
D. make risk easier to live with
E. comply with legal requirements
What is D
100
True or False:
In self-insurance, firms firms with many losses exposures plan and fund retention for potentially large losses
What is true
100
Because of the flexibility in the design of their "insurance programs", firms who self-insure are able to do what?
What is avoid state mandated benefit laws
200
What are the two requirements of forming a risk retention group (RRG)?
What are all members/owners must be from the same industry and must be insured by the RRG (i.e. all insured must be owners)
200
Fill in the blank: In a _________, companies use _______ from ________ in order to pay for losses, while still having the asset/activity exposed to the loss (________)
What is transfer, external funds, third-party sources, loss exposure
200
When using the Retention, what are three ways a company can fund their loss?
What are not buying insurance, being under-insured, or having an insurance contract with a deductible.
200
True or False:
Fairly predictable losses include health insurance and lawsuits
What is false (they included health insurance and work. comp.)
200
Firms who self-insure face the following disadvantages EXCEPT:
A. The possibility of a catastrophic loss.
B. Loss of goodwill among consumers, distributors, and channels.
C. Having to perform many administrative functions associated with insurance.
D. The possibility of higher taxes.
E. Potential employee "public relations" problems.
What is B
300
Which of the following is NOT a captive insurance company?
A. Single-Parent Captive
B. Risk Retention Group
C. Group Captive
D. Association Captive
E. Stop-Loss Captive
What is E.
300
True or False: When having insurance, the insursance company controls part of the asset/activity and is responsible for all loss payments.
False (while it is true that the insurance company is responsible for all financial losses, the insured still has the asset/activity)
300
True or False:
Passive retention is the same as planned retention.
What is false
300
True or False: Health insurance is paid over a long payout period.
What is false (ONLY workers' comp. is paid over a long period)
300
In an _________ contract, a firm can direct their administrative issues to an insurance company or third-party administrator.
What is administrative services only (ASO)
400
Which risk control and risk financing techniques best fund losses that are high in severity and high in frequency? Low in frequency?
What is loss reduction, loss prevention, avoidance, and captive or RRG; insurance or loss reduction
400
In a ________, a contract under which one party agress to assume the liability of a second party (e.g. a contractor)
What is hold harmless agreement
400
In this form of retention, losses are paid from currwent revenues or borrowed funds.
What is unfunded retention
400
In _______, a firm can prefund the "known" loss occuring in the future
What is long-tailed loss
400
Choose whether the following conditions are an example or a specific or aggregate stop-loss:
- a firm is charge 90k for cancer treatment; insurance pays 40k
- a firms total losses equal $12M, insurer pays $2M
-
What is specific, aggregate
500
Which risk control and risk financing techniques best fund losses that are low in severity and high in frequency? Low in frequency?
What is Funded retention or loss prevention; unfunded retention
500
While each is unique, what similarity do Insurance and Non-Insurance Risk Transfer share?
What is that the financial responsibility for the loss "being transferred" can return to the firm/individual
500
True or False:
Funded retention is better for losses that are high frequency and low severity
What is false
500
On-the-job injuries, lost wages, and medical expenses are all part of what type of loss exposure?
What is worker's compensation
500
Which of the following is NOT an advantage of self-insurance:
A. Is potentially less expensive
B. Reduces the loss exposure of the firm
C. Gives flexibility in the design of the insurance programs
D. Can invest money internally at a higher rate of return than credited by insurance
E. Firms retain savings from loss prevention and loss reduction programs