Discussion Questions: Personal Risk Management

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Jessica Conley Chapter 2 Discussion Questions 1. Describe the personal risk management process. a. The personal risk management process can be broken down into a few steps that can aid in the risk faced by a client. Here are the steps that risk management process: • Determining the objectives of the risk management program • Identifying the risks to which the individual is exposed • Evaluating the identified risks for the probability and severity of the loss • Selecting the most appropriate alternative for each risk • Implementing the risk management plan selected • Periodically evaluating and reviewing the risk management program 2. List the four responses to managing risk a. The four responses to managing risk are risk reduction, risk transfer,…show more content…
• Aleatory is the amount paid in and the amount paid out is unequal. • Unilateral is where the only one making a promise is the insurer. • Conditional is the terms of the contract must be adhered too. • Personal is where the policy cannot be assigned to a third party. 6. Explain the differences between pure risk and speculative risk. a. The differences between pure risk and speculative risk is pure risk is the chance of a loss or no loss happening while speculative risk is the chance of loss, no loss, or a profit. 7. Explain the four differences between subjective and objective risks a. Subjective risk is the perceived risk based on prior experience. Objective risk is the difference in the expected loss and the actual loss. 8. Describe the law of large numbers and why it is useful for insurance companies. a. Law of Large Numbers is when the actual outcome approaches the mean probability with an exposure increase. This is useful to insurance companies because it allows them to keep insurance premiums down yet where they need to be in the event of an actual loss. 9. List typical perils covered under a personal auto policy. a. Typical perils covered under a personal auto policy…show more content…
Describe the differences between actual cash value, replacement cost, and appraised value. a. The difference between actual cash value, replacement cost, and appraised value is as follows. • Actual cash value is the depreciated value of personal property. • Replacement cost is the money necessary to replace or repair property without any deduction for depreciation. • Appraised value is the money value of something that is hard to place the worth and exceeds the limits of the policy. 28. Identify the three levels of state regulation of the insurance industry. a. The three levels of state regulation of the insurance industry are legislative, judicial, and executive or state insurance commissioner. 29. Identify the goals of the NAIC. a. The goals of the NAIC are • Protect the public. • Promote the competition. • Promote fair treatment of insurance consumers. • Promote the solvency of insurance companies. • Support and improve state regulation of insurance. 30. Describe the differences between various methods to regulate insurance rates. a. The different methods to regulate insurance rates are • Prior approval law • File & use law • Use & file law • Open

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