ARM 402 UPDATED 2026 EXAM SCRIPT QUESTIONS AND
SOLUTIONS RATED A+
✔✔Any organization can self-insure its loss exposures, provided that
A) The state in which it operates permits self-insurance plans
B) It documents its enterprise risk management program with the state insurance
departments in the states in which it operates
C) Its estimated losses from physical hazards do not exceed a state-specified maximum
D) Its operations do not involve the manufacture or distribution of products intended for
human consumption - ✔✔A
✔✔Which one of the following is a motor fleet system component that can likely lead to
losses?
A) Routes
B) Premises
C) Financing
D) Contracts - ✔✔A
✔✔Which one of the following statements is true regarding the strategic management
process?
A) The strategic management process is the responsibility of an organization's board of
directors
B) The strategic management process focuses on the internal environment of the
organization
C) The strategic management process aligns all of an organization's strategies and
activities to enable it to meet its short-term goals
D) The strategic management process can be applied to any type of organization,
including business, not-for-profit organizations, and government entities - ✔✔D
✔✔Which one of the following explains how group self-insurance plans differ from
individual self-insurance plans?
A) Group self-insurance plans do not require state regulatory filings
B) Group self-insurance plans can handle many different lines of business
C) Group self-insurance plans are only used for healthcare benefits
D) Group self-insurance plans rely on a not-for-profit association or corporation - ✔✔D
✔✔Organizations use retrospective rating plans to
A) Shift the burden of retained losses through accounting procedures that take
advantage of tax rules
, B) Reallocate premium dollars to loss exposures not typically covered by such plans,
such as workers' compensation
C) Finance their low- to medium-severity losses
D) Help them predict loss frequency for future risk management decisions - ✔✔C
✔✔Which one of the following risk control techniques might actually increase loss
frequency?
A) Loss prevention
B) Separation
C) Loss reduction
D) Diversification - ✔✔B
✔✔The lease for a tenant's occupancy of an office space states that the tenant will
maintain the property in reasonable condition. The tenant fails to clear ice and snow
from the property and a passerby falls and is injured. On what basis might the tenant
most likely be liable for the passerby's injuries?
A) Breach of contract
B) Negligence
C) Strict liability
D) Tort - ✔✔A
✔✔Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli
Hardware has won best local hardware store 3 years in a row. Taylor would like to
expand operations and has undertaken a SWOT analysis.
His most dedicated customers are generally over 40 years old and engaged in small
house projects, but his biggest revenue generator continues to be the sale of lumber.
He would like to obtain more commercial customers and increase lumber sales.
One of the major complaints Taylor hears from his customers is the difficulty finding
local contractors. So, he is considering hiring a general contractor at the store who
would also make house calls to assist customers. This will allow him to bill for labor and
increase the sale of his products, but he is concerned it may increase his insurance
claims and premiums.
One of the younger store employees suggested they create a website to expand sales
to on-line purcha - ✔✔A
✔✔A patent used for the invention of a machine is a
A) Plant patent
B) Design patent
C) Utility patent
D) Process patent - ✔✔C
SOLUTIONS RATED A+
✔✔Any organization can self-insure its loss exposures, provided that
A) The state in which it operates permits self-insurance plans
B) It documents its enterprise risk management program with the state insurance
departments in the states in which it operates
C) Its estimated losses from physical hazards do not exceed a state-specified maximum
D) Its operations do not involve the manufacture or distribution of products intended for
human consumption - ✔✔A
✔✔Which one of the following is a motor fleet system component that can likely lead to
losses?
A) Routes
B) Premises
C) Financing
D) Contracts - ✔✔A
✔✔Which one of the following statements is true regarding the strategic management
process?
A) The strategic management process is the responsibility of an organization's board of
directors
B) The strategic management process focuses on the internal environment of the
organization
C) The strategic management process aligns all of an organization's strategies and
activities to enable it to meet its short-term goals
D) The strategic management process can be applied to any type of organization,
including business, not-for-profit organizations, and government entities - ✔✔D
✔✔Which one of the following explains how group self-insurance plans differ from
individual self-insurance plans?
A) Group self-insurance plans do not require state regulatory filings
B) Group self-insurance plans can handle many different lines of business
C) Group self-insurance plans are only used for healthcare benefits
D) Group self-insurance plans rely on a not-for-profit association or corporation - ✔✔D
✔✔Organizations use retrospective rating plans to
A) Shift the burden of retained losses through accounting procedures that take
advantage of tax rules
, B) Reallocate premium dollars to loss exposures not typically covered by such plans,
such as workers' compensation
C) Finance their low- to medium-severity losses
D) Help them predict loss frequency for future risk management decisions - ✔✔C
✔✔Which one of the following risk control techniques might actually increase loss
frequency?
A) Loss prevention
B) Separation
C) Loss reduction
D) Diversification - ✔✔B
✔✔The lease for a tenant's occupancy of an office space states that the tenant will
maintain the property in reasonable condition. The tenant fails to clear ice and snow
from the property and a passerby falls and is injured. On what basis might the tenant
most likely be liable for the passerby's injuries?
A) Breach of contract
B) Negligence
C) Strict liability
D) Tort - ✔✔A
✔✔Taylor owns Paoli Hardware, a mid-sized hardware store with 25 employees. Paoli
Hardware has won best local hardware store 3 years in a row. Taylor would like to
expand operations and has undertaken a SWOT analysis.
His most dedicated customers are generally over 40 years old and engaged in small
house projects, but his biggest revenue generator continues to be the sale of lumber.
He would like to obtain more commercial customers and increase lumber sales.
One of the major complaints Taylor hears from his customers is the difficulty finding
local contractors. So, he is considering hiring a general contractor at the store who
would also make house calls to assist customers. This will allow him to bill for labor and
increase the sale of his products, but he is concerned it may increase his insurance
claims and premiums.
One of the younger store employees suggested they create a website to expand sales
to on-line purcha - ✔✔A
✔✔A patent used for the invention of a machine is a
A) Plant patent
B) Design patent
C) Utility patent
D) Process patent - ✔✔C
