CISR PERSONAL LINES MISCELLANEOUS EXAM ACTUAL
EXAM 100 QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES |AGRADE
TCOR - ANSWER: Total Cost of Risk
Risk Management - ANSWER: the process of managing uncertainty of exposures that
affect an organizations assets
5 steps of risk management process - ANSWER: Identification, analysis, control,
financing and administration
Six general classes of risk - ANSWER: 1. Economic
2. Legal
3. Political
4. Social
5. Physical
6. Juridical
Four Logical Classifications of Exposures - ANSWER: A. Property
B. Human Resources
C. Liability
D. Net Income
Ways to identify risks - ANSWER: Checklists, surveys, flowcharts, Insurance policy
reviews, physical inspections, compliance reviews, contract reviews, experts, loss
data analysis and financial statement review
7 Benefits of risk management - ANSWER: Identify Exposures, Improve budgeting &
planning, determine risk appetite, allocate cost of risk, adds value, mitigate losses
and integrates risk control & safety
Risk Identification - ANSWER: the most important step of the risk management
process.
Collecting and analyzing data - ANSWER: •helps an organization identify and
understand the potential impact of losses,
•helps the organization address product/service development and pricing,
•helps the risk manager in working with the organization's insurance programs, and
•provides the foundation on which the organization calculates its cost of risk.
,Qualitative analysis - ANSWER: the "what" analysis process, in other words, the
identification and evaluation of loss exposures that cannot be easily measured by
traditional statistical or financial methods.
Quantitative analysis - ANSWER: the "how much" analysis, which attempts to
accurately measure risks by using acceptable, traditional methodologies to calculate
relative numeric values.
Loss Data Credibility - ANSWER: •Completeness - statistical analysis is valid if the
data set is complete.
•Consistency - comparisons are valid if the same items (apples to apples) are used.
•Integrity - data with good integrity is reliable, accurate and current to the time
period being measured.
•Relevance - the data must yield information on matters of concern to the
organization.
Benchmarking - ANSWER: a systematic way of continuously comparing an
organization's performance against others at a given time or against itself over a
given time period.
Risk Control - ANSWER: Any conscious action or inaction to minimize, at the optimal
cost, the probability, frequency, severity, or unpredictability of loss
Risk Financing - ANSWER: The acquisition of internal and external funds to pay losses
at the most favorable cost.
Risk Financing Techniques - ANSWER: Risk Taking appetite, transfer options, simple
transfer options & loss sensitive transfer options
Risk Administration - ANSWER: the process of planning, implementing, and
monitoring the risk management program
Risk Management Information System - ANSWER: an information system that
supports both the risk team and the organization. This type of software deploys risk
management tools in addition to managing risk data. RMIS can sometimes serve as a
customer relationship module, as well.
Four Components of the Total Cost of Risk - ANSWER: Insurance Costs, Retained
losses & ALAE, Risk Management departmental costs and Outside service fees
Pure Risk - ANSWER: A chance of loss or no loss, but no chance of gain.
Speculative Risk - ANSWER: Chance of loss or gain, usually associated with business
or financial risk.
, Exposure - ANSWER: a situation, practice, or condition that may lead to an adverse
financial consequence; an activity or asset.
Hazard - ANSWER: a condition that may give rise to a loss from a given peril; physical,
moral, or morale characteristics that increases the likelihood of a loss.
Peril - ANSWER: the cause of loss, such as fire, wind, hail, slip and fall, etc.
Severity - ANSWER: the dollar amount of a given loss or the aggregate dollar amount
of all losses for a given period.
Accidents are also evaluated according to how severe the ensuing injury or property
damage may be.
Frequency - ANSWER: the number of losses occurring in a given time period.
Accidents are evaluated according to how often they might occur.
Incident - ANSWER: an event that disrupts normal activities and may become a loss
(also referred to as a near miss)
Accident - ANSWER: an unplanned event definite as to time and place that results in
injury or damage to a person or property
Occurrence - ANSWER: an accident with the limitation of time removed (an
"accident" that is extended over a period of time rather than a single observable
happening)
Loss - ANSWER: a reduction in the value of assets. Not all losses become claims
Claim - ANSWER: a demand for payment or an obligation to pay as a result of a loss
Incurred but not reported (IBNR) - ANSWER: a reserve that must be established for
claims that have already occurred but that have not yet been reported
Which of the following is not one of the components in the definition of risk? -
ANSWER: Chance or probability of loss
Certainty concerning a loss
Possibility of a variation of outcomes from a given set of circumstances
Difference between expected losses and actual losses
Loss Trending - ANSWER: adjusting historical losses to account for inflationary trends
so that the ultimate value is more current or meaningful. Loss trend factors are
multiplied by actual historical losses to trend the losses
EXAM 100 QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES |AGRADE
TCOR - ANSWER: Total Cost of Risk
Risk Management - ANSWER: the process of managing uncertainty of exposures that
affect an organizations assets
5 steps of risk management process - ANSWER: Identification, analysis, control,
financing and administration
Six general classes of risk - ANSWER: 1. Economic
2. Legal
3. Political
4. Social
5. Physical
6. Juridical
Four Logical Classifications of Exposures - ANSWER: A. Property
B. Human Resources
C. Liability
D. Net Income
Ways to identify risks - ANSWER: Checklists, surveys, flowcharts, Insurance policy
reviews, physical inspections, compliance reviews, contract reviews, experts, loss
data analysis and financial statement review
7 Benefits of risk management - ANSWER: Identify Exposures, Improve budgeting &
planning, determine risk appetite, allocate cost of risk, adds value, mitigate losses
and integrates risk control & safety
Risk Identification - ANSWER: the most important step of the risk management
process.
Collecting and analyzing data - ANSWER: •helps an organization identify and
understand the potential impact of losses,
•helps the organization address product/service development and pricing,
•helps the risk manager in working with the organization's insurance programs, and
•provides the foundation on which the organization calculates its cost of risk.
,Qualitative analysis - ANSWER: the "what" analysis process, in other words, the
identification and evaluation of loss exposures that cannot be easily measured by
traditional statistical or financial methods.
Quantitative analysis - ANSWER: the "how much" analysis, which attempts to
accurately measure risks by using acceptable, traditional methodologies to calculate
relative numeric values.
Loss Data Credibility - ANSWER: •Completeness - statistical analysis is valid if the
data set is complete.
•Consistency - comparisons are valid if the same items (apples to apples) are used.
•Integrity - data with good integrity is reliable, accurate and current to the time
period being measured.
•Relevance - the data must yield information on matters of concern to the
organization.
Benchmarking - ANSWER: a systematic way of continuously comparing an
organization's performance against others at a given time or against itself over a
given time period.
Risk Control - ANSWER: Any conscious action or inaction to minimize, at the optimal
cost, the probability, frequency, severity, or unpredictability of loss
Risk Financing - ANSWER: The acquisition of internal and external funds to pay losses
at the most favorable cost.
Risk Financing Techniques - ANSWER: Risk Taking appetite, transfer options, simple
transfer options & loss sensitive transfer options
Risk Administration - ANSWER: the process of planning, implementing, and
monitoring the risk management program
Risk Management Information System - ANSWER: an information system that
supports both the risk team and the organization. This type of software deploys risk
management tools in addition to managing risk data. RMIS can sometimes serve as a
customer relationship module, as well.
Four Components of the Total Cost of Risk - ANSWER: Insurance Costs, Retained
losses & ALAE, Risk Management departmental costs and Outside service fees
Pure Risk - ANSWER: A chance of loss or no loss, but no chance of gain.
Speculative Risk - ANSWER: Chance of loss or gain, usually associated with business
or financial risk.
, Exposure - ANSWER: a situation, practice, or condition that may lead to an adverse
financial consequence; an activity or asset.
Hazard - ANSWER: a condition that may give rise to a loss from a given peril; physical,
moral, or morale characteristics that increases the likelihood of a loss.
Peril - ANSWER: the cause of loss, such as fire, wind, hail, slip and fall, etc.
Severity - ANSWER: the dollar amount of a given loss or the aggregate dollar amount
of all losses for a given period.
Accidents are also evaluated according to how severe the ensuing injury or property
damage may be.
Frequency - ANSWER: the number of losses occurring in a given time period.
Accidents are evaluated according to how often they might occur.
Incident - ANSWER: an event that disrupts normal activities and may become a loss
(also referred to as a near miss)
Accident - ANSWER: an unplanned event definite as to time and place that results in
injury or damage to a person or property
Occurrence - ANSWER: an accident with the limitation of time removed (an
"accident" that is extended over a period of time rather than a single observable
happening)
Loss - ANSWER: a reduction in the value of assets. Not all losses become claims
Claim - ANSWER: a demand for payment or an obligation to pay as a result of a loss
Incurred but not reported (IBNR) - ANSWER: a reserve that must be established for
claims that have already occurred but that have not yet been reported
Which of the following is not one of the components in the definition of risk? -
ANSWER: Chance or probability of loss
Certainty concerning a loss
Possibility of a variation of outcomes from a given set of circumstances
Difference between expected losses and actual losses
Loss Trending - ANSWER: adjusting historical losses to account for inflationary trends
so that the ultimate value is more current or meaningful. Loss trend factors are
multiplied by actual historical losses to trend the losses
