CAFM Risk Management 5 — Questions and Answers
Question 1: A 'captive insurance company' owned by a large fleet organization is BEST described as:
- A third-party insurer that specializes exclusively in fleet coverage
- A wholly-owned subsidiary that insures the parent's risks and retains premiums within the corporate structure (Correct answer)
- A government-sponsored insurance pool for municipal fleets
- A reinsurance arrangement with a foreign insurer
Correct answer: A wholly-owned subsidiary that insures the parent's risks and retains premiums within the corporate structure
A captive insurer is a subsidiary created to finance the parent organization's retained risks, keeping underwriting profit and investment income in-house.
Question 2: Which action BEST demonstrates a fleet manager's proactive approach to reducing workers' compensation claims related to vehicle operations?
- Purchasing higher workers' compensation policy limits
- Implementing ergonomic vehicle entry/exit protocols and load-handling training (Correct answer)
- Increasing driver pay to reduce job stress
- Outsourcing all driving duties to independent contractors
Correct answer: Implementing ergonomic vehicle entry/exit protocols and load-handling training
Ergonomic protocols and training address the physical root causes of occupational injuries in fleet operations such as slips, strains, and improper lifting.
Question 3: A fleet manager is asked to quantify the total cost of a fleet accident. Which costs are typically EXCLUDED from insurance claims but should be included in a total-cost analysis?
- Medical expenses paid by liability coverage
- Administrative time, lost productivity, rental costs, and reputational damage (Correct answer)
- Vehicle repair costs covered under collision coverage
- Legal defense costs paid by the insurer
Correct answer: Administrative time, lost productivity, rental costs, and reputational damage
Uninsured indirect costs such as management time, lost productivity, and reputational harm often exceed the direct insured losses but are invisible without a total-cost analysis.
Question 4: Which fleet risk management practice is MOST effective at preventing accidents caused by driver fatigue?
- Installing forward collision warning systems in all vehicles
- Enforcing hours-of-service limits and scheduling adequate rest periods between shifts (Correct answer)
- Requiring drivers to complete monthly online safety quizzes
- Adding roadside assistance coverage to all vehicle policies
Correct answer: Enforcing hours-of-service limits and scheduling adequate rest periods between shifts
Hours-of-service rules and rest scheduling directly address the root cause of fatigue — insufficient sleep and excessive driving time.
Question 5: What is the key difference between 'risk avoidance' and 'risk reduction' as fleet risk management strategies?
- Risk avoidance reduces the cost of a loss while risk reduction eliminates the activity
- Risk avoidance eliminates the exposure entirely while risk reduction lowers the frequency or severity of an existing exposure (Correct answer)
- Risk avoidance applies only to liability risks while risk reduction applies to property risks
- Risk avoidance is a financial strategy while risk reduction is an operational strategy
Correct answer: Risk avoidance eliminates the exposure entirely while risk reduction lowers the frequency or severity of an existing exposure
Avoidance removes the activity (e.g., discontinuing a hazardous delivery route) while reduction modifies it (e.g., requiring speed limiters on that route).
Question 6: When a fleet vehicle is involved in an accident with a third party who is uninsured, which coverage protects the fleet organization's employees for their bodily injuries?
- Collision coverage
- Uninsured/underinsured motorist (UM/UIM) coverage (Correct answer)
- Medical payments coverage
- Comprehensive coverage
Correct answer: Uninsured/underinsured motorist (UM/UIM) coverage
UM/UIM coverage pays for injuries sustained by the insured's occupants when the at-fault driver has no insurance or insufficient insurance.
Question 7: A fleet manager implements a 'graduated return-to-work' program after driver injuries. From a risk management perspective, this program PRIMARILY achieves:
- Reduced vehicle operating costs through lighter duty assignments
- Lower workers' compensation costs by reducing claim duration and preventing claim escalation (Correct answer)
- Improved vehicle utilization rates during driver recovery periods
- Compliance with FMCSA medical certification requirements
Correct answer: Lower workers' compensation costs by reducing claim duration and preventing claim escalation
Modified-duty return-to-work programs reduce the total cost of workers' compensation claims by shortening disability duration and maintaining the employee's connection to the workplace.
CAFM Risk Management 5
A 'captive insurance company' owned by a large fleet organization is BEST described as: