Risk Management Flashcards
7 cards from real TRIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management flashcards as text
Which risk management technique is most appropriate when a transportation exposure is so severe that no reasonable amount of insurance or controls can adequately manage it?
Answer: Risk avoidance
Risk avoidance eliminates the exposure entirely by choosing not to engage in the activity, which is appropriate when residual risk is unacceptably high.
Under a retrospective rating plan, a transportation company's final premium is adjusted based on:
Answer: The company's actual loss experience during the policy period
Retrospective rating ties the final premium to the insured's own loss experience, creating a financial incentive to control losses.
A risk manager reviews frequency and severity data for cargo theft claims. High frequency combined with low severity suggests the company should primarily:
Answer: Implement loss prevention programs and retain the risk
High-frequency, low-severity losses are predictable and manageable through loss prevention, making retention more cost-effective than insurance for these exposures.
The term 'total cost of risk' (TCOR) in transportation risk management includes:
Answer: Insurance premiums, retained losses, risk management administrative costs, and indirect loss costs
TCOR provides a comprehensive view of all costs associated with risk, enabling meaningful comparisons between different risk financing strategies.
When evaluating whether to form a group captive, a transportation company should primarily consider:
Answer: Whether the company has sufficient premium volume and favorable loss history to benefit
A captive is financially viable when a company has enough premium volume to fund losses and administrative costs while benefiting from its favorable loss experience.
Which approach to risk identification involves systematically reviewing all contracts, leases, and agreements to uncover potential exposures?
Answer: Contract analysis
Contract analysis reviews all legal agreements to identify indemnification obligations, hold-harmless clauses, and insurance requirements that create risk exposures.
A transportation company with operations in multiple states faces workers' compensation exposure. Using a monopolistic state fund in states that require it is an example of:
Answer: Mandatory risk transfer
In monopolistic states, employers are legally required to purchase workers' compensation from the state fund, making this a mandated form of risk transfer.