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Chap011

# Chap011 - Chapter 11 Loss Control I Multiple Choice 1 A...

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Chapter 11 Loss Control I. Multiple Choice 1. A particular loss control effort will be undertaken if a. the expected frequency of losses is reduced b. the expected severity of losses is reduced c. expected losses are reduced by an amount greater than the cost of the loss control effort d. all of the above Answer: c Type: K 2. Loss Prevention activities are aimed at reducing the a. frequency of losses b. size of a loss (for if and when a loss occurs) c. probability of loss to zero d. all of the above Answer: a Type: K 3. FunFun Toys produces assorted toy rockets. It has discovered that its water pressure rockets have a tendency to tip over just before take off thereby flying parallel, and low, to the ground. FunFun has decided to quit producing this toy rocket. This is an example of 4. Loss Reduction activities are aimed at reducing the 66

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5. Segregation of exposure units can reduce 6. Insurance coverage can reduce the incentives to undertake loss control activities if insurers a. help pay for the loss control b. don’t reduce insurance premiums to reflect the effects of the loss control activities c. pay for losses anyway d. lower premiums after loss control is implemented Answer: b Type: K Use the following information to answer questions 7-10. PTM Inc. is evaluating a loss control plan. The costs and benefits are as follows; (Ignore the implications of possible reduced insurance premiums.) Today End of Year 1 End of Years 2-5 Loss Control Expenditures \$10,000 \$4,000 0 Reduction in Expected Losses 0 \$3,400 \$3,400
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Chap011 - Chapter 11 Loss Control I Multiple Choice 1 A...

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