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HS311 - Ch2

Managing Risks

QuestionAnswer
Risk Management The systematic process for dealing with risk
Enterprise Risk management The approach to managing all of an organizations risks (pure hazardsa and speculative risks) and opportunities in order to maximize the organizations value
Risk Control Risk management techniques used to minimize the frequency and severity of losses.
Loss Reduction Risk control measure that aims to reduce the severity of loss
Noninsurance transfers Risk control measure that uses a contract other than an insurance contract.
Risk Financing Techniques used to pay for any losses that do occur.
Risk Retention Risk financing method whereby a person or organization keeps, or retains, the financial burden of any loss rather than transferring them to an insurer or other party
Deductable The initial portion of a covered loss borne by the insured
Self-Insurance Formal programs of risk retention
Captive Insurer A separate subsidiary insurance company established to write its own insurance
Risk Transfer Loss financing method that shifts risk to some other party
Hold harmless Agreement A type of non-insurance transfer whereby the transferee agrees to hold the transeror harmless in case of legal liability to others
Insurance Equation The equality between the sources and uses of income: Premiums+Investment Earnings+Other Income = Covered Losses+Cost of doing Business+Profits
Credibility The degree of reliability places on past experience to predict what will happen in the future
Risk Financing Risk Retention & Risk transfer
Risk Avoidance Is the most extreme form of risk control whereby a party decides not to incur a loss exposure or to eliminate one that already exists
Loss Prevention Risk control measure intended to lower the probability of loss or the frequency with which a given type of loss occurs
Mortality The relative incidence of death
Morbitity The relative incidence of disease
Risk Identification The careful and systematic discovery of all risks that confront a household or organization
Maximum Possible loss The worst loss that could happen
Third-Party Administrator (TPA's) A firm that administers self-insurance programs for a fee
Voluntary Benefits Benefits made available to employees for an additional fee
Cafeteria Plans A plan which allows employees to choose among several different types of benefit options
Premium-Conversion Plan Paying for additional benefits with salary reductions
Flexible Spending Accounts (Sec 125 Plans) A plan that allows employees to pay for certain types of non-insurance expenses with pre-tax dollars
Maximum probable loss The worst loss that is likely to happen
Created by: djseibel