St.

Mary’s University
College of Open and Distance Learning
Risk Management and Insurance
Assignment
(2012– III)
Student’s Name: ___________________
ID. No: ___________________________
Department: ______________________
Term: ____________________________
Center: ___________________________

Program Degree

i This is the only assignment of this course.

i This assignment is to be completed and submitted to the office of
your center. Do not attempt the assignment until you are certain
that you have understood the units it covers and have revised your
self-test exercises and learning activities, and other necessary
reference.
i If you have any question about the units and activities, state the
item/s clearly on a separate sheet of paper and attach to your
assignment paper.
i Due Date: This assignment must be submitted to the office of your
center ON OR BEFORE THE TUTORIAL PROGRAM. Please
strictly follow the deadline indicated.
Part I: True or False items (0.5 pt. each)
Write true if the statement is correct and false if it is incorrect in the following
questions in the space provided.
_________ 1. Subjective risk is the relative variation of actual loss from the expected loss.
_________ 2. Peril is a condition that creates or increases the chance of loss whereas hazard
is a specific cause of loss.
_________ 3. Like loss frequency, loss severity is measured qualitatively in the absence of
usable data.
_________ 4. A gambler bears a risk while the insured transfers a risk.
_________ 5. Dynamic risks involve those loses that occur even if there were no changes
in the over all economy.
_________6. Premiums charged for different types of insurance coverage vary depending
on the degree of risk they bring into the group.
_________7. Unlike pure risk, speculative risks are not insurable.
_________8. Public liability insurance refers to the provision of insurance for illegal
liability to pay claims to those who are injured.
_________9. In the event of loss, insurance cannot replace sentimental value and esteem.
_________10. Financial risk is materialized when the economy is under inflationary
condition.
Part II: Multiple choice items
Choose the correct answer among the given alternatives to each question and provide
your answer in the space provided. (1 pt each)
______ 1. Under which insurance is interest of insurance is transferable?
A. Property insurance C. Fire insurance
B. Life insurance D. Marine insurance
______ 2. Suppose that Ato Mehiretu Taye negligently caused damage to Ato Dubale’s
car. Dubale has already insured his car against accidental losses. His insurance
company indemnified him to the extent of loss. And then, the insurer, after
compensating the insured, has collected from Ato Mehiretu Taye who is
responsible for the loss. This is stated under the principle of;
A. Subrogation C. Utmost good faith
B. Indemnity D. Insurable interest

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St. Mary’s University Risk Management and Insurance (Degree)
________ 3. A type of hazard that can be originated from an act of carelessness leading to
the occurrence of loss is________________.
A. moral hazard C. Morale hazard
B. Physical hazard D. Legal hazard
______ 4. Identify the one which is not a major personal risk.
A. Risk of poor health C. Risk of unemployment
B. Risk of premature death D. Choice of marriage partner
______ 5. Pure risks are not insurable when.
A. The loss is calamitous.
B. The loss is determinable
C. The loss is measurable
D. The premium is economically feasible
______ 6. Identify the one which is different from the others.
A. Insurance C. Risk avoidance
B. Retention D. Non insurance transfers
_____ 7. The spreading of losses incurred by the few over the entire group is _________.
A. risk transfer C. indemnifications
B. sharing of loss D. payment of fortuitous losses
_____ 8. Speculative risk exists when _________________.
A. there is a chance of gain as well as a chance of loss.
B. there is a chance of loss, but not chance of gain.
C. there is a chance to gain, but not chance of loss.
D. there is neither a chance to gain nor chance of lose.
_____ 9. Which of the following statements is wrong about risk and uncertainty?
A. Uncertainty exists only with awareness, but risk exists whether or not
the person is aware of it.
B. Uncertainty refers to past, present and future situation whereas risk
refers to future outcomes.
C. Risk refers to subjective realties, whereas uncertainty is objective.
D. None of the above

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St. Mary’s University Risk Management and Insurance (Degree)
_____ 10. Suppose that oil station is set on fire and significant numbers of human and
material losses are incurred as a consequence. What do you think, is the peril
and hazard of this incident?
A. The hazard is fire and the peril is the oil.
B. The hazard is the loss of human, and materials and the peril is the oil.
C. The peril is the fire, and hazard is the oil in the station.
D. Both fire and oil are peril, and the loss of human and material loss are
hazard.
Part III: Short Answer (3 pts. each)
Give short and precise answers to each of the following questions in the space
provided.
1. Explain the difference between insurance and gambling
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2. Distinguish between frequency and severity of loss.
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St. Mary’s University Risk Management and Insurance (Degree)
 3. Define risk with explanation.
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4. Differentiate between financial risk and non financial risk.
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5. What is static risk? Explain.
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St. Mary’s University Risk Management and Insurance (Degree)