You must choose one question from Topic 3 (1 or 2) and one question from Topic 4 (3 or 4). You will be answering a total of two questions for this assignment.

Topic 3: Choose one from question number 1 OR 2

Topic 4: Choose one from question number 3 OR 4

• TOPIC 3 Questions:

1.Scaffold Equipment manufactures and sells scaffolds and ladders that are used by construction firms. The products are sold directly to independent retailers in the United States. The company’s risk manager knows that the company could be sued if a scaffold or ladder is defective, and someone is injured. Because the cost of products liability insurance has increased, the risk manager is considering other techniques to treat the company’s loss exposures. (Total of 50 points)

• a.Describe the steps in the risk management process. (10 points)

SCORING: 2.5 points given for each step identified.

b. For each of the following risk management techniques, describe a specific action using that technique that may be helpful in dealing with the company’s products liability exposure.

Avoidance (10 points)

SCORING: 5 points given for the specific action used; 5 points is given for analysis of why this action is avoidance.

Loss prevention (10 points)

SCORING: 5 points given for the specific action used; 5 points is given for analysis of why this action is loss prevention.

Loss reduction (10 points)

SCORING: 5 points given for the specific action used; 5 points is given for analysis of why this action is loss reduction.

Noninsurance transfers. (10 points)

SCORING: 5 points given for the specific action used; 5 points is given for analysis of why this action is noninsurance transfer.

The Swift Corporation has 5000 sales representatives and employees in the United States who drive company cars. The company’s risk manager has recommended to the firm’s management that the company should implement a partial retention program for physical damage losses to company cars. (Total of 50 points)

Explain the advantages and disadvantages of a partial retention program to the Swift Corporation. (10 points)

SCORING: 5 points given for the advantages identified; 5 points is given for disadvantages identified.

Identify the factors that the Swift Corporation should consider before it adopts a partial retention program for physical damage losses to company cars. (10 points)

• SCORING: 5 points given for the factors identified; 5 points is given for analysis of why this action is.

If a partial retention program is adopted, what are the various methods the Swift Corporation can use to pay for physical damage losses to company cars? (10 points)

SCORING: 2 points given for each method identified.

Identify two risk-control measures that could be used in the company’s partial retention program for physical damage losses. (20 points)

SCORING: 5 points given for the measure identified; 5 points is given for the analysis of why is the measure identified.

During a “hard” insurance market, a manufacturing company decided to self-insure its worker’s compensation loss exposure. The company hired a third party to administer the worker’s compensation claims. Even though the risk was being self-insured, the risk manager insisted that the third-party administrator maintain meticulous records. When asked why such detailed records were necessary, the risk manager replied, “So we have a good story to tell an insurance company next year.” What did the risk manager mean? (50 points)

SCORING: 10 points given for description of hard market; 10 points given for description of self-insurance; 10 points given for analysis of how self-insurance correspond with underwriting cycle; 20 points given for how the “good story” works with self-insurance and underwriting cycle.

• A risk manager self-insured a property risk for one year. The following year, even though no losses had occurred, the risk manager purchased property insurance to address the risk. What is the best explanation for the change in how the risk was handled, even though no losses had occurred? (50 points)

SCORING: 10 points given for description of self-insurance; 20 points given for comparison between self-insurance and insurance (advantage, disadvantage, etc.); 30 points of explanation for the change in how the risk was handled, even though no losses had occurred.