© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 1

Risk Management and Risk Management and InsuranceInsurance

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 2

Protection Against RiskProtection Against Risk

• Fire

• Lawsuits

• Accidents

• Natural disasters

• Theft

• Illness

• Disability

• Death

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 3

Understanding RiskUnderstanding Risk

• Speculative

• Pure

• Insurable

• Uninsurable

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 4

Insurable Risk CriteriaInsurable Risk Criteria

• Accidental

• Beyond the insured’s control

• Financially measurable

• Large number of similar cases

• Spans a wide geographical area

• Financially serious loss

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 5

Risk ManagementRisk Management

• Assessing risk

• Controlling risk

• Financing risk

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 6

Assessing RiskAssessing Risk

• Loss of property

• Loss of income

• Legal liability

• Loss of services

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 7

Controlling RiskControlling Risk

• Risk avoidance

• Loss prevention

• Loss reduction

• Risk-control transfer

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 8

Shifting Risk to an Shifting Risk to an Insurance CompanyInsurance Company

• Property insurance

• Consequential loss

• Liability insurance

• Key-person insurance

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 9

Property InsuranceProperty Insurance

• Replacement cost

• Actual cash value

• Functional replacement cost

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 10

Consequential Loss Consequential Loss InsuranceInsurance

• Business interruption

• Extra-expense

• Contingent business interruption

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 11

Liability InsuranceLiability Insurance

• Legal damages

• Legal defense

• Loss prevention

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 12

Types of Liability PoliciesTypes of Liability Policies

• Commercial general

• Product

• Automobile

• Professional

• Employment practices

• Excess liability

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 13

Key-Person InsuranceKey-Person Insurance

• Illness

• Disability

• Death

• Retirement

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 14

Self-InsuranceSelf-Insurance

• Predict potential losses

• Make adequate financial arrangements

• Obtain stop-loss insurance

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 15

Monitoring Risk Monitoring Risk ManagementManagement

• What does the company have?

• What can go wrong?

• What do we need to stay in business?

• What’s the best way to protect assets?

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 16

Employee InsuranceEmployee Insurance

• Health insurance

• Disability income

• Worker’s compensation

• Life insurance

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 17

Health insuranceHealth insurance

• Basic medical

• Major medical

• Disability income

• Medicare supplement

• Long-term care

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 18

Rising Cost of Medical Rising Cost of Medical CareCare

• Drugs

• Hospitals

• Lawyers

• Consumers

• State mandates

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 19

Cost Containment Cost Containment MeasuresMeasures

• Preferred-provider organization (PPO)

• Health-maintenance organization (HMO)

• National health insurance

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 20

Disability InsuranceDisability Insurance

• Partial or total

• Temporary or permanent

• Short-term or long-term

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 21

Worker’s CompensationWorker’s Compensation

• Loss of income

• Medical expenses

• Rehabilitation

• Death benefits

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 22

Life InsuranceLife Insurance

• Credit life

• Term life

• Whole life

• Variable life

• Universal life

© Prentice Hall, 2005 Excellence in Business, Revised Edition

Component B - 23

Social Insurance Social Insurance ProgramProgram

• Social security

• Unemployment insurance