An insurance claims adjuster is reviewing several different case files. Match each specific risk scenario to the correct fundamental risk management classification.
- An aging electrical panel in a manufacturing facility that frequently sparks and lacks proper grounding.Physical Hazard
- A struggling business owner intentionally sets fire to obsolete inventory to collect insurance proceeds.Moral Hazard
- A policyholder neglects to repair a known roof leak because they believe their insurance will simply cover any resulting water damage.Morale Hazard
- A sudden earthquake that causes the foundation of a commercial building to crack and shift.Peril
Answer
The electrical panel is a Physical Hazard, the intentional fire is a Moral Hazard, the neglected roof leak is a Morale Hazard, and the earthquake is a Peril.
The correct pairings accurately apply fundamental risk management definitions. An earthquake is an active cause of loss (Peril). An aging electrical panel is a structural condition increasing risk (Physical Hazard). Arson for profit demonstrates dishonest intent (Moral Hazard). Indifference to maintenance due to insurance coverage demonstrates a careless attitude (Morale Hazard).
Step-by-Step Solution
Key Concept
Distinguishing between Perils (causes of loss) and Hazards (conditions that increase the likelihood or severity of a loss), and classifying the three primary types of hazards.