All of the following statements about risk retention are true EXCEPT
A)It may be used intentionally if commercial insurance is unavailable.
B)It may be used passively because of ignorance.
C)Its use is most appropriate for low-frequency,high-severity types of risks.
D)Its use results in cost savings if losses are less than the cost of insurance.

Question

Quizplus · Accepted Answer

Risk retention is most appropriate for high-frequency, low-severity types of risks, not low-frequency, high-severity risks. High-frequency, low-severity risks are more predictable and manageable through a retention program, whereas low-frequency, high-severity risks can be financially devastating and are better transferred to an insurance company.

All of the Following Statements About Risk Retention Are True