Final answer:
Driving at lower speeds to reduce accident risks exemplifies loss control, a technique to reduce the likelihood or impact of losses. Option B is correct.
Step-by-step explanation:
Driving at lower speeds in order to reduce the probability of having an automobile accident is an example of loss control. Loss control is a risk management technique that involves implementing measures to reduce the likelihood or potential severity of losses.
It includes actions like providing safety training, installing security systems, and in the case of driving, adhering to speed limits to prevent accidents.
Cars these days are designed with crumple zones that reduce injury to the passengers by increasing the time of impact. This change in how cars are built is a physical manifestation of loss control, intended to protect occupants during a collision by absorbing some of the force and extending the time over which the impact occurs, hence lowering the force felt by passengers.
Moreover, the concept of moral hazard is important in understanding risk-related behaviors. Moral hazard occurs when the availability of insurance leads individuals or businesses to take greater risks than they would without insurance coverage. Insurance companies combat this by offering incentives for safer behavior, such as lower insurance premiums for businesses that install high-quality safety systems.
Another concept related to risk management is diversification. This is employed by banks, for example, to protect themselves against an unexpectedly high rate of loan defaults. By spreading their loans across a variety of customers and industries, banks can balance the risk as some loans perform well while others may default.
Crumple zones in cars also embody loss control, increasing the time of impact during a crash to protect passengers. Insurance companies manage moral hazard by incentivizing risk-reducing behaviors and banks diversify loans to mitigate financial risks.