High Frequency, Low Severity results in which approach?

• A. Insurance
• B. Loss Prevention (Losing cell phone)
• C. Avoidance
• D. Moral hazard management

Answer: (B)

High-frequency, low-severity risks are best handled with loss prevention—actually reducing the chance of the loss occurring or its impact when it does. For something like frequently losing a cell phone, you prevent or lessen losses by practical controls: keep the phone securely stored, use a strong screen lock or password, enable device-tracking, back up data regularly, and adopt habits that reduce where and how you lose it. These steps cut the likelihood of a loss and lessen the damage when a loss happens.

Insurance might help after a loss, but it doesn’t prevent it and can be costly if losses occur often. Avoidance would mean not using a phone at all, which isn’t practical. Moral hazard management deals with behavior after a loss is insured, not with preventing frequent small losses in the first place. So the approach that fits best here is loss prevention.