A health insurer funds a free smoking-cessation and annual-physical program for its policyholders. This program primarily uses which risk management technique?

Why A is correct

Loss reduction (also called loss prevention and control) seeks to lower the frequency or severity of losses. Smoking cessation reduces the likelihood of smoking-related disease, and routine physicals catch conditions earlier so they are less severe and costly. Such wellness programs are a direct application of reduction. The technique does not eliminate risk entirely, but it measurably improves the group's loss experience, which can moderate premiums.

Why the other options are wrong

• B) Paying for a prevention program is an expense of the reduction technique, not a transfer of risk to another party.
• C) Reduction does not make all illness impossible; it only lowers the probability and size of losses.
• D) Retention means deliberately keeping a risk; funding prevention is a different technique even though the insurer bears costs.

Memory hook

Reduction = bend the odds and shrink the bill. Prevention is reduction with a wellness plan.