Download CPCU 520 Practice Exam 1 Questions and Answers (Solved Papers) and more Exams Nursing in PDF only on Docsity!
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The expenses associated with adjusting claims are referred to as Select one: A. Prospective loss costs. B. Loss adjustment expenses. C. Claims costs. D. Operating expenses. - Correct Answers ✅B. Loss adjustment expenses. Insurer Y is small but has a specialty insurance market for high- value vehicles. In competing with a larger insurer with a broader market, Insurer Y is likely to have which one of the following advantages? Select one: A. Insurer Y would have more capital surplus available than a larger insurer would have. B. Insurer Y can be more nimble, allowing it to respond quickly to an emerging trend or change. C. Because Insurer Y has a niche market, a larger insurer would not be able to compete on price due to state rate regulation.
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D. Insurer Y is better able to invest in research and product development due to a more narrow market focus. - Correct Answers ✅B. Insurer Y can be more nimble, allowing it to respond quickly to an emerging trend or change. Which one of the following statements is correct? Select one: A. Some of the five ideal characteristics of rates conflict with others, and compromises are often necessary. B. Rates are based on what consumers would be willing to pay for insurance coverage, which can be difficult to determine. C. A rate can be adequate or it can be competitive, but it cannot be both adequate and competitive at the same time. D. From the insurer's perspective, the primary goal of ratemaking is to implement the highest rates that regulators will allow so as to maximize insurer profits. - Correct Answers ✅A. Some of the five ideal characteristics of rates conflict with others, and compromises are often necessary. To be successful, the differentiation business-level strategy must Select one:
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D. Customers are generally not considered in a SWOT analysis because the focus is on the assets an organization owns. - Correct Answers ✅A. Identifying internal strengths and weaknesses involves considering financial, physical, human, and organizational assets. Samuelson Insurance has developed special programs to market personal insurance to members of college alumni and professional associations. This is an example of which one of the following types of market segmentation? Select one: A. Psychographic B. Behavioristic C. Geographic D. Demographic - Correct Answers ✅D. Demographic All of the following are challenges that an insurer may face that can hinder a complete alignment of information technology (IT) and business strategies, EXCEPT: Select one:
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A. Changing IT or business metrics B. An overly complex IT infrastructure C. IT professionals assured of their job security D. IT operating as a separate unit - Correct Answers ✅C. IT professionals assured of their job security An applicant for commercial property insurance is found unacceptable by an underwriter due to the nature of its operations and the construction of the building it occupies. If the applicant installs an automatic fire-extinguishing sprinkler system, the underwriter will approve the application. This type of underwriting modification is known as Select one: A. Changing insurance rates, rating plans, or policy limits. B. Requiring risk control measures. C. Using facultative reinsurance. D. Amending the policy terms and conditions. - Correct Answers ✅B. Requiring risk control measures Which one of the following insurer performance goals is the most difficult to evaluate?
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payments immediately so that displaced families could return to their homes as soon as possible? Select one: A. Internet of Things B. Low cost mobile technology C. Cloud computing and storage D. Telematics - Correct Answers ✅B. Low cost mobile technology Which one of the following are shared by the primary insurer and the reinsurer in pro rata reinsurance transactions? Select one: A. Investment income from reserves B. Premium taxes C. Commissions to producers D. Amounts of insurance - Correct Answers ✅D. Amounts of insurance Many of Fredine Insurance Company's risk control activities help the insurer reach its profit goals by reducing the frequency and
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severity of covered losses that would detract from Fredine's profits. Which one of the following activities provides an additional revenue source that contributes directly to Fredine's profit goals? Select one: A. Fredine risk control representatives identify unsafe conditions that policyholders can correct. B. The quality of Fredine's risk control services helps retain policyholders. C. Fredine sells unbundled risk control services to self-insured companies. D. The underwriting information provided by Fredine's risk control representatives leads to better underwriting decisions. - Correct Answers ✅C. Fredine sells unbundled risk control services to self- insured companies. Which one of the following is the insurer's quality control check for uniform application of the underwriting guidelines and for continuous improvement? Select one: A. Reinsurance treaty
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B. Receiving ceding commissions to offset policy acquisition expenses. C. Minimizing fluctuations in retained losses from year to year. D. Reducing large line capacity to minimize the ratio of net written premium to policyholders' surplus. - Correct Answers ✅B. Receiving ceding commissions to offset policy acquisition expenses. Which one of the following cases is an example of why insurance needs to be regulated to maintain insurer solvency? Select one: A. Lachlan, an agent for Gulford Insurance Company has sold Alex a homeowners endorsement on other structures which he does not need. B. Lachlan, an agent for Gulford Insurance Company has kept premium on several large Gulford accounts and has not transmitted the funds to the company. C. Gulford Insurance Company goes out of business because it did not have enough surplus or reinsurance to cover its hurricane losses. D. Gulford Insurance Company has discontinued its farm liability product due to losses and there is a shortage of farm liability
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coverage in the state. - Correct Answers ✅C. Gulford Insurance Company goes out of business because it did not have enough surplus or reinsurance to cover its hurricane losses. The principal method of determining a prospect's insurance needs is through Select one: A. Asking the prospect what coverage they would like to purchase. B. Determining how much the prospect is willing to pay for insurance coverage. C. Reviewing the prospect's current insurance policies. D. Completing a risk management review for the prospect. - Correct Answers ✅D. Completing a risk management review for the prospect. Which one of the following statements is correct with respect to pro rata reinsurance? Select one:
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C. Finite risk reinsurance is less expensive than most traditional types of reinsurance. D. Finite risk reinsurance agreements generally allow the reinsurer to assess additional premium if losses exceed premium. - Correct Answers ✅A. Finite risk reinsurance agreements typically have a three to five year term. Graydon Insurance is a regional insurer that is working hard to manage a large database of information. Graydon relies on the National Council of Compensation Insurance so the insurer can do which one of the following? Select one: A. Producers can find information on personal lines customers' risk retention and risk management efforts. B. Claims representatives can confirm audio and video file information very quickly. C. Accountants can compile internal billing and collection information in a more efficient manner. D. Underwriters can use its information that analyzes trends and prepares workers compensation rate recommendations. - Correct Answers ✅D. Underwriters can use its information that analyzes
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trends and prepares workers compensation rate recommendations. Independent agent networks are known as Select one: A. Agent forces. B. Exclusive agents. C. Direct writers. D. Agent clusters. - Correct Answers ✅D. Agent clusters. Riko is an automobile claim representative who has been assigned a claim submitted by John. John owns a Honda Civic, which is insured in his name for liability, collision, and comprehensive coverage on a Personal Auto Policy (PAP). He is the only named insured on the policy. John lives with his parents and his sister, Carla. One Saturday, while John is asleep, Carla borrows his car to run errands. Unfortunately she backs into the concrete base of a sign at the mall, damaging the vehicle. Riko confirms that the Honda is the covered vehicle, that it is insured against collision, and that the loss occurred during the policy period. Which one of the following will she most likely determine next? Select one:
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With respect to underwriting, it is an unfair trade practice to Select one: A. Unfairly discriminate when selecting loss exposures. B. Misrepresent coverage in an application. C. Rebate premium to a policyholder. D. Misappropriate claim funds. - Correct Answers ✅A. Unfairly discriminate when selecting loss exposures. The state advisory organization has developed a new homeowners form which increases the personal property limits for guns, silverware, jewelry, and boats. Jancy Insurance Company is considering modifying the form for its own use. Which one of the following members of Jancy's staff would be involved in the research and development of this new form? Select one: A. Clara, the underwriting manager B. Antonia, the accounting manager C. Merve, the claims manager
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D. Emma, the staff underwriter - Correct Answers ✅D. Emma, the staff underwriter The universal connectivity that allows people to interact with devices and for those devices to meaningfully interact with each other without human interaction is known as Select one: A. Cloud computing. B. The blockchain. C. The Internet of Things. D. Telematics. - Correct Answers ✅C. The Internet of Things. With regard to insurer licensing, a foreign insurer is an insurer Select one: A. Licensed and operating in states other than its state of domicile. B. Domiciled outside of the U.S. and licensed to transact business in the U.S.
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B. The process the premium auditor uses is known as auditing the policy because the focus is on the exposures identified on the policy. C. The definition of "employee" is the same for both workers compensation and general liability policies when the premium base is payroll. D. An examination of the insured's books and records at the insured's premises is referred to as a voluntary audit. - Correct Answers ✅A. A premium auditor's job involves not only counting loss exposures, but also classifying them correctly. Which one of the following is a claim control used to help meet regulatory compliance? Select one: A. Special damages B. Annual Statements C. Access security D. Structured settlements - Correct Answers ✅C. Access security
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Day-to-day regulation of the insurance business is performed by state insurance departments, which fall within each state government's Select one: A. Judicial branch. B. Legislative branch. C. Executive branch. D. Consumer branch. - Correct Answers ✅C. Executive branch Insurers have become insolvent despite regulatory reviews. A goal of insurance regulation is to Select one: A. Minimize the number of insolvencies. B. Establish and maintain state guaranty funds for insolvencies. C. Eliminate all insurer insolvencies. D. Educate consumers regarding insurer insolvencies. - Correct Answers ✅A. Minimize the number of insolvencies. Gulford Insurance Company (Gulford) is a direct writer of commercial insurance in Pennsylvania. The management team is
