CPCU 520 QUESTIONS AND ANSWERS
After a devastating hurricane, Blithe Insurance Company was declared insolvent and
the state's guaranty fund stepped in. Which one of the following is most likely to be true
regarding how the guaranty fund will administer Blithe's policies? - Answers -For
terminated policies, the state will provide for a refund of unearned premiums to current
policyholders.
Loss ratios, expense ratios, and combined ratios are all examples of which one of the
following? - Answers -Financial controls
Which one of the following statements is correct regarding the use of treaty and
facultative reinsurance? - Answers -Most treaties require that all loss exposures within
the treaty's terms be reinsured.
The risk control service of conducting a physical survey consists of - Answers -
Collecting underwriting information on a customer's loss exposures.
Day-to-day regulation of the insurance business is performed by state insurance
departments. State insurance departments fall within which one of the following
branches of government? - Answers -Executive
Which one of the following is the primary business purpose of a professional reinsurer?
- Answers -To serve insurers' reinsurance needs
The loss ratio - Answers -incurred losses including LAE / earned premiums
Brookgreen Insurance has a 40% quota share treaty with Cypress Reinsurance. Policy
A has a limit of $50,000, a premium of $2,000, and a loss of $5,000. How much of the
premium will Cypress Reinsurance receive? - Answers -Cypress Reinsurance will
receive $2,000 × 40%, or $800 of the premium.
Readability legislation has influenced the drafting of commercial as well as personal
insurance policies. However, readability tests do not necessarily measure - Answers -
How well the policies can be understood.
Greatview Insurance is trying to improve the property claim handling process. The
claims department has decided to review the various steps in the property claim
handling process, from the time it is first reported until the final step when the payment
is made. Which one of the following types of organizational strategies does this
represent? - Answers -Operational-level strategy
During which one of the following steps in the ratemaking data development process
does an insurer review which areas in a state deserve higher or lower rates? - Answers
-Determine territorial and class relativities
, The most prominent actuarial functions for an insurer involve estimation of unpaid
liabilities and adequacy of loss reserves as well as - Answers -Ratemaking.
Which one of the following statements is true concerning claim information users? -
Answers -Producers must have policyholder loss information to prepare renewal
policies properly.
When adjusting a property loss, a claim representative must determine whether or not
the loss was caused by a covered peril. Insurance that covers every cause of direct
physical loss or damage that is not specifically excluded is referred to as - Answers -
Special form coverage.
Developing a safety management program begins with a - Answers -Complete
evaluation of the policyholder's operations.
The main components of an insurer's bulk (or aggregate) loss reserves are reserves for
unreported claims plus - Answers -Reserves for losses that have inadequate case
reserves and reserves for claims that have settled and then reopened.
Which one of the following is a claim control used to help meet regulatory compliance? -
Answers -Access security
Which one of the following statements is correct regarding the use of treaty and
facultative reinsurance? - Answers -Most treaties require that all loss exposures within
the treaty's terms be reinsured.
Financial controls include assessing the company's stock price or - Answers -using
return on investment for evaluating specific projects.
With respect to underwriting, it is an unfair trade practice to - Answers -Unfairly
discriminate when selecting loss exposures.
An insurer's marketing department is working with the underwriting department to
determine what characteristics of middle market businesses result in the most profitable
commercial insurance accounts. Which one of the following methods would be most
effective in identifying these characteristics? - Answers -Predictive analytics
After data have been collected and adjusted, and after any territorial and class
relativities have been determined, rate filings must be prepared. Which one of the
following statements is true regarding rate filings? - Answers -If an advisory
organization files rates or loss costs on behalf of an insurer, it also handles any follow-
up or negotiations.
After a devastating hurricane, Blithe Insurance Company was declared insolvent and
the state's guaranty fund stepped in. Which one of the following is most likely to be true
regarding how the guaranty fund will administer Blithe's policies? - Answers -For
terminated policies, the state will provide for a refund of unearned premiums to current
policyholders.
Loss ratios, expense ratios, and combined ratios are all examples of which one of the
following? - Answers -Financial controls
Which one of the following statements is correct regarding the use of treaty and
facultative reinsurance? - Answers -Most treaties require that all loss exposures within
the treaty's terms be reinsured.
The risk control service of conducting a physical survey consists of - Answers -
Collecting underwriting information on a customer's loss exposures.
Day-to-day regulation of the insurance business is performed by state insurance
departments. State insurance departments fall within which one of the following
branches of government? - Answers -Executive
Which one of the following is the primary business purpose of a professional reinsurer?
- Answers -To serve insurers' reinsurance needs
The loss ratio - Answers -incurred losses including LAE / earned premiums
Brookgreen Insurance has a 40% quota share treaty with Cypress Reinsurance. Policy
A has a limit of $50,000, a premium of $2,000, and a loss of $5,000. How much of the
premium will Cypress Reinsurance receive? - Answers -Cypress Reinsurance will
receive $2,000 × 40%, or $800 of the premium.
Readability legislation has influenced the drafting of commercial as well as personal
insurance policies. However, readability tests do not necessarily measure - Answers -
How well the policies can be understood.
Greatview Insurance is trying to improve the property claim handling process. The
claims department has decided to review the various steps in the property claim
handling process, from the time it is first reported until the final step when the payment
is made. Which one of the following types of organizational strategies does this
represent? - Answers -Operational-level strategy
During which one of the following steps in the ratemaking data development process
does an insurer review which areas in a state deserve higher or lower rates? - Answers
-Determine territorial and class relativities
, The most prominent actuarial functions for an insurer involve estimation of unpaid
liabilities and adequacy of loss reserves as well as - Answers -Ratemaking.
Which one of the following statements is true concerning claim information users? -
Answers -Producers must have policyholder loss information to prepare renewal
policies properly.
When adjusting a property loss, a claim representative must determine whether or not
the loss was caused by a covered peril. Insurance that covers every cause of direct
physical loss or damage that is not specifically excluded is referred to as - Answers -
Special form coverage.
Developing a safety management program begins with a - Answers -Complete
evaluation of the policyholder's operations.
The main components of an insurer's bulk (or aggregate) loss reserves are reserves for
unreported claims plus - Answers -Reserves for losses that have inadequate case
reserves and reserves for claims that have settled and then reopened.
Which one of the following is a claim control used to help meet regulatory compliance? -
Answers -Access security
Which one of the following statements is correct regarding the use of treaty and
facultative reinsurance? - Answers -Most treaties require that all loss exposures within
the treaty's terms be reinsured.
Financial controls include assessing the company's stock price or - Answers -using
return on investment for evaluating specific projects.
With respect to underwriting, it is an unfair trade practice to - Answers -Unfairly
discriminate when selecting loss exposures.
An insurer's marketing department is working with the underwriting department to
determine what characteristics of middle market businesses result in the most profitable
commercial insurance accounts. Which one of the following methods would be most
effective in identifying these characteristics? - Answers -Predictive analytics
After data have been collected and adjusted, and after any territorial and class
relativities have been determined, rate filings must be prepared. Which one of the
following statements is true regarding rate filings? - Answers -If an advisory
organization files rates or loss costs on behalf of an insurer, it also handles any follow-
up or negotiations.
