CPCU 520 Study Set- Questions with Correct Answers

Conflict between profit go an Customers needs goal Regulation of insurance policies Legislations require policy appear in certain types of insurance policies Advisory organizations Companies that work with and on behalf of insurers develop standard policy insurance policy forms and data requiring rules or prospective loss cost Approach used in determining whether an insurance rates are adequate or excessive is based on ensure should expect at least some minimum rate of return on equity invested in its operations Fair rate of return approach Insurance rates consist of three components 1) pay for future claims loss adjustment expenses 2) Pay for future expenses, acquisition, expense, overhead, premium taxes 3) profit and contingencies Statement correct in regard to increased limit factors and liability insurance Data used in developing rates for basic coverage limits include on a loss is associated with the basic coverage limit SWOT Strength identifying internal strengths. Weakness identifying internal weakness involves consideration of financial physical human and organizational assets Opportunities analyzing the external environment might present new markets acquisition targets or reduction in competition threats include new competitors and increasing competition level economic downturns changes in customer preferences Underwriting department responsible for To achieve profit and additional two purposes guard against adverse selection, ensure adequate surplus and enforce underwriting guidelines What is an actuary Actuaries put a price on risk and an actuary is one who deals with the financial impact of risk Licensing insurers Alien ensures must satisfy the requirements of domestic insurers and must establish a branch office and have funds on deposit in the United States Sources of reinsurance Reinsurance pools syndicate and association professional reinsurers and reinsurers department of the primary insurance Reinsurance intermediaries Represent insurer and work with that teinsurer to develop a reinsurance program that is placed with a reinsurer. Receives a brokerage commission Flash coverage are set by Potential for multiple policies involved in a single occurrence potential for excess of policy limits and losses policy limits offered by insurer